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Budget (from french bougette ,
purse) generally refers to a list of all planned expenses
and revenues. A budget is an important concept in microeconomics ,
which uses a budget
line to illustrate the trade-offs between two or
more goods .
In other terms, a budget is an organizational plan stated
in monetary terms.
In
summary, the purpose of budgeting is to:
Provide
a forecast of revenues and expenditures i.e. construct
a model of how our business might perform financially
speaking if certain strategies, events and plans are
carried out.
Enable
the actual financial operation of the business to be
measured against the forecast.
Zero-Based
Budgeting is
a technique of planning and decision-making which
reverses the working process of traditional budgeting .
In traditional incremental budgeting, departmental
managers justify only increases over the previous
year budget and what has been already spent is automatically
sanctioned. No reference is made to the previous
level of expenditure. By contrast, in
zero-based budgeting [1] , every
department function is reviewed comprehensively and
all expenditures must be approved, rather than only
increases. ZBB requires the budget request justified
in complete detail by each division manager starting
from the Zero-base. The Zero-base is indifferent
to whether the total budget is increasing or decreasing.
The
term "Zero-Based Budgeting" is sometimes used in personal
finance to describe the practice of budgeting every dollar
of income that you receive, and then adjusting some part
of the budget downward for every other part that needs
to be adjusted upward. It would be more technically correct
to refer to this practice as "Active Balanced Budgeting"
"With
zero-based processing one can forget about last year, pretend
that the program is brand-new, and see if one can provide
a detail of expenses for what one would need to fully accomplish
the program. This technique will help one to develop a
complete picture of what the program actually needs to
cost and not just what it has been costing." (Batarla,
Rob. Playbook: Add Value to Your Budgeting Process.
Parks & Recreation , 00312215, Sep 2005, Vol.
40, Issue 9)
In
business, revenue or revenues ( turnover in
Europe) is income that
a company receives
from its normal business activities, usually from the sale
of goods
and services to customers. Some companies also receive
revenue from interest , dividends or royalties paid
to them by other companies. [1] Revenue
may refer to business income in general, or it may refer
to the amount, in a monetary
unit , received during a period of time, as in "Last
year, Company X had revenue of $32 million."
For non-profit
organizations , annual revenue may be referred to
as gross receipts . [3] This
revenue includes donations from individuals and corporations,
support from government agencies, income from activities
related to the organization's mission ,
and income from fundraising activities, membership dues,
and financial investments such as stock
shares in companies . [4] For government ,
revenue includes gross proceeds from income taxes on
companies and individuals, excise
duties , customs
duties , other taxes, sales of goods and services,
dividends and interest. [5]
Williams,
Jan R.; Susan F. Haka, Mark S. Bettner, Joseph
V. Carcello (2008). Financial & Managerial
Accounting . McGraw-Hill Irwin, p 199. ISBN
9780072996500 . This definition is based on IAS
18 .
An operating
budget is the annual budget of
an activity stated in terms of Budget Classification
Code, functional/subfunctional categories and cost
accounts. It contains estimates of the total value
of resources required
for the performance of
the operation including reimbursable work or services
for others. It also includes estimates of workload in
terms of total work units identified by cost accounts.
The
theory makes the most sense under assumptions of constant
returns to scale and the existence of just one non-produced
factor of production. These are the assumptions of the
so-called non-substitution
theorem . Under these assumptions, the long run price
of a commodity is equal to the sum of the cost of the inputs
into that commodity, including interest charges.
Historically,
the most well known proponent of such theories is probably Adam
Smith . Piero
Sraffa , in his introduction to the first
volume of the "Collected Works of David Ricardo" ,
referred to Adam Smith's adding up theory. Smith contrasted natural
prices with market
prices . Smith theorized that market prices would tend
towards natural prices, where outputs would be at what
he characterized as the "level of effectual demand". At
this level, Smith's natural prices of commodities are the
sum of the natural rates of wages, profits, and rent that
must be paid for inputs into production. (Smith is ambiguous
about whether rent is price-determining or price determined.
The latter view is the consensus of later classical
economists , with the Ricardo-Malthus-West theory of
rent.)
David
Ricardo mixed such cost of production theory of
prices with the labor
theory of value , as that latter theory was understood
by Eugen
von Bohm-Bawerk and others. This is the theory that
prices tend toward proportionality to the socially necessary
labor embodied in a commodity. Ricardo sets this theory
at the start of the first chapter of his " Principles
of Political Economy and Taxation ". Ricardo also
refutes the labor theory of value in later sections of
that chapter. This refutation leads to what later became
known as the transformation
problem . Karl
Marx later takes up that theory in the first volume
of "Capital", while indicating that he is quite aware
that the theory is untrue at lower levels of abstraction.
This has led to all sorts of arguments over what both
David Ricardo and Karl Marx "really meant". Nevertheless,
it seems undeniable that all the major classical economics
and Marx explicitly rejected the labor theory of price
( [1] ).
The
Polish economist Michal Kalecki [2] distinguished
between sectors with "cost-determined prices" (such as
manufacturing and services) and those with "demand-determined
prices" (such as agriculture and raw material extraction).
One
might think of this theory as equivalent to modern theories
of markup-pricing , full-cost
pricing, or administrative
pricing. Ever since Hall and Hitch, economists have
found that the evidence gathered in surveys of businessmen
support such theories.
Most
contemporary economists accept neoclassical
economics or mainstream economics. The non-substitution
theorem is presented in graduate level microeconomics textbooks
as a theorem of mainstream economics. Also many mainstream
economists think they can justify theories of full-cost
pricing within their theory. The majority of mainstream
economists would probably then accept this theory as an
element in their theory which does not give adequate attention
to issues of consumer demand and marginal
utility.
An accounting
information system ( AIS )
is the system of records a business keeps
to maintain its accounting
system . This includes the purchase, sales, and
other financial processes of the business. The purpose
of an AIS is to accumulate data and provide decision
makers (investors, creditors, and managers) with information
to make decision While this was previously a paper-based
process, most modern businesses now use accounting
software such as UBS, MYOB etc. Information System
personnel need basic, if not vast, knowledge of database
management and programming language such as C, C++,
JAVA and SQL as all software is basically built from
platform or database.
In
an Electronic
Financial Accounting system, the steps in the
accounting cycle are dependent upon the system itself,
which in turn are developed by programmers. For example,
some systems allow direct journal posting to the
various ledgers and
others do not.
Accounting
Information Systems provide efficient delivery
of information needed to perform necessary accounting
work and to assist in delivery of accurate and
informative data to users, especially those who
are not familiar with the accounting and financial
reporting areas itself.
