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BUDGET

MEANING OF BUDGET

One of the primary objectives of management accounting is to provide information tomanagement for planning and control.

A widely used device for managerial control is the budget. Because the amount and quality

of Nursing Services depended on budgetary plans, nurses should provide the resources

necessary for the safe and effective nursing care

DEFINITION

A budget is an estimate of future needs arranged to an orderly basis covering some or all

the activities of an enterprise for a definite period of time.

.N. !hhabra

Budgeting is the formulation of plans for a given period in numerical terms.

  "arold #oont$

A budget is a plan that uses numerical data to predict the activities of an organi$ation over 

a period of time. Bessie.

PURPOSE OF BUDGET

Budget supplies the mechanism for translating fiscal objectives into project monthly

spending pattern.

Budget enhances fiscal planning and decision ma%ing.

Budget clearly recogni$es controllable and uncontrollable cost areas.

Budget offers a useful format for communication fiscal objectives.

Budget allows feedbac% of utili$ation of budget.

Budget helps to identify problem areas and facilitates effective solution.

Budget provides means for measuring and recording financial success within the

objectives of the organi$ation.

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FEATURES OF BUDGET

&t should be fle'ible.

&t should be synthesis of past, present, future.

&t should be product of joint venture for co(operation of e'ecutives department

heads or different level of management.

&t should be in the form of statistical laid down in specific numerical terms.

&t should have support of top management throughout the period of its planning

and implementation

IMPORTANCE OF BUDGET

Budget is needs for planning for future course of action and to have a control over all

activities in the organi$ation.

Budget facilitates co(ordinating operation of various departments and section for 

reali$ing organi$ational objectives.

Budget serves as a guide for action in the organi$ation.

Budget helps one to weight the value and to ma%e decision when necessary or 

whether one is of a greater value in the programme that the order.

PRINCIPLES OF BUDGET

Budget should provide sound financial management by focusing on requirement of 

the organi$ation.

Budget should focus on objectives and policies of the organi$ation. &t must flow from

objectives and give realistic e'pression to the way of realistic such objective.

Budget should ensure the most effective use of scarce financial and non financial

resources.

Budget requires that programme activities planned in advance.

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Budgetary process requires consistent delegation for which fi'ed duties and

responsibilities are required to be allocated to managers at different level for framing

and e'ecuting budget.

Budget should include co(ordinating efforts of various departments establishing a

frame of reference for managerial decision and providing certain criteria for 

evaluating managerial performance.

Selling budget target requires an adequate chec%s and balance against the adoption of 

too high or too low estimate, almost care is a must for fi'ing targets.

Budget period must be appropriate to the nature of business or service and to type of 

 budget.

Budget is prepared under the direction on the supervision of the administration or 

financial officer.

Budget is to be prepared and interpreted consistently throughout the organi$ation in

the communication in the planning process.

TYPES OF BUDGET

• Incremental budget r !er ba"ed budget # his is a budget prepared using a

 previous period)s budget or actual performance as a basis with incremental amounts

added for the new budget period

• O$en ended budget# this is a budget which is subjected to any change at any time.

here is no set upper limit of cost* it can change according to needs and

circumstances.

• F%&ed ce%l%ng budget# +i'ed budgets are budgets that are drafted on the basis of 

specific criteria, and do not allow any room for any changes or variations in activity at

any point during the period of time covered by those budgets.

• Fle&%ble budget# A fle'ible budget is a budget that adjusts or fle'es for changes in the

volume of activity. he fle'ible budget is more sophisticated and useful than a static

 budget, which remains at one amount regardless of the volume of activity.

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Rll 'er budget# A rollover budget is a budget in which the funds, if not spent in a

 particular month, roll over into that budget for the following month, adding to the

allocation for that particular month.

 

Per(rmance budget# A budget that reflects the input of resources and the output of 

services for each unit of an organi$ation. his type of budget is commonly used by the

government to show the lin% between the funds provided to the public and the

outcome of these services.

• Prgrammed budget#  is the budgeting system that, contrary to conventional

 budgeting, describes and gives the detailed costs of every activity or programme that

is to be carried out in a budget. Objectives, outputs and e'pected results are described

fully as are their necessary resource costs, for e'ample, raw materials, equipment and

staff. he sum of all activities or programmes constitutes the rogramme Budget.

• Sale" budget# an estimate of future sales, often bro%en down into both units and

currency. &t is used to create company sales goals.

o A projection of how much a business will generate in profit for the year. his

is not true form of determination for profit margin.

• Prduct%n budget# an estimate of the number of units that must be manufactured to

meet the sales goals. he production budget also estimates the various costs involved

with manufacturing those units, including labor and material. !reated by product

oriented companies.

CLASSIFICATION OF BUDGET

!lassified on the basis of -(

• !overage of functions /aster 0 +unctional budget.

•  Natured and activity covered !apital 0 1evenue budget.

• eriod of Budget long term and short term budgets.

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• +le'ibility adopted +i'ed and fle'ible budget

A) MASTER * FUNCTIONAL BUDGET

•

A mastered budget is prepared for the entire organi$ation incorporating the budget of different functions. e g. 2hen we refer to the annual budget of 3ovt. of &ndia. &t

incorporates the budget out lays of different ministries.

• A functional budget is prepared incorporating a major function and its sub functions

since an organi$ation may have a number of functions, numerous functional budgets

are prepared. 4 g., production budget, cash budget in an organi$ation.

B) CAPITAL * RE+ENUE BUDGET

An organi$ation activities involve two process. !reating facilities for carrying out

activities and actual performance activities. !reating facilities for carrying out

activities include capital e'penditure whole returns accrue over a number of years.

+or such activities, capital budget is prepared which is essentially a list of what

management believes to be worthwhile projects for acquisition of new assets together 

with the estimated cost of each project.

1evenue budget involves the formation of target for a year or so in respect of various

organi$ational activities such as production, mar%eting, finance, etc., hus a revenue

 budget includes e'penditure and earning for a specific period li%e one year.

C) LONG TERM AND S,ORT TERM BUDGET

5 /any organi$ations integrate their yearly budgets with long term projection of 

 business activities and along with yearly budget* they prepare budgets for a longer 

 period of 6(7 years. 2hen one budget period is over budgets are prepared for the ne't

year and subsequent 6(7 years.

5 he short term budget is for a year and is divided into a number of periods for 

effective implementation. e g. !ash budgets are prepared on yearly basis as well as on

monthly or quarterly basis to facilitate better cash management.

D) FI-ED AND FLE-IBLE BUDGETS

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5 3enerally, organi$ations prepare budgets which pertain to only certain projected fi'ed

volume of operations for a year or so such budget are %nown as fi'ed or static

 budgets. 2hen an organi$ations volume of business can be predicted with fair 

amount of precision, the fi'ed budget is satisfactory.

5 A budget which is designed to change in accordance with the activities of the

organi$ation is %nown as fle'ible budget. &t considers several level of activity and

assures that labour, material or facilities used in production and hence cost vary with a

%nown relationship to the actual volume of activity. 

TYPES OF BUDGETING

T.ere are ma%nl/ t0 t/$e" ( budget%ng1

21 Per(rmance Budget%ng

31 4er ba"e budget%ng1

2) PERFORMANCE BUDGETING

A performance budgeting is an input8output budget or costs and results budget. &t

shows costs matching with operations. erformance budget emphasis on non

financial measures of performance which can be related to financial measures in

e'plaining changes and deviation from planned performance. erformance

measurement are useful for evaluating past performance and for planning future

activities. erformance budgeting, results into the following.

&t correlates the financial and physical aspects of every programme or activity.

&t improves budget formulation, review and decision ma%ing at all levels of theorgani$ation.

&t facilitates better appreciation and review of organi$ational activities by the top

management.

&t ma%es possible move effective performance audit.

&t measures progress towards long term objectives.

3) 4ERO BASE BUDGETING

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his was applied for the first time in preparing the divisional budgets of e'as

instruments of the 9SA in :;

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PROCESS

1eview the goals of agency of "ospital.

1eview Objectives of e'isting programme.

 

1evise the e'isting programe.

/anpower, capital and operating e'penses are computer or each programme, old and

new.

Alternative methods are identified for reali$ing designated objectives.

!omparison is made to determine which alternative is most cost effective.

Budget is develop.

 

FUNCTION OF BUDGET IN NURSING

5 &dentifies the importance of and develops short a long range fiscal plans that reflects

unit needs.

5 Articulate and documents units needs effectively to higher administrative levels.

5 Assess the internal and e'ternal environment of the organi$ation in forecasting to

identify driving forces and barriers of fiscal planning.

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5 >emonstrate %nowledge of budgeting and uses appropriate technique.

5 rovide opportunities for subordinates to participate in relevant fiscal planning.

5 !o(ordinates unit level fiscal planning to be congruent with organi$ational goals and

objective.

5 Accurately assesses personal needs using predetermined standards or an established

 patient classification system.

5 !o(ordinates the monitoring aspects of budget control.

5 4nsure that documentation of clients need for services in clear and complete for 

facilitate organi$ational reimbursement.

ROLE OF NURSE ADMINISTRATOR IN BUDGETING

5 &s visionary in identifying of forecasting short and long term unit needs, thus inspiring

 proactive rather than reactive fiscal planning.

5 &s %nowledgeable about political, social and economic factors that shape fiscal

 planning in health care today.

5 >emonstrate fle'ibility in fiscal goals setting in a rapidly changing system.

5 Anticipates recogni$ed and actively problems solve budgetary constraints.

5 &nfluences and inspires group members to become active in short and large range

fiscal planning.

5 1ecogni$es when fiscal constraints have resulted in an ability to meet organi$ational

or unit goals and communicate this insight effectively, allowing the chain of 

command.

5 4nsure that client safely is not jeopardi$ed by cost constraints.

AD+ANTAGES

• Ma&%m%!%ng ( $r(%t# it helps the organi$ation in increasing profit. he allocation of 

resources should be such that it increases profit and decrease e'penditure.

 

C5rd%nat%n# he major strength of budgeting is that it coordinates activities

across departments.

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Tl" (r mea"ur%ng $er(rmance# it provides a tool to measure the performance of 

top level managers and their capabilities.

 

Determ%n%ng 0ea6ne""# it helps to determine the sensitive areas and wea%ness in an

organi$ation.

• Crrect%'e act%n# Budgets provide a tool for corrective action through allocations.

 

Reduce" c"t# it helps to reduce cost within an organi$ation

• Budgets translate stretegic plans into action. hey specify the resources, revenues and

activities required to carry out the strategic plan for coming year.

• Budgets provide an e'cellent record of organi$ational activities.

• Budgets improve communication with employees

• Budgets improve resource allocation, because all requests are clarified and justified

• rovide a method of allocating and using resources within the organi$ation

•  "elp to monitor and control operations

• romote forward thin%ing• Show employees an overall picture of the direction of the organisation which can

motivate staff 

•  "elp to co(ordinate different departments and align them towards shared objectives

• rovide a framewor% for delegation.

DISAD+ANTAGES

 

Budgets can demotivate employees because of lac% of participation. &f the budgets are

arbitrarily imposed top down, employees will not understand the reason for budgeted

e'penditures, and will not be committed to them.

 

Budgets can cause perceptions of unfairness.

 

Budgets can create competition for resources and politics.

 

A rigid budget structure reduces initiative and innovation at lower levels, ma%ing it

impossible to obtain money for new ideas.

• Budgets can be seen as pressure devices imposed by management, thus

resulting in-

a? Bad labour relations

 b? &naccurate record(%eeping.

• >epartmental conflict arises due to-

a? >isputes over resource allocation

 b? >epartments blaming each other if targets are not attained.

• &t is difficult to reconcile personal8individual and corporate goals.

LIMITATION OF BUDGETING

5 lanning, budgeting or forecasting is not an e'act science* it uses appropriately and

 judgment which may not be :@@ accurate. At best a budget is an estimate no one

%nows precisely what will happen in the future.

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5 he success and utility of budgeting depends on the co(operation and participating of 

all members of management. All person should direct their effort according to the

 plan. /any time budgeting has paid only lip services to its e'ecuting.

5 A budget is only a tool and neither eliminates nor ta%es over the place of management.

A budget cannot be substituted for management but should only be used by

management for accomplishing managerial functions.

5 he establishment of a budgeting process ta%es time. Also sometime too much is

e'pected from a budget and in case e'pectation are not fulfilled the blame is put on

the budget. An efficient budgeting programme requires that responsible person

should understand the philosophy, objective and essential of budgeting.

BUDGET PLAN FOR ,OSPITAL

S1

N1

Item" Pre'%u" /ear

3728529

Current /ear

372952:

Future /ear

372:52;

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&ncome 4'penditure &ncome 4'penditure &ncome 4'penditure

1. Opening

 balance

:,@@@@@ :C,@@@@@ :

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Balance amount 31,00000 42,80000 41,25000

BUDGET OF I,BAS ,OSPITAL

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INCOME & EXPENDITURE ACCOUNT FOR THE YEAR ENDED ON 31/3/2012

 

(Amount in Rupees)

  FOR THE YEAR ENDED FOR THE YEAR ENDED

  31/3/2012 31/3/2011

INCOME

Grant-in-ai re!ei"e #rom Go"t o# De$%i &'000000000 ''000000000

*nterest on Term Deposits + sa"in, A/ 1.'2000 11&30&1.

is!e$$aneous Re!eipts .&30100 1&221'13

 Total 57,79,02,213!0

 

EXPENDITURE

Aministrati"e er"i!es + O##i!e E4penses 1''..''22& '&13

a$ar5 + Ot%er 6ene#its to Emp$o5ees 2'23&'0.00 2311'3

Dietar5 *tems 3033 '1'1&32'

Genera$ tore *tems 2030. 12'.2

ei!ines an Dru,s 2'&00 1'&3&21

Tra"e$in, + on"e5an!e E4penses 12&300 1.00'&100

aintenan!e o# E7uipment 31&&300 1&0'&100

8u9$i!ation + 8erioi!a$s '1.1000 100100

Diese$ + 8etro$ 1&1000 &.23.000

8atient :e$#are E4p 2.300 '31'.00

;e,a$ + 8ro#essiona$ %ar,es 310000 '&3'0000

aintenan!e o# E4istin, 6ui$in, '.&000 32001&300

NA6H E4penses 0100 3.'&0000

Repairs o# otor &914C,E7,6,6C.CE :6,E6,D@,:6.6D

 Total !7,9!,02,391 57,79,02,213!0

RESEARC, ABSTRACT

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Budget%ng re"earc.# t.ree t.eret%cal $er"$ect%'e" and cr%ter%a (r "elect%'e

%ntegrat%n1

Article from- Iournal of /anagement Accounting 1esearch J Ianuary :, 6@@7 J!ovales%i,

/ar% A.* 4vans, Iohn "., &&&* Fuft, Ioan F.* Shields, /ichael >. J

Abstract- Budgeting is one of the most e'tensively researched topics in management accounting and

has been studied from the theoretical perspectives of economics, psychology, and sociology. hus,

 budgeting offers opportunities for research that chooses between competing theories from these

 perspectives or combines theories from different perspectives if they are compatible, to create more

complete and valid e'planations of the causes and effects of budgeting practices. &n the first part of 

the paper we analy$e budgeting research in the three theoretical perspectives, focusing on important

similarities and differences across perspectives with respect to the primary research question, levels

of analysis, assumptions about rationality and equilibrium, budgeting and nonbudgeting variables,

and causal(model forms. &n the last part of this paper we identify four interrelated criteria for 

selective integrative research and provide an e'ample of using these criteria for research on

 participative budgeting.

Budget Tec.nlg/ * Inn'at%n

&nnovation needs investment. 4.ON has recogni$ed the sign of the times and has significantly

increased its overall e'penditure in new technologies. By ma%ing new investments in

demonstration projects, in 10> e'penditure and in developing basic research at universities,

4.ON is facing the growing challenge of finding technical solutions for the energy system of 

the future &n 6@::, 4.ON invested around 491 :@< million in the research and

implementation of innovative technical solutions.

he variety of topics to match the requirements of tomorrow)s energy system has led to a

readjustment of major areas of research- &n 6@:@, the main focus was based on activities in

centrali$ed generation. +or 6@::, the budget reflects the increasing importance of growth

areas within the whole value chain.

REFERENCES

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 Neelam #umari, /adhu Sharma. e't boo% of Nursing Service 0 Adminstration.

 published by .G Boo%s 4dition :st K6@::?p 7:;(777

 Ann Boyle 3rant .Nursing Feadership /anagement 0 1esearch ublished by

Springhouse Notes. 4dition :st  p ;6

2olper +. Fawrence, L"ealth !are AdministrationM, edition 7 rd , published by Iones

and Barlett, p6@(6:

#apoor 1enu, Le'tboo% of "ealth 4conomics for nursesM, published by Fotus

ublishers, 4dition :st KSeptember 6@@;?, age number 6 7D.

INDE-

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S1NO CONTENT PAGE NO1

:. /eaning 0 >efinitions of Budget :

6. urpose of Budget :

7. +eatures and &mportance of Budget :(6D. rinciples of Budget 6

. ypes of Budget 7

C. !lassification of Budget

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TOPIC# Budget Pre$arat%n ( ,"$%tal

 

SUBMITTED TO SUBMITTED BY

1espected /s. 1avneet #aur /eena%shiFecturer /.Sc KN? && ear 

/ental "ealth Ksychiatric? Nursing /edical Surgical Nursing