How do the differences between profit and non-profit organisations affect the way in which they should employ budgetary controls - Essay Example

Only on StudentShare

Extract of sample
How do the differences between profit and non-profit organisations affect the way in which they should employ budgetary controls

Budgetary controls involve regulating the operations of an organization by establishing targets and standards with regard to expenditure and income. This regulation is done to ensure performance of a business institution. It incorporates various methods of applying financial values to financial forecasts in the management of a business organization. These values are usually compared to actual estimates. Irrespective of whether business is profit or non-profit oriented, having budgetary control is essential since it makes sure that the organization realizes success. However, non- profit organizations usually use budgetary control methods that are different from those used by profit oriented business establishments (Kaplan, 2001). Budgetary control methods used by business establishments usually involve management accounting (Lanskroner, 2002). Management accounting refers to the process whereby the management of a business establishment uses accounting information that is provided to them in order to make decisions concerning the future of the company. For companies whose main intention is to realize profits, the accounting information is fundamentally future oriented and not past oriented. The information is also model based and not case based. ...
Download paper

Summary

Name Instructor Course Date How do the differences between profit and non-profit organizations affect the way in which they should employ budgetary controls? The main objective of almost all business organizations is to make profits. However, there are some business establishments whose main aim is not to realize profits (Kaplan, 2001)…
Author : estevan59

Related Essays

Short-run profit maximization
It is evident from the study that in business, you obviously want to avoid spending more money than you make. Speaking in terms of production, there is a point where when you start producing too much, it becomes unprofitable. Therefore, it is optimal for a company to produce as long as they are making a profit. After the optimal production point is reached, the company begins to lose money if they continue to produce. If you picture marginal revenue (the additional revenue generated from increasing sales by one unit) as a line on a graph, and picture marginal cost (the cost of producing one...
3 pages (753 words) Assignment
Investigation of the effect of the balanced scorecard on the performance of the for profit organisations
The researcher states that it is important to first understand and comprehend the basic concept of balanced scorecard before investigating its impact on the performance of the organisations. The balanced scorecard provides a new and changed approach towards the management of the performance of the organisation. It is important to manage, monitor, and control the organisational performance in order to make sure that the organisation is able to accomplish the objectives, vision, and mission defined by the top management. There have been several research studies in order to understand the...
36 pages (9036 words) Dissertation
Profit and Loss Account
The indirect costs (those that cannot be directly attributed to generating revenue) are then deducted from the gross profit to give a net income figure. A single profit and loss account provides information about how much it costs to generate sales, and how much room for manoeuvre the business has before an increase in the costs of generating those sales causes the business to become unviable (e.g. raw materials may increase to a point where it is no longer financially viable to make a particular product). This can be shown by considering the gross profit as a percentage of the sales revenue....
2 pages (502 words) Coursework
Balanced Scorecard and Its Application to Not-For-Profit Organisations
These measures form the framework for the implementation of the strategy. BSC obtained its name from the attempt to balance both financial and nonfinancial performance measures. While traditional approaches to strategy focused on the financial aspect of the business the balanced scorecard looks at both the financial and non-financial aspects of the organisation. Finkler (2010, p. 299) indicates that the balance scorecard approach monitors how well the organisation is achieving its goals based on four critical perspectives: financial perspective; customer perspective; internal business...
4 pages (1004 words) Essay
Cost, Volume, and Profit Formulas
The preferable outcome in most businesses is to sell as many units as possible, thus high volumes are preferable. The selling price is the unitary price of each product. It can be calculated by dividing the total sales by the amount of units sold. If a company had sales of $5,000 and it sold 100 units the unitary price is $50 per unit. There are two types of costs. These two types of costs are variable costs and fixed costs. A variable cost can be defined as a cost of labor, material, or overhead that changes according to the change in the volume of production units (Investorwords, 2011)....
2 pages (502 words) Essay
Ratios/Profit Margin
In special cases, ratio analysis is done to help in predicting possible future bankruptcy of the company. The main financial ratios used in most cases include: Liquidity ratio, financial leverage ratio, asset turnover rations, dividend policy ratios and profitability rations. Generally, these ratios are useful indicators of a firm's performance and the prevailing financial situation. Do ratio tells the whole story? To some extents, financial ratios play an important role by providing an overview of accounting and financial position of the company. However, ratios do not give the overall...
3 pages (753 words) Assignment
Local Government Or A Non-Profit Organization
Budgeting process refers to determining expenditure needs of the organization in line with its overall objective and long term strategies. It is usually done after assessment of expected expenditure because its relevance is ultimately decided by judging the real expenditure and the proposed allocation in a particular program and also in overall budget. Thus, monitoring of budget is also an important part of the whole budgeting process. Budgetary variances between actual and budgeted allocations must be minimized to increase reliability of forecasting. Some of the common causes of budget...
5 pages (1255 words) Article
Got a tricky question? Receive an answer from students like you! Try us!