Question

1. What types of resources could be allocated in a budget?

2. To ensure effective monitoring and reporting of budgets what do you need to do?

3. You will need to prepare financial reports for management. What do reports answer?

Thank you

Answer 1

1. While preparing a budget, those resources which are are scarce in supply, i.e. that supply of which is lower than its demand should be allocatd. Also, it shlould be practically feasible to be able to quantify those resources in measurable terms so that its vlauecan be ascertained. Like for example, the total number of skilled labour hours, the total amount of raw materials - they all are measurable & can be allocated under the different heads for which a budget is prepared.

2 To ensure effective monitoring and reporting of budgets, the managemnet should continuously measure the results after a gap of certain time periods like weekly, monthly, quarterly, etc with the budgeted results. By doing this, they can readily find out the gaps & variances from already defined budgets. Thusm they will be in a better position to take remedial action in case of unfavourable variances at the right times thereby, making the budget a success.

3. The financial reports are the answer to all the question that variuos stakeholders like employees, management, share holders, investors, creditors, government can possibly have. They contain and reflect all the information for the time period to which they relate. So, for the managment it provides answers like how much is the total profits, how much they have been successsful in acheiving the desired budgeted results. For investors, they answer the questions relted to growth in value, Earnings per share.