BUDGET

INTRODUCTION
• One of the primary objectives of
management accounting is to provide
information to management 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
become proficiency will 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.
[Link]
• Budgeting is the formulation of plans
for a given period in numerical terms.
Harold
Koortz
DEFINITION

• A budget is a plan that uses

numerical data to predict that
activities of an organization 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
making.
• Budget clearly recognizes controllable and
uncontrollable cost areas.
• Budget offers a useful format for communication
fiscal objectives.
• Budget allows feed back of utilization 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 organization.
FEATURES OF BUDGET

It should be flexible.

It should be synthesis of past, present,
future.
It should be product of joint venture for co-
operation of executives department heads
or different level of management.
It should be in the form of statistical laid
down in specific numerical terms.
It 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 organization.
• Budget facilitates co-ordinating operation of
various departments and section for realizing
organizational objectives.
• Budget serves as a guide for action in the
organization.
• Budget helps one to weight the value and to
make decision when necessary or whether
one is of a greater value in the programme
that the order.
 PRINCIPLE OF BUDGET

• Budget should provide sound financial

management by focusing on requirement of
the organization.
• Budget should focus on objectives and policies
of the organization. It must flow from
objectives and give realistic expression 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.
• Budgetary process requires consistent delegation for
which fixed duties and responsibilities are required
to be allocated to managers at different level for
framing and executing 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 checks
and balance against the adoption of too high or too
low estimate, almost care is a must for fixing
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 are to be prepared and interpreted
consistently throughout the organization in the
communication in the planning process.
 TYPES OF BUDGET

• Incremental budget
• Open ended budget
• Fixed ceiling budget
• Flexible budget
• Roll over budget
• Performance budget
• Programmed budget
• Sunset budget
• Sales budget
• Production budget
 CLASSIFICATION OF BUDGET
Classified on the basis of :-
• Coverage of functions – Master &
Functional budget.
• Natured and activity covered –
Capital & Revenue budget.
• Period of Budget – long term and
short term budgets.
• Flexibility adopted – Fixed and
flexible budget
 MASTER & FUNCTIONAL
BUDGET
• A mastered budget is prepared for the entire
organization incorporating the budget of
different functions. For eg. When we refer to
the annual budget of Govt. of India. It
incorporates the budget out lays of different
ministries.
• A functional budget is prepared incorporating
a major function and its sub functions since
an organization may have a number of
functions, numerous functional budgets are
prepared. Eg., production budget, cash
budget in an organization.
 CAPITAL & REVENUE BUDGET

• An organization activities involve two process.

Creating facilities for carrying out activities and
actual performance activities. Creating facilities
for carrying out activities include capital
expenditure whole returns accrue over a number
of years. For such activities, capital budget is
prepared which is essentially a list of what
management believes to be worth while projects
for acquisition of new assets together with the
estimated cost of each project.

• Revenue budget involves the formation of target

for a year or so in respect of various
organizational activities such as production,
marketing, finance, etc., Thus a revenue budget
includes expenditure and earning for a specific
period like one year.
 LONG TERM AND SHORT TERM
BUDGET
• Many organization integrate their yearly
budgets with long term projection of
business activities and along with yearly
budget; they prepare budgets for a longer
period of 2-3 years. When one budget period
is over budgets are prepared for the next
year and subsequent 2-3 years.
• The short term budget is for a year and is
divided into a number of periods for effective
implementation. For eg. Cash budgets are
prepared on yearly basis as well as on
monthly or quarterly basis to facilitate better
cash management.
 FIXED AND FLEXIBLE
BUDGETS
• Generally, organizations prepare budgets which
pertain to only certain projected fixed volume of
operations for a year or so such budget are known
as fixed or static budgets. When an organizations
volume of business can be predicted with fair
amount of precision, the fixed budget is
satisfactory.
• A budget which is designed to change in
accordance with the activities of the organization
is known as flexible budget. It considers several
level of activity and assures that labour, material
or facilities used in production and hence cost
vary with a known relationship to the actual
volume of activity.
TYPES OF BUDGETING

There are mainly two types of

budgeting.
• Performance Budgeting
• Zero base budgeting.
PERFORMANCE BUDGETING

• A performance budgeting is an input/output

budget or costs and results budget. It shows
costs matching with operations. Performance
budget emphasis on non financial measures
of performance which can be related to
financial measures in explaining changes and
deviation from planned performance.
Performance measurement are useful for
evaluating past performance and for planning
future activities. Performance budgeting,
results into the following.
• It correlates the financial and physical
aspects of every programme or
activity.
• It improves budget formulation, review
and decision making at all levels of the
organization.
• It facilitates better appreciation and
review of organizational activities by
the top management.
• It makes possible move effective
performance audit.
• It measures progress towards long
term objectives.
ZERO BASE BUDGETING

• This was applied for the first time in

preparing the divisional budgets of
Texas instruments of the USA in 1971.
• Zero base budget is based on a system
where each function, irrespective of the
fact whether it is old or new, must be
justified in its entirely each time a new
budget is formulated. It requires each
managed to justify his entire budget in
detail from scratch that zero base.
The process of zero base involves four basic
steps.

• Identification of decision units,

• Analysis of each decision unit in the
context of total decision package.
• Evaluation and ranking of all decision
units
• Allocation of resources to each unit based
upon.
 BENEFITS OF ZERO BASE
BUDGETING
• Effective allocation of resources.
• Improvement in productivity and cost
effectiveness.
• Effective means to control costs.
• Eliminator of unnecessary activities.
• Better focus or organizational
objectives.
• Saving time of top management.
 BUDGET PROCESS
Indian method

• Annual method i.e., annual budget will

be made in India.
• Month : Starts from Sep/Oct of
current years.
• Made by : Directorate of health and
family welfare.
 Process
Review the goals of agency of
Hospital.

Review Objectives of existing

programme.

Revise the existing programe.

Manpower, capital and operating

expenses are computer or each
programme, old and new.
Alternative methods are identified for
realizing designated objectives.

Comparison is made to determine which

alternative is most cost effective.

Budget is develop.
FUNCTION OF BUDGET IN NURSING
• Identifies the importance of and develops
short a long range fiscal plans that
reflects unit needs.
• Articulate and documents units needs
effectively to higher administrative levels.
• Assess the internal and external
environment of the organization in
forecasting to identify driving forces and
barriers of fiscal planning.
• Demonstrate knowledge of budgeting
and uses appropriate technique.
• Provide opportunities for subordinates to
participate in relevant fiscal planning.
• Co-ordinates unit level fiscal planning to
be congruent with organizational goals
and objective.
• Accurately assesses personal needs using
predetermined standards or an
established patient classification system.
• Co-ordinates the monitoring aspects of
budget control.
• Ensure that documentation of clients need
for services in clear and complete for
facilitate organizational reimbursement.
 ROLE OF NURSE ADMINISTRATOR
IN BUDGETING
• Is visionary in identifying of forecasting
short and long term unit needs, thus
inspiring proactive rather than reactive
fiscal planning.
• Is knowledgeable about political, social
and economic factors that shape fiscal
planning in health care today.
• Demonstrate flexibility in fiscal goals
setting in a rapidly changing system.
• Anticipates recognized and actively
problems solve budgetary constraints.
• Influences and inspires group members
to become active in short and large
range fiscal planning.
• Recognizes when fiscal constraints
have resulted in an ability to meet
organizational or unit goals and
communicate this insight effectively,
allowing the chain of command.
• Ensure that client safely is not
jeopardized by cost constraints.
 LIMITATION OF BUDGETING
• Planning, budgeting or forecasting is not
an exact science; it uses appropriately
and judgment which may not be 100%
accurate. At best a budget is an estimate
no one knows precisely what will happen
in the future.
• The 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. Many
time budgeting has paid only lip services
to its executing.
• A budget is only a tool and neither
eliminates nor takes over the place of
management. A budget cannot be
substituted for management but should
only be used by management for
accomplishing managerial functions.
• The establishment of a budgeting
process takes time. Also sometime too
much is expected from a budget and in
case expectation 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.
BUDGETS FOR GOVERNMENT OF INDIA

• India’s budget : India’s public finance

system follows the British pattern. The
Indian constitution establishes the
supremacy of the Parliament –
specifically the Lok Sabha in financial
matters.
• Proposal for taxation or expenditures,
however, may be initiated only within
the council of ministers – specifically by
the Ministers of Finance.
• Ministers of finance is required submit to
parliament, usually on the last day of
February, a financial statement detailing the
estimated receipts and expenditure of the
Central Govt. for the forthcoming fiscal year
and financial review of the current fiscal
year.
• The Lok Sabha has one month to review and
modify the Government’s budget proposals.
If by April 1 the beginning of the fiscal years,
the parliamentary discussion of the budget
has not been completed, the budget a
proposed by the minister of finance goes
into effect, subject to retroactive
modifications after the parliamentary
review.
• On completion of its budget discussion,
the Lok Sabha passess the annual
appropriation act, authorizing the
executive to spend money, and the
finance act, authority the executive to
impose and collect taxes.
• Supplementary requests for funds are
presented during the course of the fiscal
year to cover emergencies, such as war
or other catastrophes.
• The bills forwarded to the Rajya
Sabha (Council of State the upper
house of parliamentary) for comment
Lok Sabha, however, is not bound by
the comments, and the Rajya Sabha
cannot delay passage of money bills.
When signed by the president, the
bills become Law.
»SUMMARY

»CONCLUSION