BUDGET

Budget

Budget

Budget is a tool for control and optimization of productive resources. It identifies and combines human, material and organizational available resources. The budget is constrained by the existing productive capacity of the company or the project. Budgeting is the process by which the goals of an organisation, and resources to attain those goals, are quantified and communicated (Atkinson, 2007).

Budgetary Control

Budgetary control can be defined as, “A means of achieving the financial control of an entity whereby the actual results for a defined period of time are compared with the budgeted results, any differences (or variances) being noted, and some corrective action taken to bring the actual activities back into line with the budgeted ones if such variances need to be dealt with.” This paper provides a detailed operation budget for the project being proposed by the management. The paper also relates the services and revenue budget with the operations' budget for the project.

Budget Highlights for the Project

The project involves various activities for which payments have to be made. Specifically, the project will entail three major expenses in relation to operations. The expenses break-up for these activities are shown under the following table:

Components of Operations

Budget in $ million

Personnel Expenses

1,000,000

Direct project expenses 400,000

Administrative or overhead expenses

600,000

Total

2,000,000

As mentioned above this budget is divided in to three parts

1.Personnel Expenses

2.Direct Project Expenses

3.Administrative or Overhead Expenses

Personnel Expenses

As this project will start on a large scale, personal expenses will have a vital part of total expenses. Personnel expenses cover the employees who are being paid from the grant funds. The personal expenses will be settled through the use of payroll. Determination of the payroll involves computing three amounts: gross earnings (wages or salaries), payroll deductions, and net pay.Gross earnings show the total compensation earned by the employee in the form of wages, salaries, commissions and bonuses. They reflect the maximum amount of earning payable to an employee (Cammann 2006). Payroll deductions show the applicable allowances that are deductible from the gross income of workers.

These allowances could be mandatory like FICA and income taxes, and voluntary, like employee credit pool participation and retirement plans. A typical accounting entry for recognizing the payroll expense appears in the journal like the one given in the following table:

Debit Accounts

Credit Accounts

Debit $ million

Credit $ million

Office Salaries Expense

750,000

Wages Expense

250,000

FICA Taxes Payable

125,000

Federal Income Taxes Payable

175,000

Union Dues Payable

150,000

Salaries and Wages Payable

550,000

Total

1,000,000

1,000,000

The credits show the payroll deductions and net payable ...