FINANCE

Finance

Finance

The cash budget is an accounting device that is used to effectively monitor and manage the immediate cash flow of a home or business budget. Many people choose to employ a cash budget approach as a quick and easy way to monitor the financial condition of the household or a small business on a daily, weekly, or monthly basis. Generally, cash budgets are used to manage short-term cash flow by creating an organized means of keeping up with cash receipts and balancing them against cash disbursements during the accounting period.

Part of the genius of a cash budget is the simplicity of the approach. Often, it is possible to employ the principle of a cash budget by using a basic spreadsheet. Creating columns that make it possible to record basic information, it is possible to tell at a glance how much money came in for the period, and how much went out. This is accomplished by recording each cash receipt and cash disbursement on the spreadsheet. Often, the date, amount, and a brief description of the transaction are all that is necessary.

The cash budget is such a simplistic tool that even people who feel they lack any real accounting acumen can employ this approach. Because it is possible to track the cash in and cash out in the same format that is used for a standard check register, most people will find that the process takes very little time. A simply designed cash budget will provide a helpful look at how well the entity is doing in staying within the approved expenses for the period.

It is possible to keep a cash budget in a simple accounting ledger, or design one using spreadsheet software. Most accounting software programs are also equipped with a simple cash budget feature that will gather data from within the database and provide a quick snapshot of the period under consideration.

Year

 

 

0

7900000

7900000

1

70000

-21000000

2

120000

-36000000

3

140000

-42000000

4

80000

-24000000

5

60000

15600000

IRR

 

312%

NPV

 

($72,003,770.12)

From the cash budget of Caledonia Productswe conclude that that its deficit for the company as the entire budget amount is negative.

The purpose of this paper is to explore the various stages of the budgeting process and evaluate their effectiveness. I will discuss the role of the budget as an analytic tool and explain how the budget can be used to evaluate Alpha Manufacturing performance, eliminate inefficiencies in an Alpha Manufacturing's performance, and explain the budget's role in the business control cycle. I will further analyze internal and external control mechanisms that can be put in place to monitor and evaluate the budget and finally describe how the budget can be used in the performance accountability and reward process.

The five stages of the budgeting process are:

1.) Investment screening and selection

2.) Capital budget proposal

3.) Budgeting approval and authorization

4.) Project tracking

5.) Post completion audit

In the investment screening and selection phase, projects consistent with corporate strategy are identified by production, marketing and research, and the firm's development management. Once identified, projects are evaluated and screened by estimating how they affect future firm cash flows and hence, the firm's value (Peterson, ...