Understanding the Concept of Budget Deficit

Abstract

According to the available research, those economists agree that high-budget deficits today will reduce the growth rate of the economy in the future. In this reflection paper, we are verifying the statement and the questions affiliated with it. This statement is true as the budget deficit have had an immense impact on the economic conditions of the United States. However, economists suggest that the problem of budget deficit can be improved with the help of effective financial management. Government should utilize effective management techniques to curb the dramatic issues related to the budget deficit.

Abstract2

Introduction5

Discussion5

1. Why it is Important to Control and Manage Budget Deficit5

2. The Effect of Government Budget Deficit over Economy6

3. Facts about Budget Deficit7

4. Financial Plans or Budgeting9

5. Financial Performance10

6. Financial Systems12

7. Accounting Standards13

7.1. Standards of Reporting14

7.2. To Ensure Integrity14

7.3. To Ensure Objectivity14

7.4. To Maintain the Confidentiality15

7.5. To Improve the Productivity15

7.6. To Ensure Professional Competence & Due Diligence15

7.7. Maintaining Professional Behavior15

8. Internal Control15

9. Role of Effective financial management in controlling the issues related to the Budget Deficit20

10. Why it is important to incorporate FM in the budgetary Decisions of Government23

10.1. Forecasting of Expenses & Associated Revenues23

10.2 Capital Budgeting Decisions23

10.3. Decisions Regarding the Source of Finance24

10.4. Performance Appraisal24

10.5. Money Availability25

11. What is the Importance of the Federal Budget Process?25

12. Role of Accounting Standards in the Development of Financial Statements26

12.1. Pros and Cons of IFRS28

13. How Financial Information Plays a Part in the Performance Measurement?30

14. Use of Financial Information in Making Government Decision31

References33

Understanding the Concept of Budget Deficit

Introduction

Problem of Budget deficit has attracted the attention of professional and professional bodies. Policy makers are continuously trying to identify new ways of controlling this issue of budget deficit. This research is a reflection of underlying paper and mainly focuses on the issue related to the budgetary gaps (budget deficit). Government, its agencies and all other organization faces the issue when their target expenses exceed their actual expenses (Furgang, K., Furgang, A., 2011). However, financial professionals are utilizing various financial management techniques to curb this issue.

Discussion

1. Why it is Important to Control and Manage Budget Deficit

The budget deficit is the most important part of any economy that needs to put under control because increasing budget deficits tends to increase different problems in the economy. An estimated 3% budget deficit is considered as normal for any developing economy (Courant, P., Gramlich, E., 1986). Developed economies, on the other hand, is facing higher or lower percent of budget deficits. The developing economies like China, Syria, Pakistan and Japan etc are facing budget deficits problems in the same way as United States and Europe is facing. There are various reasons which have destabilized their economy to an extent (Jones, 1997). There are some facts about the budget deficits in the developed and developing countries which are recognized and focused in the whole world. Following are the developing countries which are facing budget deficits either more or less:

Argentina

Bolivia

Botswana

Brazil

Bulgaria

Burkina

Burundi

Cameroon

Chad

Chile

China

Colombia

Congo

Costa Rica

Côte d'Ivoire

Dominican

Ecuador

Egypt

Ethiopia

Fiji

Ghana

Guatemala

Haiti

Hungary

India

Indonesia

Iran,

Jamaica

Jordan

Kenya

Korea

Lesotho

Malaysia

Mauritius

Morocco

Nepal

Nicaragua

Pakistan

Panama

Papua New Guinea

Paraguay

Peru

Philippines

Senegal

Seychelles

St. Vincent and the ...