Accounting and Financial Management

Accounting and Financial Management

Table of Contents
Operating budget.............................................................................................................................2
Process of preparing of the budgets.................................................................................................2
Benefits of the Master Budget.........................................................................................................4
Benefits of the Master Budget.....................................................................................................4
Investment Appraisal.......................................................................................................................5
Payback period.................................................................................................................................5
Advantages...................................................................................................................................6
Disadvantages..............................................................................................................................6
Net present value.............................................................................................................................6
Advantages...................................................................................................................................6
Disadvantages..............................................................................................................................6
Internal rate of return.......................................................................................................................6
Advantages...................................................................................................................................7
Disadvantages..............................................................................................................................7
Accounting rate of return.................................................................................................................7
Advantages...................................................................................................................................7
Disadvantages..............................................................................................................................7
References........................................................................................................................................8

Operating budget
Operating budgets are the budgets prepared annually which are normally stated in terms in the
classification codes of the budget. The major features of the operating budget are the pool value
of the resources required for the performance of the operation including the work of the others
(Ognjenovic, Ishkov, Cvetkovic Peric & Romanovich, 2016).
The main elements or the parameters of the operating budget are revenue, variable costs, fixed
costs, and non-operating expenses, non-cash expenses as well as cash used in the payment of the
capital costs. There are several costs which are included such as raw materials, finished goods,
salaries, wages, and utilities, rent and so on. Once the preparation of the budget is done, the
summary has been prepared with certain assumptions as well as projections. It is the duty of the
manager to answer the questions regarding the sales, goals, met or exceeded, or any expenses
that have been incurred in reality but unaccounted for yet. This overall results in the better
planning of the future costs and sales (Ng & Beruvides, 2015).
The main reason for preparing the operating budget is to undertake the analysis of the balance
between the operating expenses as well as income. It improves the overall efficiency and the
effectiveness of the organization. Further the operating budget is classified as deficit budget,
balanced budget, surplus budget depending upon the need and the performance of the business
(Liu, Wang Li & Ma 2018).