Budgeting is used by the managers to determine the future course of actions of the organization. It helps the organizations to estimate its future action. It is useful in satisfying the future course of actions.
Mr. M 's request should be rejected by Mr. C.as Mr. M had requested to Mr. C to include the convention expenses in July's budget, which is very common issue that managers face. Usually the managers try to balance out the heavy future expenditure in the low expenditure months are tried to be balanced by the managers. Which is ethically incorrect. Budget should be prepared in a way that it projects the actions to be taken correctly.
At this point of time expenditure is not legitimate as the event might get cancelled or its schedule get change, it raises a question on the requirement of the expenditure. Moreover, it will lead to blockage of working capital and window dressing of budgets which will further reduce the authenticity of budget.
Budgetary integrity will suffer, and major object of budget preparation will be defeated, and it could not be depending upon for future decision making. Instead of making such adjustment, company could make provision of certain foreseeable future expenditure (i.e. advertisement) up to some extent it is certain that there will be an outflow of resources.
The three major objectives of budgeting involve (1) establishing specific goals, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with the goals.
a. Cash Budget estimates the expected receipt (inflows ) and payment (outflows) of Cash during the given period. The Cash Budget for Katherine Malloy as below.
Cash balance at the end of December 31, 2016 is $3,000
b. The Budget presented is a Static Budget since the Budgeted income and Expenses remain constant, and do not changes with respect to change in any variable factor.
c. Implication for Katherine Malloy is that cash requirements at the end of December 31 to pay spring semester tuition fee is $3,700. However cash available at the end of December is only $3,000, and hence, there would be a requirement of Bank Loan for the remaining amount.