According to Kumra (2016), budgeting is an important technique which is widely used by organizations across the world. Budgeting is the estimation of the revenue generation of a company and its expenditure for the future period or for the upcoming financial year (Shah, 2007). Two journals have been selected to carry out the research. The two articles which are selected are “The development of budgets and their use for purposes of control in Japanese aviation, 1928-1945” written by M. Noguchi and T. Boyns and the other one is “Spending patterns with lapsing budgets: Evidence from U.S. Army Hospital” written by R. Balakrishnan, N.S. Soderstrom and T.D. West. These two articles are used to analyze and evaluate the techniques, which are used for making budgeting decisions.
Budget is an estimation of expenses and revenue over a specific time period (Towey, 2013). Budgeting is an important management accounting technique that can be used to allocate resources for the upcoming year. Budgeting technique is also considered a quantitative plan (J.K. Shim, Siegel, and A.I. Shim, 2011). Budgeting is also considered to be a technique which is generally used by the management team of any particular organization. There is a concept called balanced budget which means at the end of a particular period the expenses and the generated revenue are expected to be similar. Another concept which comes is known as the surplus budget which means the expenses has exceeded the revenues which has been generated. According to Jeston (2014), budgetary process clearly depends on assumptions based on previous years.
The process of budgeting includes estimation of the cost, which will be incurred for the production process in the upcoming year; it helps to identify the trend of sales of a company (Chohan, 2016). The process of budgeting also helps to give an economic view of any particular sector. Budget is considered a financial plan but it includes financial as well as non- financial information (Dropkin, Halpin and Touche, 2011). Budgeting is mainly considered as a forecasting technique. In contrary to the discussed explanation, Wyatt (2012) has mentioned that in various organizations there can be a political infighting because managers of the organization are approving capital budget.
There are various forms of budget and budgetary process, which is discussed below:
When any individual plan their budget to allocate resources for the expenses in the upcoming year and to manage their personal finances is termed as Personal Budget (Barr, and McClellan, 2008).
The budget, which is not changed in its tenure even though there are any proper changes which as, occurred in that specific period (Alviniussen and Jankensgard, 2015). In a static or fixed budget the figures, which is being allocated for resources, also remains unchanged in that particular tenure (Duncombe, 2018).
In this kind of budget, a financial plan is set to carry out various activities is generated for the upcoming year. In a master budget the financial plan which is formed aims at sharing to the shareholders or the investors of the company.
Flexible Budget
In this form of budget, the expenses and the revenue, which is being allocated changes with the change in various factors like change in sales, change in productions and many more.
The budget, which is created to identify the cash inflow and outflow of the organization, is known as cash budget (Rumble, 2018).
The journal which is written by Balakrishnan, Soderstrom and West (2007) explains how the concept of unutilized funds is affecting organizations. It explains the importance of the effective utilization of resources for carrying out business operations without any disruption. In this research paper it has been mentioned that there has been an exhaustion in the budget of the U.S. Army Hospitals and thus it illustrates the concept of Budget Lapsing. The selection of this article has two purposes. The first purpose is that the writer has evaluated the discrepancies which has occurred while allocating the expenditures. The second purpose for the selection of this article is that it has explained the relationship between the organizational objective and the technique of resource allocation. In this article it has been seen that the management department of the U.S. Army Hospitals had to face problems due to improper budget management. The issues which has raised is due to budget maximization and improper interpretations of revisions of budgets. One research question which has been evaluated by the writers of this article has a relation to monthly expenses of the hospitals, total number of permanent employees and how the budget lapsing had an impact on the hospital in the first few months of the financial year.
The other selected article written by Noguchi and Boyns (2011) evaluates the role of Japan in the process of budget development within few companies especially operating in the transportation sector between the year span of 1928 to 1945. The organizations which are mentioned in the article is Japan Air Transport (JAT), Japan Airways, Japan Mail Streamer (JMS). The research question which has been evaluated in this article is related the entire process which is used for budget developments. This article deals with the budget development of specific region i.e. Japan. This article also answers a research question by using sociological concepts and gives an insight on the decoupling between formal policies in the organizations and the actual practices.
In both the research paper there exists limited similarities. In one of the paper the budgetary process is taken in to account while in the other research paper the trends of the income and the expenses of one particular organization is evaluated. The pattern of the U.S Army hospitals management team is different from the budgetary preparation pattern of the Japan companies.
Along with the similarities the two articles there exists various dissimilarities also. The article which is written by Noguchi and Boyns (2011) legitimize the subsidies of the receipts from the government for preparing the budget of the two companies mentioned in the article i.e. Japan Mail Streamer and Japan Air Transport. On the other hand, the article which is written by Balakrishnan, Soderstrom and West (2007) states that according to the saving-dissaving model the administrator of the U.S. Army Hospital tends to pile up the stocks of various supplies including medicines till the end of the upcoming year. This means that the administrator aims to reserve the resources which would be utilized in the upcoming financial year. Thus, this budget aims at generating reserves after all the monetary and non-monetary resources gets accelerated. Thus, from the above discussion it can be said there exists differences between the two journal articles. As per the findings of the journal article written by Balakrishnan, Soderstrom and West (2007) there exists a trend in the expenditures though the budget is already laid out whereas the journal article written by Noguchi and Boyns (2011) mentions the various process in which a budget is prepared.
The outcomes from the article written by Balakrishnan, Soderstrom and West (2007) describes the pattern of expenses that is followed by the U.S. Army Hospitals. In this article it has been found that the expenditure at the end of one particular financial year increases approximately by 15% from the budgeted expenditure. From the findings of this journal article it can be said that the regulation which has been passed by Continuing Resolution Authority (CRA) it divides the funds which are available across various TRICARE branches and armed forces. So, it can be said that a budget uncertainty is created and it leads to decrease in expenses when the financial year starts.
It has been found out from the articles that the patients who visit U.S. Army Hospitals delay their treatment in the first quarter of the year due to less budget allocation. It has also been researched that the expenses in the first part of the year is much less as compared to the ending time of the financial year. The another outcome extracted from this research paper is that the budgeting of the U.S. Army Hospitals is done by dividing the departments in to four segments. The four segments are ambulance services, ancillary services, inpatient care services and support services. Among this four services the segment which deals with inpatient services follows uniform budgeting system and the pattern of expenses in this segment is dissimilar from the pattern of expenses of other segments.
The major outcome which comes out from the article written by Noguchi and Boyns (2011) is that before 1938 the government was required to offer statements of budgets. Government subsidies was offered to Japan Mail Streamer (JMS) to maintain its routes both domestic as well as international. So, in Australian companies the expenses related to particular branch can be considered as a method of budget preparation.
On the other article it has been seen that Japan Airways prepared its budget through the preparation of income and other operating expenses in the entire budget statement. The outcome which can be extracted from this article is that budget cannot be formulated on the basis of actual figures but it can be formed by estimating various operational expenses of the organization. So, it can be concluded that various Australian companies can formulate the budget on the basis of estimated figures and not on the basis of the actual results from the previous years.
Conclusion
From the entire study it can be concluded that the budgetary preparation of organizations like U.S. Army Hospitals and Japan Airways primarily depend on the administrative department or the management department of the organization. It has been mentioned in one of the research paper that various organization like the U.S. Army Hospital tend to lower down the expenditure in the beginning of any financial year but the expenditure increases when the financial year comes to an end. On the other hand, the other research paper suggests that when an organization prepare and budget before the start of its operations it is mostly influenced by the government of that particular country where the organization is carrying out its operation. It can also be concluded from the research paper is that there are various organizations who prepare the budget keeping in mind the actual figure of the previous year.
Reference
Alviniussen, A. and Jankensgard, H., 2015. Enterprise risk budgeting: bringing risk management into the financial planning process. 6TH ed. London: McGraw Hill.
Balakrishnan, R., Soderstrom, N.S. and West, T.D., 2007. Spending patterns with lapsing budgets: Evidence from US army hospitals. Journal of Management Accounting Research, 19(1), pp.1-23.
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher education. 7TH ed. New Jersey: John Wiley & Sons.
Chohan, U.W., 2016. The idea of legislative budgeting in Iraq. International Journal of Contemporary Iraqi Studies, 10(1-2), pp.89-103.
Dropkin, M., Halpin, J. and La Touche, B., 2011. The budget-building book for nonprofits: A step-by-step guide for managers and boards. 5TH ed. New Jersey: John Wiley & Sons.
Duncombe, W., 2018. Lecture Notes in Public Budgeting and Financial Management. World Scientific Books.
Jeston, J., 2014. Business process management. 6TH ed. Abingdon: Routledge.
Kumra, N., 2016. The case for rights-based budgeting and spending in India. Evaluation Journal of Australasia, 16(1), pp.38-42.
Noguchi, M. and Boyns, T., 2012. The development of budgets and their use for purposes of control in Japanese aviation, 1928-1945: The role of the state. Accounting, Auditing & Accountability Journal, 25(3), pp.416-451.
Rumble, S., 2018. Prepare operational budgets. 8TH ed. AU: Cengage Learning.
Shah, A. ed., 2007. Budgeting and budgetary institutions. The World Bank.
Shim, J.K., Siegel, J.G. and Shim, A.I., 2011. Budgeting basics and beyond. 6TH ed. New Jersey: John Wiley & Sons.
Towey, D., 2013. Cost management of construction projects. New Jersey: John Wiley & Sons.
Wyatt, N., 2012. The financial times essential guide to budgeting and forecasting: how to deliver accurate numbers. 7TH ed. UK: Pearson.
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