The Budget Case

Budgets are an essential aspect of any business as they help an organization to gain control of its finances. In case a business has a funding organization, the funders can keep track of the company’s monetary spending. When creating a reasonable budget, various steps must be followed to develop the best budgeting strategy. Consequently, ABC manufacturing company must consider this process when drafting its budget. According to Community Tool Box (2020), a business should include its projected expenses in its budget. In the case of ABC Company, it is evident that the company has listed its costs correctly. Their budget also contains the projected income, which is part of the budget-making process. Given that the president cuts the funding by 20%, ABC Company has given a rough estimate of the following year’s expenses.

An essential aspect of strategic planning in any company is the creation of a budget. The managers use these budgets to make decisions. The control of activities such as expenses and finance options relies on managerial skills applied. It is the manager’s responsibility to ensure expenses are not inflated as they may cause slack in budget operations. They ensure that budgets are developed and are within the targets of the company. In a budget, every expense needs to be justified. If the manager cites any unnecessary expense, the manager has the role of eliminating it as it is not justifiable (Graybeal et al., 2018). As in the case of ABC Company, there is a likelihood that the president cuts the budget by 20%. This may be due to some expenses not being justified. Also, the president is quite conversant with the company’s targets. If the budget made does not work within its parameters, he is entitled to cut the budget to meet its goals and vision. By doing this, the president shows good leadership and full control of the ABC Company.

A company that operates based on ethical considerations is responsible for ensuring the budget is based on those ethics. When making a budget, honesty is one of the moral principles that should be considered. Honesty is displayed when resources are allocated according to the interests of the company. When numbers are fudged, this shows a level of dishonesty in the budget. The ABC Company supervisor shows a certain level of deception when he decides to inflate the budget numbers for personal gains. Also, conflicts of interest are another ethical issue displayed at ABC. For instance, the supervisor increases the budget to accommodate his interests in visiting Las Vegas, claiming he has worked so hard. Skewing the allocation is dishonest and acting irresponsibly as a supervisor to ABC Company (Gartenstein, 2021). Indeed it is evident that ethical issues of honesty, conflict of interest, and responsibility arise due to inflating the budget.

In conclusion, there is no doubt that the budget-making process must follow specific ethical considerations. Given that the managers use these budgets to plan, it is their responsibility to keep track of what happens in budget making. They should therefore watch out for inflated budgets to avoid having a budget with a deficit. Protecting the image of a company is essential as most companies depend on funders to finance their operations. ABC manufacturing company follows all the processes of a fair budget-making process except that the figures are inflated, which tasks the president to cut the budget by 20%. This shows that the president has good leadership skills.

 

 

References

Community Tool Box, (2020). Planning and writing an annual budget. Retrieved February 22, 2021, from https://ctb.ku.edu/en/table-of-contents/finances/managing-finances/annual-budget/main

Gartenstein, D. (2021). Budgeting ethics. Chron. Retrieved February 22, 2021, from https://smallbusiness.chron.com/difference-between-accounting-costs-accounting-profit-26278.html

Graybeal, P., Franklin, M., & Cooper, D. (2018). Principles of accounting, Volume 2: Managerial accounting. OpenStax. http://cnx.org/contents/920d1c8a-606c-4888-bfd4-d1ee27ce1795@14.13

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