The zero based budgeting accounting essay

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The zero based budgeting accounting essay

Links Accounting Tutorial If you'd like to know how to better manage your personal finances our aim here is to provide you with an easy example of a bank statement reconciliation and a budget and at the same time illustrate some of the basic principles and terminology of double-entry bookkeeping using our LedgerLite program.

If it doesn't make much sense at first just continue following the instructions and it'll definitely become clearer as you progress. Because the same concepts apply to both personal and business finances you may be surprised to discover you're actually taking the first steps towards becoming the financial controller of a large organisation.

For a comprehensive introduction to double-entry booking we also recommend Dave Marshall's excellent free on-line tutorial So, you want to learn Bookkeeping! Even if your career aspirations are not so ambitious or your interests lie in areas other than accounting which is understandable!

The ability to understand financial reports such as a balance sheet or income statement is useful when making an investment decision and what better way to become familiar with them than by using them on your own personal finances. Entering a Bank Statement Let's suppose John has just received his bank statement and it looks something like this.

John notices immediately his bank account is overdrawn even though he was hopeful when he got paid there would be enough money in it to buy food, pay his rent and pay the electricity bill he forgot that his bank also charges a significant fee whenever his account is overdrawn!

He decides from now on The zero based budgeting accounting essay order to avoid overdrawing his account and being forced to pay the extra bank fee he will record his transactions in a cashbook. This will allow John to check his balance any time without having to wait for his statement to arrive.


It will also allow him to enter transactions before they occur so he can see their effect on his bank balance. He can then adjust his spending pattern to avoid his account becoming overdrawn.

John begins by downloading LedgerLite. Before he can create a cashbook and chart of accounts for his personal finances John must first delete the default cashbook, taxes and chart of accounts that are created automatically when LedgerLite is first run.

He then goes to the Maintain menu again, selects Taxes and deletes all the default taxes. He then goes back to the Maintain menu, selects Chart of Accounts and deletes all the default accounts. Equity doesn't begin with P but we had to use something other than E since we already chose that for expense.

You can think of P for property which means essentially the same as equity and represents what the company, or in our case John Smith, owns ie.

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There is another account type L for Liability that we'll use later when we look at budgeting. To create a new cashbook John goes to the Maintain menu and selects Cashbooks. This account can also be selected from a list by double-clicking in the account field.

Next John goes to the Cashbooks screen by clicking on Cashbooks in the dark blue navigation area on the left. He then selects the cashbook from the drop-down list labelled Cashbook and proceeds to create entries in the cashbook from his current bank statement.

To create the opening entry he clicks on the New button to switch the screen to New Entry mode. Because the opening balance of John's account is in credit ie.

Managerial accounting assignment zero based budgeting.. creative writing of nature

If the opening balance was a debit ie. This seems illogical at first glance and is one of the reasons newcomers to double-entry bookkeeping despair of it making sense.

The confusion occurs because in popular usage the terms debit and credit are most commonly used from the bank's perspective. However because what is a liability for the bank is actually an asset for the account holder when John enters the bank statement into his own accounting system he must reverse the position of the entries.

If this doesn't make sense don't worry about it for now and just continue with the example.

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When you are ready for a more detailed explanation of debits and credits you can refer to our essay on accounting theory. And because he is making the entry from a bank statement he puts a tick in the check box next to On Statement. Once the entry is complete John clicks the Save button to save the entry to the database.

As soon as John does this two things happen. Firstly, the cashbook entry is saved to the database and secondly, a double-entry consisting of a debit to the BNK - Bank account and a credit to the NET - Opening Net Worth account is created in the general ledger and linked to the cashbook entry.

At this point John views the balance sheet by clicking on Balance in the dark blue navigation area on the left and then clicking on the Print button in the bottom right-hand corner.

The balance sheet shows the balances of John's asset and equity accounts and provides him with a statement of his current financial position. It tells him that his total assets are John now goes back to the Cashbooks screen, clicks on the New button and proceeds to enter the next entry on his statement.

Because John's pay is credited to his account he makes this entry a Deposit Debit. Once the entry is complete he clicks on the Save button.For Developers By Developers. SourceForge is an Open Source community resource dedicated to helping open source projects be as successful as possible.

Zero-Based Budgeting: Zero or Hero? Introduction For many organizations, the thought of rebuilding the company budget from the ground up can be nightmare-.

Financial planning software, personal finance software, and investment software for consumers, investors, financial advisers and investment managers. Zero Based Budgeting Zero-based budgeting avails a better approach to dealing with the drawbacks associated with incremental budgeting.

The zero based budgeting accounting essay

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