Financial management

Basic Accounting,
Financial Statements
Budget
CHAPTER - 1 INTRODUCTION TO FINANCIAL MANAGEMENT
Meaning, Definition of Finance, Meaning, Definition of Financial Management, Types of Finance, Objectives of
Financial Management, Approaches to Financial Management.
CHAPTER - 2 BASIC ACCOUNTING
Accounting Concepts, Types of Accounts, Credit & Debit, Principle of Double Entry, Books of Accounting.
CHAPTER – 3 FINANCIAL STATEMENTS
• Income statement, • Position statement, • Statement of changes in owners equity, financial position.
CHAPTER – 4 BREAK-EVEN ANALYSIS, BUDGET & BUDGETING
Business concern needs finance to meet their requirements in the economic world. Any kind of business activity depends
on the finance. Hence, it is called as lifeblood of business organization. Whether the business concerns are big or small, they
need finance to fulfil their business activities, Finance may be called as Capital, Investment, Fund etc.

MEANING OF FINANCE
Finance may be defined as the art and science of managing money. It includes financial service and financial instruments.

Finance also is referred as the provision of money at the time when it is needed. Finance function is the procurement of
funds and their effective utilization in business concerns.

DEFINITION OF FINANCE
According to Khan and Jain, “Finance is the art and science of managing money.”
According to Oxford dictionary, the word ‘finance’ connotes ‘management of money’.

TYPES OF FINANCE:
Finance can be classified into two major parts:
Private Finance which includes the Individual, Firms, Business or Corporate financial activities to meet the requirements.
Public Finance which concerns with revenue and disbursement of Government such as Central Government, State
Government and Semi-Government Financial matters.

What is Financial Management?

Defined by Solomon, “It is concerned with the efficient use of an important economic resource namely, capital funds”.
“Financial Management deals with procurement of funds and their effective utilization in the business”.
There are four main forms of business organizations:
(1) Proprietorships, (2) Partnerships, (3) Corporations, and (4) Limited liability companies (LLCs) and limited liability
partnerships (LLPs). In terms of numbers, most businesses are proprietorships. However, based on the dollar value of sales,
over 80% of all business is done by corporations.

A proprietorship is an unincorporated business owned by one individual. Many corporations begin as proprietorship. Going
into business as a sole proprietor is easy—a person begins business operations. Proprietorships have three important
advantages: (1) They are easily and inexpensively formed, (2) they are subject to few government regulations, and (3) they
are subject to lower income taxes than are corporations.

2) More than One Owner: A Partnership:

A partnership is a legal arrangement between two or more people who decide to do business together.

Partnerships are similar to proprietorships in that they can be established relatively easily and inexpensively.

Moreover, the firm’s income is allocated on a pro rata basis to the partners and is taxed on an individual basis.

3) Many Owners: A Corporation:

A corporation is a legal entity created by a state, and it is separate and distinct from its owners and managers. It is this
separation that limits stockholders’ losses to the amount they invested in the firm—the corporation can lose all of its money,
but its owners can lose only the funds that they invested in the company.
Corporations also have unlimited lives, and it is easier to transfer shares of stock in a corporation than one’s interest in an
unincorporated business.
Objectives of Financial Management may be broadly divided into two parts such as:
1. Profit maximization
2. Wealth maximization.

PM is maximising the rupee income of the business, WM refers to the maximisation of the market price per share of the
company.
(i) Main aim is earning profit. Emphasizes short term.
(ii) Profit is the parameter of the business operation.

Unfavourable Arguments for Profit Maximization

The following important points are against the objectives of profit maximization:
(i) Profit maximization leads to exploiting workers and consumers.
(ii) Profit maximization creates immoral practices such as corrupt practice, unfair trade practice, etc.

SOURCES OF FINANCE TO A BUSINESS:

The term “Source” implies the agencies from which funds are procured. Finance is the lifeblood of business concern, because
it is interlinked with all activities performed by the business concern. In a human body, if blood circulation is not proper, body
function will stop. Similarly, if the finance not being properly arranged, the business system will stop.

Long-term financial requirement means the finance needed to acquire land and building
for business concern, purchase of plant and machinery and other fixed expenditure. Long term financial requirement is also
called as fixed capital requirements. The long term sources are Shares, Debentures, Retained Earnings and these are mainly
raised for a period NOT LESS THAN 10 years.
Accounting Basics:
The entire accounting is summarized in three statements viz. balance sheet, income statement and statement of cash
flows. They are prepared according to generally accepted accounting principles (GAAP), which facilitate near universal
understanding of their contents and implications. Each of these statements have their own characteristics.

Concepts:
Accounting is the language adapted to record financial transactions. To make the language convey the same meaning as
far as practical to all concerned people-owners, management, public and the Government, accountants use a number of
concepts which they try to follow uniformly.

These are:

Business entity concept: Accounting treats a business as distinct from the persons who own it. For example, the personal
expenses of the owner doctors are not included in the accounts of the nursing homes owned by them.

Money measurement concept: Accounting recognizes only those transactions, which can be expressed in monetary
terms.
For example, the professional expertise of doctors attached to hospital, which partly accounts for the level of its income,
does not find a mention in the hospital accounts. Only amounts payable to them are recorded.
For example, a high level of customer support will likely lead to increased customer retention and a higher propensity to
buy from the company again, which therefore impacts revenues. Or, if employee working conditions are poor, this leads to
greater employee turnover, which increases labor-related expenses.
Cost Concept: Transactions are entered in the books at the amount actually paid out.

Let’s consider the example of a business that purchases a building worth Rs. 1,00,00,000 in cash.

The value of the building will be entered at its cost price (i.e., Rs. 1,00,00,000).

It will be entered as Fixed Assets in Balance Sheet. As Cost of manufacturing goods in Profit & Loss Accounts.

Their current values are ignored except at the time of revaluation of assets.

After four years, the value of the building rises to INR 5,00,00,000.
However, under the cost concept, the accounting records will continue to show the value of the building at the cost price
of INR 1,00,00,000 less depreciation.

The basic Objective of this method is: The measurement of accurate and reliable profits and losses for a business over a
period of time.
Year-end inventory is valued at their actual purchases cost or at the current market rates whichever are lower. However,
the general practice is to value the inventory at cost.

Realization Concept: Accounting does not record what has not transpired. It could provide for likely losses but never
unrealized profits.
TYPES OF ACCOUNTS:
Personal Accounts relate to persons or organisations, which are distinct legal entities. These include patients, creditors,
suppliers and employees accounts. Impersonal Accounts include assets, liabilities, income, and expenses.
Personal Accounts:
Real Accounts
Individuals Debtors, creditors, borrowers, owners
Artificial persons Firms, banks, companies
Investments, securities Bonds, shares
Impersonal Accounts
Nominal Accounts
Current asserts Cash, stocks
Fixed assets Machinery; buildings
National accounts Income, gains, expenses, losses
Income, Revenues, Receipts:
From hospital services
Patients services: Beds, nursing home, operating services
Diagnostic services: CT scan, X-ray, pathological laboratory
Other income
Revenue from ancillary program, cafeteria sales, gift shop sales, vending machine commissions, shop rentals
Donations, charity box collections, unrestricted contributions,
Investment income, Expenses = Materials, stores, Maintenance, Energy, Rent, Employees expenses, Other operating
expenses, administration. Interest/Depreciation, Balancing figures excess of income over expenditure (profit) or vice versa
(loss)
Principle of Double Entry

Book Keeping:
It involves recording of all transactions, which have financial implications. Every such transaction has dual impact, viz. the
receipt of a benefit in the shape of goods, money or service and provider of such benefit. It is the recording of this “dual
effect” of every transaction that has given rise to the term” double entry”.

The receiver of the benefit is debited and provider of the benefit credited.

If a doctor deposits, his Rs. 10000 in his Nursing Home’s account with the bank, in the accounting books of the Nursing
Home, the bank account will be debited since it has received benefit and the doctor’s account will be credited since he
has provided the benefit.

The debit side consist of: (1) assets, and or (2) expenses.

Income and liabilities appear on the credit side.

When an asset value is increased, there has to be either decrease in the value of some other asset or increase in the value
of some item appearing under liabilities for an equivalent amount.
Documentations:
It is cardinal principle of accounting that no transaction should be recorded in financial books unless it is supported by a
written record or document.

Such a document is called a voucher. It could be:

A document, which serves as evidence of the disbursement or receipt of cash. Examples: cash receipt of the hospital, cash
memo for purchase made etc.

A document serving as evidence of the authority to disburse cash. Example: an approved invoice from supplier.

A form or a voucher to which bills, receipts, and other evidence of indebtedness are often attached, showing the authority
for payment, the particulars of settlement, and other relevant details.

The written evidence of a business or accounting transaction sometimes contained in a single document without
attachments. (e.g. fixed assets register in which annual depreciation charges are computed).

A purchase order for supply or material or equipment is not an accounting document since it does not indicate receipt of
material. At best, it is a commitment to make payment when the order is executed and material is received and indicative
of contingent liability. A proforma bill sent by a supplier is also not an accounting document for the same reason. Cheque
issued by the hospital has to be accounted in the hospitals bankbook. When material or equipment is received without a
supplier’s bill, the hospital should make a provision towards the cost of the same based on evidence of receipt of material.
BASIC BOOKS:
General Ledger: It is a basic book of accounts. It contains a record of all transactions for the accounting period analysed
under various accounting heads each referring to a separate nature of transaction.

Cash and Bank Book is maintained separately from the General Ledger. Entries are not made directly into the General Ledger.
Every entry in the ledger should be based on an originating entry. It is utilized to record transactions, which do not originate
in the other two-day books, such as opening entries and closing entries.

Cash and Bank Book lists all cash and bank transactions and could be considered part of the ledger. In view of the importance
of these transactions and their number.

Purchase Day Book/ Purchase Returns Day Book.

Sales Day Book/Sales Returns Day Book (Income and Credit Notes Register for Hospitals).

Petty Cash Book

Fixed Assets Register which may provide for computation of depreciation charges in respect of fixed assets.

Provision for expenses incurred but not paid for or income for services rendered but not yet billed
Short-term Financial Requirements or Working Capital Requirement
Apart from the capital expenditure of the firms, the firms should need certain expenditure like procurement of raw
materials, payment of wages, day-to-day expenditures, etc. The sources are such as Public Deposits, Trade Credits and
Commercial banks, and the period is for 1 year and less than 1 year.
Medium-term Finance: Funds required for meeting long-term needs of Working Capital are known as Medium-term
Finance. The sources of Medium term are Financial institutions, Public Deposits and banks and for a period of 1 year to 10
years.

Sources of Financing for small business or startup can be divided into two parts: Equity Financing and Debt Financing. Some
common source of financing business is Personal investment, business angels, assistant of government, commercial bank
loans, financial bootstrapping, buyouts.

Venture Capitalists: They are private companies which uses other people who come to invest in start-ups, for a short term
period, expect a higher rate of returns.
Business angels: They are own money holders, come during incubation stage of business, stay for longer duration, expect
lower rate of returns.

SHARES:
The capital of a company is usually divided into certain indivisible units of a definite sum. These units are called, “Shares”.
Shares represent the interest of shareholders in a company measured in terms of money. They carry with them certain
rights and liabilities. Shares are also called ownership securities and can be transferred from one person to another person.
Those who subscribe are called shareholders. They are the owners of the company. In India, a Public Limited company may
issue two kinds of shares: They are 1) Preference Shares and 2) Equity Shares.
FINANCIAL STATEMENTS:

Financial statements, essentially are interim reports presented annually and reflect a division of the life of an enterprise
into more or less arbitrary accounting period – Frequently a year.

A company’s annual report usually begins with the chairperson’s description of the firm’s operating results during the
past year and a discussion of new developments that will affect future operations.

The annual report presents 4 basic financial statements – the balance sheet, the income statement, the statement of
stockholder’s equity, and the statement of cash flows. The quantitative and written materials are equally important.

The financial statements report what has actually happened to assets, earnings, dividends and cash flows during the
past few years, whereas the written materials attempt to explain why things turned out the way they did.

Position Statement
Position statement is also called as balance sheet, which reflects the financial position of the firm at the end of the
financial year.

Balance sheets can be represented as ‘snapshots’ of the financial positon on the last day of each year or quarter. This
snapshot actually changes daily as inventories are brought and sold, fixed assets are added or retired, or loan balances
are increased or paid down.
Current Assets – Current Liabilities = Net Working Capital
 Balance Sheet of MicroDrive Company on March
Balance sheets begin with assets, which are the “things” the company 31st 2012 and 2013:
owns. Assets are listed in order of liquidity or length of time it typically
takes to convert them to cash at fair market values.

Balance sheet also lists the claims that various groups have against
the company’s value; these are listed in the order in which they must
be paid. For eg. Suppliers may have claims called “Accounts payable”
that are due within 30 days. Banks may have claims called “notes
payable” that are due within 90 days, and bond holders may have
claims that are not due for 20 years or more.

Position statement helps to ascertain and understand the total assets,

liabilities and capital of the firm. One can understand the strength
and weakness of the concern with the help of the position statement.
Assets are Current Assets and Fixed Assets, Liabilities are Current &
Fixed Liabilities.
Income Statement:

Income statement is also called as profit and loss account, which reflects the operational position of the firm during a
particular period. Normally it consists of one accounting year, hence they are prepared monthly, quarterly and annually.
Unlike balance sheet which is a snapshot of a firm at a point in time, this reflects performance during the period.

It determines the entire operational performance of the concern like total revenue generated and expenses incurred for
earning that revenue.

Income statement helps to ascertain the gross profit and net profit of the concern.

Gross profit is determined by preparation of trading or manufacturing a/c and net profit is determined by preparation of
profit and loss account.

Net Income is also called Accounting Profit, Profit or Earnings, particularly in financial reports. Dividing net income by the
number of shares outstanding gives earning per share (EPS), often called “bottom line”.
 2013 2012 Net Sales are the revenues less any discounts or returns. Depreciation
Net Sales $ 5000 $ 4760 and Amortization reflect the estimated costs of the assets that wear out
Cost of Goods sold except in producing goods and services. Depreciation applies to tangible assets
depreciation $3800 $3560
such as plant and equipment, whereas amortization applies to intangible
Depreciation and Amortization 200 170 assets such as patents, copyrights, trademarks and good will.
Other operating expenses 500 480

Earnings before interest and The cost of goods sold (COGS) includes labour, raw materials, and other
taxes (EBIT) $ 500 $ 550
expenses directly related to production or purchase of items or services
Less interest 120 100
sold in that period. Subtracting, COGS (including depreciation) and other
Pre-tax earnings $380 $450
operating expenses results in earning before interest and taxes (EBIT).
Taxes 152 180
Many analysts add back depreciation to EBIT to calculate EBITDA,
Net Income before dividends $228 $270
Earnings before interest, taxes, depreciation, and amortization. Because,
Additional information
neither depreciation nor amortization is paid in cash, some analysts
Common dividends $ 50 $ 48
claim that EBITDA is a better measure of financial strength than is net
Addition to retained earnings 170 214
income. This company’s EBITDA is EBIT + Depreciation = $500 + $ 200 = $
Number of common shares 50 50
700 million.
Stock price per share $ 27 $ 600
Alternately, EBITDA calculation can start with Sales,
Per share data 1,200 1,000
EBITDA = Sales – COGS excluding depreciation – Other expenses =
Earnings per share, EPS $ 1,980 $ 1,600
$5000 - $ 3800 - $500 = $ 700 million.
Dividends per share, DPS 100 100
The net income available to common shareholders, which equals
Book value per share, BVPS 500 500
970 800
revenues less expenses, taxes and preferred dividends (but before paying
Retained earnings
common dividends), is generally referred to as Net Income.
Problem: From the information given below, prepare a monthly Cash Budget for the four months ending 31st March
2021.
Expected Sales In Rs.
December 1,00,000
January 1,20,000
February 90,000
March 1,60,000

Expected Purchases:
December 64,000
January 1,20,000
February 1,40,000
March 90,000

Other relevant information:

1) Wages to be paid to workers Rs. 12,000 each month

2) Dividend from investments amounting to Rs. 2,000 are expected on 31st March
3) Income tax to be paid (in advance) in March Rs. 4000
4) Preference share dividend of Rs. 10,000 is to be paid on 28th February.
5) Balance at Bank on 1st December is expected to be Rs. 12,000.
Solution:

Receipts December January February March

Rs. Rs. Rs. Rs.
Balance b/d 12,000 36,000 24,000 -
Sales 1,00,000 1,20,000 90,000 1,60,000
Dividend ______ 2,000
Deficit c/d ____ __ 48,000 --
1,62,000
1,12,000 1,56,000 1,62,000

Payments:

Deficit b/d _­ _ ------ -- 48,000

Creditors 64,000 1,20,000 1,40,000 90,000
Wages 12,000 12,000 12,000 12,000
Pref: Dividend -- -- 10,000 --
Income-Tax -- -- -- 4,000
Balance c/d 36,000 24,000 -- 8,000
1,12,000 1,56,000 1,62,000 1,62,000

N.B. Deficit implies overdraft

Discussion Questions:

1) What is the annual report and what two types of information does it present?
2) What 4 types of financial statements does the annual report typically include?
3) What is the balance sheet, and what information does it provide?
4) What determines the order of the information shown on the balance sheets?
5) Why might a company’s December 31 balance sheet differ from its June 30 balance sheet?
6) A firm has $8 mill in total assets. It has $3 mill in current liabilities $2 mill in long-term debt, and $1 mill in
preferred stock. What is the total value of common equity? ($2 mill)
7) What is an income statement, and what information does it provide?
8) What is often called “Bottom Line”?
9) What is EBITDA? How does income statement differ from balance sheet with regard to time period reported
 BREAK EVEN ANALYSIS
An important indicator of an organisation's performance is the profit. An analysis of the effects of various factors on profit is an
essential step in financial planning and decision making.

A break even analysis is a specific technique of studying and presenting the interrelationship between costs, volumes and
profits. It is an efficient and effective method of financial reporting and planning.

At the start of any financial activity for profit say introduction of a new facility in a hospital; it becomes logical and essential to
analyse with facts and figures to whether the venture would be profitable in near future.

Fixed Costs: These are the costs that cannot be avoided and are essential for the business. These remain fixed irrespective of
the changes in the volume i.e. the number of units of goods produced.

For example, the total rent of hospital facilities may be Rs. 1 lakh a year. This cost will remain the same whether patient is zero
or 1,00,000 patients. In nursing home the rent will have to be paid irrespective of number of x-ray images or other clinical tests
performed.

The other examples are: a) Depreciation b) Insurance c) General administrative expenses lie salaries, and maintenance of office
d) Repairs and maintenance
Variable Costs: These are the costs (expenses) which vary in direct proportion to the changes in volume of production.

The examples are:

a) Cost of raw materials; say x-ray film the quantity of which will go on increasing in direct proportion to the x-ray images
made.
b) Direct labour cost.
c) Direct activity cost say electric power, which will go on being consumed in direct proportion to the number of units of
goods or number of units of service provided say with every x-ray image made.
d) Commission payable on unit basis. Variable costs are those that go on increasing in direct proportion to the production
activity.

The recovery of this cost is by the way of sales. Each unit of product sold will cover its own variable cost and leave a balance
to cover fixed costs and profit.

This is called Contribution Margin. Which is represented in formula as Contribution Margin = Selling Price – Variable Cost

This approach stems from a very simple logic as under :

Unit selling price - unit variable cost = unit contribution

Unit contribution x units sold = total contribution

Total contribution = total fixed cost + profit

Determination of BEP as Number of Units/Events

BEP (units) = (Total Fixed Costs)__________

((Selling price) - (Variable costs per unit)) . .

Or BEP = (Total Fixed Costs)

(Unit Contribution)

The above equations will give the units required to be produced and sold so that the break even point is achieved. The
following example will indicate the point:-

Example: A nursing home laboratory has priced its x-ray test and report for Rs. 200/- each. The variable cost is Rs. 120/-
per test. The annual fixed cost is Rs. 2,40,000/-. Find out the number of x-ray tests to be performed per year at break
even?

Solution: Total fixed cost = 2,40,000

Unit selling price = 200
Unit variable cost = 120

Therefore BEP (units) = 240000/(200 - 120) = 3000 as per Eqn. 1

Thus a minimum of 3000 x-ray tests must be carried out so that the nursing home breaks even.
Example 2: A manufacturing firm produces a single product whose selling price is Rs. 100/- per unit and a variable cost of
Rs. 60/-. The annual fixed cost is Rs. 10,00,000/-. How many units the firm must produce at BEP.

Solution: Total fixed cost = 10,00,000/-

Unit selling price = 100
Unit variable cost = 60

Unit contribution = unit selling price - unit variable cost = 100 - 60 = 40

Therefore BEP (units) = 1000000 / 40 = 25000 numbers as per Eqn. 2

Thus a minimum number of 25000 must be produced so that the firm achieves breakeven point.

The following are the important decision-making situation where marginal costing technique can be applied.
1) Profit Planning and Maintaining a Desired Level of Profit.
2) Make or Buy Decisions
3) Problems of Key or Limiting Factors
4) Selection of a suitable or profitable sales mix
5) Alternatives course of action
6) Determination of Optimum Level of Activity
7) Evaluation of Performance
8) Capital Investment Decision
9) Determination of Price
Explanatory Notes:
1) The horizontal axis (i.e., X-axis or abscissa) represents the
units of output.
2) The vertical axis (i.e., Y-axis or ordinate) represents the cost
and revenue in terms of value.
3) Fixed cost line is drawn parallel to X-axis. Here the fixed cost
line at Rs. 4,00,000 is assumed to be the same at all output
levels.
4) The revenue line (assuming the same selling price per unit at
all output levels) starts at nil and progresses evenly.
5) The total cost line starts at the fixed cost of Rs. 4,00,000 (fixed
cost is incurred even at nil production) and increases by the
addition of variable cost per unit as output increases.
6) The point at which the total cost line intersects with the sales
line is the break-even-point. The break-even-point reads at
40,000 units on the graph. This can be proved arithmetically.
Contribution at 40,000 units is 40,000×Rs. (20-10), i.e., Rs.
4,00,000 which is equal to the fixed cost.
7) The number of units to be produced at break-even point can
be determined by drawing a perpendicular to the X-axis from
the point of intersection of cost and sales line.
8) The area below the break-even-point represents the loss area
and the area above the break-even-point indicates the profit
area.
BUDGET & BUDGETING:

DEFINITION:
• Budget is an operational plan, for a definite period usually a year.
• Expressed in financial terms and based on the expected income and expenditure.
• Hospital budget is the process of estimating proposed expenditure and the means of financing the expenditure. Its
projection made from Cash flow statements, Profit & Loss statement, Balance Sheets.
• Budget is a concrete precise picture of the total operation of an enterprise in monetary terms. By: H.M. Donoven

Purpose of Budgeting:
 Mechanism for translating fiscal objectives into projected monthly spending pattern.
 Clearly recognises controllable and uncontrollable cost areas.
 Allows feedback of utilization of budget.
 Helps to identify problem areas and facilitates effective solution.

History: Budget word was first coined by the British Kings in early days from the word
‘BOUGETTE’ .
The important milestones were:
• 1215 AD: constitutional exposure
• 1718 AD: consolidated fund act passed which considered budget as financial statement of
Govt activities for facilitating accountability of public fund .
• 1882 AD: Budget entered the parliament for first time seeking advice
 Income and Expenditure Budget Year 200-200
Prev.Yr actual
Cur.yr Estimated
A/c No. Description Bud.yr forecast
Income
3111 Hospital Income
Inpatient bed charges
ICU/ICCU bed charges
3119 outpatients
Registration
operation theatre charges
Diagnostic centre income
Laboratory
Pharmacy
X-ray income/ultra sound
ECG/EEG
CT Scan
Dialysis
Reimbursements
Sub Total
invest income
other sources
Total income (A)
Cvariable expenses
411 purchases medical
412 Expenses
42/43 Purchases-Pharmacy
44 Dietary services stores
45 utilities
46 concessions given
other variable expenses
Doctors fees
Total variable expenses (B)
Gross margin (V)=(A)-(B)
Fixed and Semi Variable
51/4 Expenses
55/9 Employees Expenses
61/9 Other Operating
71/9 Expenses
85 Administration Expenses
Research Expenses
Interest
Sub Total (D)
81 Depreciation
91 Non-current income/expenses
Profit/loss
TYPES of BUDGET:
1. OPERATING BUDGET(Revenues and Expenses):Provides an overview of agency function by projecting
the planned operation for upcoming year. Deals with salaries, medical-surgical supplies, office supplies,
laundry services, books periodicals, recreation and contractual services.
2. CAPITAL EXPENDITURE BUDGET: Related to long range planning. Includes physical changes
(replacement and expansion of plant, major equipment's and inventories).They are major investment and
reduces flexibility in budgeting.
3. CASH BUDGET: Planned to make adequate funds available and to use extra funds profitably. Should not
have too much cash on hand during budgetary period.
4. LABOR OR PERSONNEL BUDGET: - Estimate cost of direct labour necessary to meet agency objectives.
Determine the recruitment, hiring, assignment, layoff, discharge of personnel. Nurse manager has to
decide number of aids, orderlies required during a shift months and areas.
5. FLEXIBLE BUDGET: Some costs are fixed, others changes with volume of business. Some expenses are
unpredictable and can be determined only after change has begun. Periodic reviews required to
compensate for changes. From unexpected clinical equipment needs to mysterious shifts in care reimbursement
revenue, the ways in which a hospital or health system budget can go awry are numerous.
6. STRATEGIC PLANNING BUDGET: Long range budget for long range planning. Projected for 3-5 years.
Programme budget is a part of this budget.
7. ZERO-BASED BUDGET:
8. ROLLOVER BUDGET
9. PROGRAM BUDGET
Thank you