Page 154 - Budgeting for Managers

Authorizing and Tracking Expenses
When the budget is approved and set up in accounting, we say
that the money is allocated, but that it hasn’t been spent yet. To
track our expenses, we Tracking Your Budget 137
need to work at a more Track To track expenses
detailed level: we need to means to make sure that
keep track of each pur- we have good records for
chase we approve and what we are spending and that we
make. know how closely our spending
When we approve a matches our budget plan.
purchase, we’re authorizing Adjust To change a budget upward
spending money from a or downward during the budget year
to adapt to changing circumstances.
particular line item for that
particular purchase. We Split To allocate money from more
than one line item to one purchase.
make the purchase when
we place a purchase order,
use a business credit card, or use petty cash. At that moment,
we should know which line item we’re using for the expense. If
we want to allocate money from more than one line item to one
purchase, that’s called a split.

Splitting a Single Expense
Suppose you’re adding $500 to a postage meter. Rather than
call this general office expense, you could estimate how
much of the postage will be used for advertising, how much for ship-
ping, and how much for general office mail.You might split the postage
cost as $300 for marketing, $150 for shipping, and $50 as a general
office expense.When you record the check to the post office, you
create a split record in the accounting program, allocating money from
three expense categories to pay one check.Table 9-1 illustrates the
record of a split transaction.We say a transaction is balanced when
the total debits (money taken out of accounts) equals the total credits
(money added to accounts).
Using splits is an excellent way to keep a good budget. It lets you
track expenses according to their purpose rather than just by items
bought.