Response to Discussions Capital Vs Budget Please read the Discussion Post 1 and Discussion Post 2 uploaded below and respond to each one. Your two responses should be at 150 words each, APA format and at least one reference. Capital vs. Operational Budget
The capital and operational budgets are the two most common budgets that a nurse
manager deals with and they usually are funded through two separate accounts, but not always
(Ledger and Dunham-Taylor, 2018). Budgeting should be an ongoing process as this
enhances one’s ability to determine a budget that most accurately reflects the conditions faced
with (Penner, 2013).
A capital budget reveals what capital equipment needs to be purchased; what
structures need to be renovated, built, or leased; the amounts to be spent; and each asset’s
estimated useful life (Berger, 2014). They cover costs of long-term expenses or capital assets;
including intravenous infusion pumps, patient beds, and other high-priced items (Ledger and
Dunham-Taylor, 2018). Each organization sets specific cost limits for what they consider an
item to be a capital expense (Ledger and Dunham-Taylor). Looking into these capital ticket
items allows for a depreciation expense to be determined, which needs to be included in the
next year’s budget (Berger, 2014). Capital budgets require a higher level of justification
because their costs are usually greater than operational expenses (Ledger and Dunham-Taylor,
2018). Justification for capital items would include the replacement on non-functional or
safety risk items or purchasing a new item to generate income (Ledger and Dunham-Taylor,
Operational budgets include expenses that relate to the daily operations of a nursing
unit; including salaries, equipment, supplies, maintenance, travel, education, and dues (Ledger
and Dunham-Taylor, 2018). An operational budget requires one to analyze patient volumes,
such as patient days, visit, and/or procedures; revenue; and expenses, both personnel and nonpersonnel related (Penner, 2013). Justifying these expenses would be done by reviewing the
variances. A manager should keep track of his/her budget and the variances throughout the
year as this will help them determine their needs and will provide evidence to justify their
demands (Penner, 2013).
Capital and Operating Budgets
There are two types of budgets that nurse leaders will be expected to understand. The
first is the operating budget and the second is the capital budget. Each budget requires an
understanding of the expenses required to run a department. An operating budget is the dayto-day expenses that are required for a business or department to run smoothly. The capital
budget are the expenses that a business incurs to benefit the future (Hall, 2018). Each of these
budgets are treated differently and separately for accounting and tax purposes.
The operating budget is developed to estimate what expenses or costs a department will incur
during the year. This will include staff, small equipment, office supplies, and wages. To
accurately prepare for the fiscal year a manager must look at the year before and based on
data collected prepare a budget that allows for stability and growth. Continued monitoring is
important and consumes a great deal of time on behalf of the manager. Following trends, like
the daily census allows managers to project what their staffing needs are and make
Capital budgets are purchases that are made for the future growth of the
department. These investments are larger items that are expected to be used for extended
periods of time. This includes the building, large equipment, computers etc. The capital
budget is developed separately from the operating budget and is often funded through separate
sources, or accounts (Ledger & Dunham-Taylor, 2018).
The rationale behind making capital purchases and preparing a capital budget is to prepare for
the future and allow for grow. To be a capital asset it must provide useful service that lasts
longer than a year.
Preparation of an operating and capital budget is important in developing a productive
and workable department. Adjustments can be made as fluctuations in profit and expenses
change. A properly managed operating and capital budget will allow success in a department.
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