Allama Iqbal Open University

Subject Title: Cost Accounting Presented By: Adeel Ahmad Roll No: ADAD-514968

Topic
Periodic Budget Application

Periodic Budget Application
Definition Meaning Forms of Budget The Purpose of a Budget Types of Budgets Qualities of good Budget

Definition
An estimation of the revenue and expenses over a specified future period of time.

Meaning
A budget is the statement of the financial plan of a Organization. It indicates the revenue and expenditure of the last completed financial year.

Forms of Budget
Balanced and Unbalanced Budget A balanced budget is that, over a period of time, revenue does not fall short of expenditure. If expenditure exceeds revenue, the budget is said to be unbalanced A budget for which expenditures are equal to income. Sometimes a budget for which expenditures are less than income is also considered balanced.

The Purpose of a Budget
A budget is a formal estimate of future revenues & costs Making realistic budgets requires clear thinking; as a financial plan of firm s expectations over time, it should be a an assessment of what each part of the firm can accomplish

Types of Budgets
A. Should have at least 3 types of budgets An operating budget A cash flow budget A capital expenditures budget

Operating budget
A detailed projection of all estimated income and expenses during a given future period. Records Sales, Production costs, & other related activities

A cash flow budget
A budget that provides an overview of cash inflows and outflows during a specified period of time. This is often called the cash flow, or the cash flow budget.

A capital expenditures budget
Capital Expenditures is referred as amount of money needed to spend on capital items or fixed assets such as land, buildings, roads, equipment, etc. that are projected to generate income in the future. Capital expenditures to be budgeted include replacement, or construction of plants and major equipment. Capital Expenditure Budget is plan prepared for individual capital expenditure projects

Ibrahim Fibres Limited is situated at Ibrahim Centre,15 club Road Faislaabad.Ibrahim Fibres Limited is a Pakistan-based company. The principal business of the Company is manufacture and sale of polyester staple fibre (PSF) and yarn. The polyester fiber division of the Company produces a range of the PSF of different lusters and varieties, including semi-dull, bright, optical bright, anti pilling, flame retardant and trlobal with cut length of 32, 38, 44, 51 and 64 millimeters. The Company s textile product range includes Clock Tower Brand, A.A. Brand and Gold Star Brand. The Company s manufacturing units are located at Faisalabad in the Province of Punjab.

Practical study

Qualities of good budget
1. Responsibility -

To prepare the budget one should be the responsible and well defined authority.
2. 3. Comprehensiveness -

Budget should show the entire financial position of the organization in board details.
Flexibility -

A good budget should have certain flexibility so its implementations can be made easy.
4. Realibilty -

The information of budget which estimates should be reliable as much as possible.
5. Integrity -

A good budget should involve the assurance that the fiscal program as enacted and as intended.

Summary
A. Budgeting is a critical step in business planning B. It puts ideas into numbers for profit or loss measurement C. Budgets are valuable tools in good management

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