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Budget, Types of Budgets A budget is a detailed plan of operations that is predetermined for a particular period. Budgets are quantitative or financial statements prepared for the purpose of attaining a particular objective.
Budgeting Process Budgeting is the formal procedure of preparing budgets. It involves the following basic steps: • • • • • • • Identifying expenses Determining different sources of income Preparing the budget Establishing the budget period Laying down the budget procedure Allocating income for expenses Monitoring the efficiency of the budget Re-assessing the budget National Budget National budgets are legal documents, which are provided by legislatures before being passed by the executive head of the nation, such as the president, prime minister or other chief official of a nation. The budgeting process of a nation involves: • Classifying expenses: The expenses allocated in a government budget include consumption and investment expenditure on infrastructure development and research and development. It also includes transfer payments, such as social security and unemployment benefits.
Revenue determination: The primary source of revenue generation for a government budget is taxes.
Preparing budgets: A government budget may be for a quarter, a year, five years or ten years. The period of the budget and the procedure of revenue allocation are exclusively mentioned by the government. Examples of specific country budgeting processes, such as those in US, Canada, UK, Germany, Australia, New Zealand, Japan, India and Brazil, are detailed at the end of this article. Company Budget A company budget is prepared by the owner and shareholders of the company. It may also be prepared with the inputs of other stakeholders, such as employees and creditors. The budgeting process of a company involves:
Categorizing Expenses: Business expenses include capital expenditure on acquisition and modification of assets and revenue expenditure on routine activities such as payment of electricity and rent.
Revenue calculation: Sources of business revenue include capital, borrowed funds and sale of goods.
Budget preparation: This is generally prepared for a financial year. The purpose of the budget is to allocate funds for various business activities, such as production and distribution.
Personal Budget A personal budget is prepared by individuals and families to allocate income for various expenses, savings, investments and other financial obligations, such as debts. A personal budget is prepared by: • Organizing expenses: Personal expenses include expenditure on present consumption or future savings and investments. This includes incorporation of travel and leisure expenses and savings for the education fund of children.
Revenue summation: An individual earns an income from a number of sources, including salary, social security, worker’s compensation and rent collection.
Budget preparation: This is generally prepared on a weekly or monthly basis. The idea of a personal budget is to allocate income for various expenses, while setting aside a portion for savings. The budgeting process of governments, companies and individuals involves re-evaluation and revision of the budget. The budget is periodically monitored with respect to established targets and results obtained. Shortcomings in the outcome are evaluated and necessary modifications are made in the future budget to avoid unnecessary expenses.
Definition: A Budget is a plan that outlines an organization's financial and operational goals. So a budget may be thought of as an action plan; planning a budget helps a business allocate resources, evaluate performance, and formulate plans. While planning a budget can occur at any time, for many businesses, planning a budget is an annual task, where the past year's budget is reviewed and budget projections are made for the next three or even five years. The basic process of planning a budget involves listing the business's fixed and variable costs on a monthly basis and then deciding on an allocation of funds to reflect the business's goals. (For more on fixed and variable costs, see Breakeven Analysis.) Businesses often use special types of budgets to assess specific areas of operation. A cash flow budget, for instance, projects your business's cash inflows and outflows over a certain period of time. It's main use is to predict your business's ability to take in more cash than it pays out. And if you're planning on starting a business, planning a budget plays an important role in determining your start up and operating costs.The Financial Plan Section of the Business Plan provides information on calculating your start up and operatiing expenses. Common Misspellings: Buget; budjet. 1 OVERVIEW Brief description
This toolkit provides guidelines on how to go about developing and monitoring a budget.It will help you with an overall organisational budget as well as with a budget for a specific project.It includes tools for estimating costs as well as tips for ensuring that your budgets meet the needs of your project or organisation.In the examples section we give actual examples of budgets and how they can be monitored. Why have a toolkit on budgeting? Budgeting is the key to financial management.The toolkit will help you plan, develop and use budgets effectively in your organisation. If you have a sound understanding of the principles of budgeting, you will be well on the way to sound financial management. If you use this toolkit in conjunction with other toolkits, as indicated, you will increase the capacity of your organisation to manage its finances effectively.You will also increase its ability to survive through foresight and planning.
When making a personal budget. one may be less likely to overspend. clothing. or entertainment. and more likely to meet their financial goals. and figure out the best way to divide it among a variety of categories. Financial Budget one that embraces the impacts of the financial decisions of the firm. By keeping track of where one's money goes. With a budget. which shows the effects of planned operations and capital investments . an individual is able to carefully look at how much money they are taking in during a given period. and then make an educated estimation for how much money they will spend in other categories.BUDGET An itemized forecast of an individual's or company's income and expenses expected for some period in the future. such as groceries. It is a plan including a budgeted balance sheet . or utility bills. car payments. an individual will typically designate the appropriate amount of money to fixed expenses such as rent.
IT etc) to list their expected revenues and expenses in the final budget. While traditionally the Finance department compiles the company's budget.on assets.. Bottom of Form Explore . but may not be. if the figures diverge wildly from the budget. All other expenses are like labour factory overhead all freshmen expenses are also included into business budgeting  Corporate budget The budget of acompany is often compiled annually. modern software allows hundreds or even thousands of people in various departments (operations. Presentations.. usually requiring considerable effort. On the other hand. which forecasts the flow of cash and other funds in the business. The assets should be valued with each and every cost. If the actual figures delivered through the budget period come close to the budget. It also includes a cash budget . equipment. this sends an 'out ofcontrol' signal. insurance). working capital. is a plan for the short-term future. sources and collateral. Cash budgeting (cash planning) is a critical part of budgeting because it is essential to have the right sums of cash available at the right times. Business start-up budget The process of calculating the costs of starting a small business begins with a list of all necessary purchases including tangible assets (for example. inventory) and services (for example. this suggeststhat the managers understand their business and have been successfully driving it in the intendeddirection. The budget should contain a narrative explaining how you decided on the amount of this reserve and a description of the expected financial results of business activities. Business. remodeling. human resources. and the share price could suffer as a result Scribd Upload a Document Top of Form Search Books. typically one year (seeBudget Year). Academics. and equities. liabilities. A finished budget.
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one may be less likely to overspend. and figure out the best way to divide it among a variety of categories. It is a plan including a . clothing. Financial Budget one that embraces the impacts of the financial decisions of the firm. an individual is able to carefully look at how much money they are taking in during a given period. When making a personal budget. or entertainment. With a budget. and then make an educated estimation for how much money they will spend in other categories. or utility bills. such as groceries. By keeping track of where one's money goes.BUDGET An itemized forecast of an individual's or company's income and expenses expected for some period in the future. car payments. and more likely to meet their financial goals. an individual will typically designate the appropriate amount of money to fixed expenses such as rent.
It also includes a cash budget .budgeted balance sheet . and equities. human resources. modern software allows hundreds or even thousands of people in various departments (operations. While traditionally the Finance department compiles the company's budget. insurance). typically one year (seeBudget Year). working capital. sources and collateral. which shows the effects of planned operations and capital investments on assets. but may not be. Cash budgeting (cash planning) is a critical part of budgeting because it is essential to have the right sums of cash available at the right times. The budget should contain a narrative explaining how you decided on the amount of this reserve and a description of the expected financial results of business activities. IT etc) to list their expected revenues and expenses in the final budget. is a plan for the short-term future. Business start-up budget The process of calculating the costs of starting a small business begins with a list of all necessary purchases including tangible assets (for example. The assets should be valued with each and every cost. All other expenses are like labour factory overhead all freshmen expenses are also included into business budgeting  Corporate budget The budget of acompany is often compiled annually. If the actual figures delivered through the budget period come close to the budget. liabilities. A finished budget. this suggeststhat the managers understand their business and have been . equipment. inventory) and services (for example. remodeling. which forecasts the flow of cash and other funds in the business. usually requiring considerable effort.
this sends an 'out ofcontrol' signal. On the other hand. . if the figures diverge wildly from the budget. and the share price could suffer as a result.successfully driving it in the intendeddirection.
if properly constructed. can be used topredict the future. . One approach focuses on mathematical models. There are two basic approaches or philosophies when it comes to budgeting. inputs and outputs. The first school of thought believes that financial models. A budget can also be used as ap r icin g tool. The focus is on variables. and the other on people. Event management budget A budget is a fundamental tool for an event director to predict with reasonable accuracy whether the event will result in a profit. a loss or will break-even.
but the federalgovernment is allowed to run deficits. which are typically held in some typeof financial spreadsheet application.  Government budget For more details on this topic. The companies that adhere to this approach have their managers develop their own budgets. The budget of agovernment is a summary or plan of the intended revenues and expenditures of that government. Parliament rarely makes any significant amendments. This includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery . Investmentsof time and money are devoted to perfecting these models. No matter how sophisticated models can get.drivers and the like. and building accountability for the results. Congress makes many and substantialchanges. The focus is therefore in engaging the managers in the business more fully in the budget process. the best information comes from the people in the business. see Government budget. The other school of thought holds that it¶s not about models. Nearly all American states are required to have balanced budgets. andsubmitted to Congress for consideration. in reality the investment of time and money falls squarely in one approach or the other. While many companies would say that they do both.  United States The United States federal budget is prepared by the Office of Management and Budget. Invariably.  India The Budget of India is prepared by the Budget division of Department of Economic Affairs of the Ministry of Finance annually (Excluding the railway budget). it¶s about people.  United Kingdom The UK Budget is prepared by the Treasury under the direction of the Chancellor of the Exchequer.
In a personal or family budget all sources ofincome (inflows) are identified and expenses (outflows) are planned with the intent of matching outflows to inflows (making ends meet.) In consumer theory.  Personal or family budget For more details on this topic.  Budget types Sales budget: The sales budget is an estimate of future sales. Cash Flow/Cash budget:The cash flow budget is a prediction of future cash receipts and . It is used to create company sales goals. the equation restricting an individual or household to spend no more than its total resources is often called the budget constraint. see Personal budget.is in operation in relation to a State or a Union Territory. Production budget: Product oriented companies create a production budget which estimates the number of units that must be manufactured to meet the sales goals. including labor and material. The production budget also estimates the various costs involved with manufacturing those units. preparation of the Budget of such State or Union Territory. often broken down into both units and dollars.
It usually covers a period in the short term future. water. materials. Revenue budget: The Revenue Budget consists of revenue receipts of government and the expenditure met from these revenues. This may not be true for electric. Tax revenues are made up of taxes and other duties that the government levies. The Importance of a Budget It is not uncommon for people to ignore the need for a budget in their lives. and public relations in order to market the product or service. Project budget: The project budget is a prediction of the costs associated with a particular company project. Marketing budget: The marketing budget is an estimate of the funds needed for promotion.expenditures for a particular time period. The project budget is often broken down into specific tasks. etc. Not many people think that a budget has anything to do with fixing your credit score. advertising. Thecash flow budget helps the business determine when income will be sufficient to cover expensesand when the company will need to seek outside financing. and other related expenses. but it most certainly does. Thefollowing is a quick way you can make a solid budget. with task budgets assigned to each. Making a Budget The good thing about most bills is that they are generally the same each month. gas. Expenditure budget: A budget type which include of spending data items. A budget can really help you calm things down. and make it work for you in order to fixbad credit score. These costs include labor. and helps put a lot of things into perspective. What you need to do is grab a piece of paper and write down how much income you will be taking in for the . but you can have a good idea of what it will be.
When you see how much money you have after bills then you can figure out how your money will work best or you. You might even think that you do not need to make a budget because of this reason. You must start out with a budget though. etc. You just need to know how much you make and where you money must go. y . If you want to make a more advanced budget then you can also budget in the average amount you spend on food and gas a month.month. You may be doing well with your finances right now. and it does not have to be advanced. and you might even pay them on time. A budget helps you unlock your finances though. You might be able to pay off more of your debts one month. That is a very good thing. You just need to have an idea of how much money you are making and where it all has to go. In order to fix bad credit score you must know how your money works each month and you must maximize it. A budget can help in so many ways. and you need to keep doing it. that is a very important thing. or you might be able to start a college fund for your kids. food. BENEFITS Here are some common benefits of having a budget. Why Make a Budget? You may know all the bills you have. When you subtract the bills you will then have a final amount. This is the amount you will have after your bills for everything else including gas. When you have the amount you will make for the month you must subtract every bill that you will have to pay. Do not forget about any bills. In the end. This amount needs to be after taxes. You do not even have to take a lot of time on it. When you have a better idea of this you will be able to make your money truly work for you. and is your starting point. and making a budget will only help you out.
. 21 p.You become aware of your income and spending habits. 17 p. o you will learn where your money come from and where they go to. Budget Download this Document for FreePrintMobileCollectionsReport Document Info and Rating Follow Aman Singh Share & Embed Related Documents PreviousNext 1.
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A fixed budget is one which is prepared keeping in mind one level of activity. Management Science-II Prof. R.Madumathi Expenditure Budgets Expenditure budgets may be drafted as fixed / flexible budgets. In contrast. It is defined as one which is designed to remain unchanged irrespective of the level of activity attained. The purchase budget is based on the production budget and the standard material consumption requirement for the production estimates. The sales budget begins with the previous year actual and incorporates the likely changes Production Budget The production budget is prepared based on the sales estimate incorporated inthe sales budget. flexible budget is one which is designed to change in relation .Search w ithin do Bottom of Form Download this Document for Free Types Of Budget • • • • • • • • Sales Budget Production Budget Purchase Budget Expenditure Budgets Cash Budget Master Budget Zero Base Budget Flexible Budget Sales Budget Sales budget is a functional budget. Management Science-II Prof. The product wise as well as regional break up of sales estimates are incorporated in the sales budget.Madumathi Indian Institute of Technology Madras Purchase Budget The purchase budget is another functional budget that estimates the purchase requirement of materials utilized in the production process. R. The adjustments with respect to the opening and closing stockpositions that are policy decisions of the business are then made to prepare theproduction budget.
Madumathi Indian Institute of Technology Madras to the level of activity attained. Consolidating the functional budgets. Flexible budgets are prepared where the nature of business is such that it is difficult to predict the demand/sale of goods. R.Madumathi Indian Institute of Technology Madras The cash budget is based upon the business policy of holding a certain amountas cash.Management Science-II Prof. an income and expenditure budget and budgeted balance sheet are prepared. Cash Budget A cash budget consolidates all the cash inflows and outflows for the business. The cash budget helps the business to plan the project purchases as well as to provide for the loan requirements. The cash budgets also help in defining the repayment plans for short and long term loans of the business. Accordingly. Management Science-II Prof.Madumathi Indian Institute of Technology Madras Master Budget – Income Statement Particulars January February March Total Sales 12000 15000 10000 37000 Less: cost of goods sold 5000 7000 4300 16300 Factory overheads 2000 2000 2000 6000 Administrative overheads 1000 1000 1000 3000 Selling overheads 500 600 400 1500 Net profit 3500 4400 2300 10200 Indian Institute of Technology Madras Zero Base Budget . The cash budget is also a functional budget. The master budget is usually a one-year budget expressing the expected asset position and capital and liability positions for the projected year.the cash budget forecasts the loan requirements or short term investments thatare to be made with excess cash at any specific time. This is the desired opening cash balance for the business. Management Science-II Prof. R. Master Budget The overall or master budget summarizes the other functional budgets. R.
. These are necessarily long term project budgets. Types of Budget Download this Document for FreePrintMobileCollectionsReport Document Info and Rating types budget budgets based control sales budget budget position kinds sales management four types (more tags) Follow vishalroks Share & Embed Related Documents PreviousNext 1. 17 p. Zero Base Budgeting process looks at requirements/ plans anew each year irrespective of project continuity.An illustration of a long term budget is the Zero base budget.
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