Budget

• • A budget is a spread sheet that details what the enterprise intends

to generate in revenues and expend in costs over the next quarter or year.
• • It is a forecast.
• • Enterprises use pest performance combined with expectations of
future results and performance to create a budget.
• • A budget is an important accounting and administrative planning
tool because it helps in defining and setting business goals and measure
the achievement of those goals.
• • Budget helps to identify the potential pit falls of a business down
turn or rapid growth and determine ways to avoid or reduce those
pitfalls.

Cash budget
• • It is one of the forms of budgets.
• • A budget is a sum of money allocated for a particular purposes

• A cash budget can be defined as an estimation of the cash inflows

and outflows for a business over a specific period of time.
• • Cash inflows refers to money which a business receives from its
activities.
• • Cash outflows refers to the money which a business paid out in
order to meet its expenses.
Importance of cash budgets
• • To forecast the firm’s future in terms of financial needs.
• • It is a tool for cash planning and control.
• • It allows to make management decisions regarding cash position
a business.

How to create a cash budget

• • To create a cash budget one need to focus on three components
which are time frame, cash position and estimated sales and expenses.
• • On time frame one need to decide the period or the time for
which one’s budget will apply for example 3 months, 6 months or
yearly.
• • On cash position one need to focus on the amount of money one
need to keep and this will depend on the nature of the business.

Budget
• • It is an estimated financial plan made in advance, which takes
into account revenues, resources and costs for a specific period of time.
• • It is a quantified plan made prior to a given trading period.

Classification of budgets
• • Budgets can be classified according to time; that is short term and
long term.
• • They can be classified according to flexibility, for example fixed
budget and flexible budget.
• • They can also be classified according to function.
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