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 INTRODUCTION:

This report includes a financial statement of SME (Small and Medium Enterprises) in their
production plan and sales for the next nine months. Additionally, it remains about budgeting as
well.
At the outset, we make a statement for the 6 months ending 31 December that includes a raw
materials inventory budget (physical quantities and financial values), a trade payable budget, a
cash budget, a budgeted income statement for the month of July. Furthermore, we indicate
which months have budget deficits and how we can do to overcome this problem of SME.
Thirdly, we calculate the profit for July and reconcile it to the month that is calculated in 1.4. It
must be included: sales volume, sales price, direct materials, direct labour, fixed overheads.
Next, we discuss the definition, benefits, and drawbacks of following the budget. Finally, we
come up with solutions to control the budget. This can affect the decision making and ensure
the development of organizations and resources effectively.

MAIN CONTENT:

Preparing a budget:

Table 1:

Table 2:

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Table 3:

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Table 4:

Table 5:

Budget

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 ⮚ Definition: budget is the list that contains totally cost and revenue of an enterprise. The
cost and revenue are forecasted by estimating, predicting, and calculating the previous
quarter. By the way, budget is the spending plan with the aim to supply the overall view
of the current and future performance of the business (BAC, 2021)

⮚ Roles of budget in planning strategy

Planning budget in a company is very important:

1. Help the enterprise follow direct strategy. Depending on the clear, exact, and specific
tactic, the company may know the business activities that they will do in the future. So, the
enterprise’s decisions cannot go out of the company’s objective.
2. Using existing resources effectively: not only the budget may forecast the future strategy,
it may also illustrate the exact enterprise’s situation about the working effectiveness of the
enterprise.
3. Future forecast: planning has an important role in the decision of the company. They may
follow the budget to know what they will do in the next period, and also the achievement.
4. Effective scale: the budget does not only manage the revenue and expenditure, it is
always used to be an effective scale for the company’s business activities, helping the
management evaluate the real result in comparison with the company’s hope. (BAC, 2021)

⮚ Benefits of making budget

The first benefit of budgeting is for planning. In this stage, the management has to make a formal
strategy to determine all parts of an organization. Then, set all of the separate parts into one on
a quantified basis. Secondly, making budget is for controlling. Not only the company pays
attention to meeting expectations, but it should also care about non meeting expectations and
make budget for this case. Thirdly, budgeting has other advantages in communicating and
coordinating as well. It ensures that everyone gets all information about plans and policies of
the organization. Finally, budgeting is seemed as a standard to check the effectiveness. Making
budget will make a basis for financial objective activities. (Weetman, 2019)

⮚ Limitation:
Sometimes, the enterprise is limited the business activities because of following the budget.
Additionally, the company may decrease motivation if it sets the budget unrealistic.
Furthermore, it is believed to get battles between departments about the budget allocation.
Finally, the budget cannot be accurate because it is just predicted in comparison to the
previous quarter. (BAC, 2021) (MBK, 2021)

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➢Budgetary control : a series of stages from a preparation of budgets to continuous comparison
between actual performance and budgeted performance to ensure the objectives of plans.
(Accountlearning, 2021)

⮚ Objectives of budgetary control

First and foremost, budgetary control is set up to determine detailed objectives of a

corporation, then assess plans for accomplishing given objectives. To optimize strategies,
budgetary control supports integrating activities of departments and distinct units of the
business to attain the best outcome. In addition to that, applying budgetary control in business
does wonders for managing most functional areas and budget systems economically as well as
increasing the monetary return by eliminating waste. In several cases, it helps in identifying and
correcting deviations, if any.
(Accountlearning, 2021)

⮚ The process of budgetary control

1. Planning: Preparing the business activities required to meet the objectives set by
superiors, followed by the creation of a budget for the future period. A well-prepared
plan can support in harnessing remaining as well as scarce resources effectively to
facilitate predetermined objectives. Budgetary control necessitates that managers at all
levels impose the same objectives.
2. Coordination: means the orderly interrelation between business activities to pursue the
predetermined objectives in a body. After budgeting is implemented, it lays down targets
regarding various functional areas to coordinate as well as fulfill the work efficiency.
3. Control: To ensure given objectives are not derailed, the actual performance is measured
and compared with budgeted performance for finding out any differences with the initial
plan.
4. Corrective actions: If there are any variances, these differences are needed to be
investigated then managers put forward corrective actions to reach the best outcome.
(Dr. Mahasweta Bhattacharya, 2021)

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 ➢ Suggestions for budget deficit

According to the cash budget, a potential cash deficit occurs in October.

The issue of budget deficit occurs when spending exceeds revenue - the total amount of output
is greater than the total amount of input. There will come a deleterious impact on the stability of
the budget and the continuation of the business as well.
In order to solve the budget's liquidity shortages, I believe that these seven methods can be
applied in reality and improve the situation. This is my seven recommendations: make a greater
proportion of your sales in cash, collect money from credit clients more quickly, for example,
during the holidays a month after the sale, maintain reduced inventories of both raw materials
and finished commodities, increase the payment time for trade payables, postpone the payment
for advertising, obtain greater credit for overhead expenditures; now, just 20% are on credit, defer
payments for the new plant.
� It is possible to mix two or more of these.

CONCLUSION:

The report illustrates clearly about the financial statement for the next nine months. In addition,
with all the knowledge about the budget, we finally know how to use the budget in a direct way.
This may make SME enterprises have a close relationship among departments and get more
profits in the future.

REFERENCES:
Account learning, n.d. accountlearning.com. [Online]
Available at: https://accountlearning.com/budgetary-control-objectives-advantages-
disadvantages/
[Accessed 16 Nov.2021].
BAC, 2021. bacs.vn. [Online]
Available at: https://www.bacs.vn/vi/blog/kien-thuc/ngan-sach-la-gi-cach-lap-ke-hoach-ngan-sach-
cho-doanh-nghiep-20898.html
[Accessed 27 Nov. 2021].
Bhattacharya., M, 2021. umeschandracollege. [Online]
Available at :
https://www.umeschandracollege.ac.in/pdf/study-material/accountancy/Budget-Budgetary-
Control-Sem-IV.pdf

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[Accessed 17 November 2021]
Jan R. Williams, Susan F. Haka, Mark S. Bettner, Joseph V. Carcello (2015) Financial & Managerial
Accounting .The basis for business decisions.
[Accessed 24 Nov. 2021]
MBK, 2021. mbaknol.com. [Online]
Available at: https://www.mbaknol.com/financial-management/the-advantages-and-
disadvantages-of-budgeting
[Accessed 28 Nov. 2021].
Vietnambiz (2019). vietnambiz. [Online]
Available at : https://vietnambiz.vn/kiem-soat-ngan-sach-budgetary-control-la-gi-muc-dich-kiem-
soat-ngan-sach-20191018180551868.htm
[Accessed 16 Nov.2021]
Weetman, P., 2019. Financial and Management Accounting An Introduction. 8th Edition ed.
s.l.:Pearson.

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