Definition

Budgeting is a process of planning and controlling

operations that is expressed in activities and
monetary units, aimed at projecting the
operations in projected financial report and cash
flow.
 budgeting

• Budgeting is a plan that is systematically developed

in the form of numbers, and expressed in monetary
units. The budget includes all certain activities in
certain periods in the future.

• A budget is a plan for anticipating income and

expenses to achieve specific objectives within a
certain time.
 budgeting

• Budget . Output that is obtained after completing the

plan.

• Budgeting indicates a process beginning from

preparation plan step, collecting the needs of data
and information, job describing, planning, plan
implementing, to the last phase, namely controlling
and evaluating the result.
 BENEFITS OF BUDGET FOR MANAGEMENT

• As a means of integrated planning

Corporate budget to be utilized to arrange planning of
all corporate activities cohesively. All company
activities need a cost, therefore all have carefully been
plotted and gets to give real representation of its
activity unit and also its monetary value.
BENEFIT OF BUDGET FOR MANAGEMENT

For example sells 1.000 product unit at unit price

Rp 40.000,- , then sell point is Rp 40.000.000,-
BENEFIT OF BUDGET FOR MANAGEMENT

• As a guidelines in operating a firm

With budget therefore firm activities will be
performed by all of the budget already being
arranged, that so will result activity that
corresponds to plan already be arranged
previously.
BENEFIT OF BUDGET FOR MANAGEMENT

• As a means of job coordinating

Corporate budget arrangement
covers all activities in corporate,
involving all part of corporate.
Budget is important to harmonies
(coordination) each part which
exists in corporate.
BENEFIT OF BUDGET FOR MANAGEMENT

• Target 1.000 product units. Marketing departement gets

coordination with Production Department. After
production departement consider the ending inventory
(example 150 units) & beginning inventory (example
100 units), so the product need to be produced 1.000 +
150 - 100 = 1.050 unit products.
• Then production departement do such as coordination
with financial Departement and General Department. To
fund the activity of 1.050 unit products, financial
departement in year 2015 has to provide Rp.
31.750.000,- whereas General departement has to
provide labours 50 persons
BENEFIT OF BUDGET FOR MANAGEMENT

As a means of controlling and evaluating

Budget is arranged bases standard that was

determined by firm before, and performance are
noted. In the end period, budget and reality will be
compared.

if the gap happened, analyzed by its cause.

 Purpose of Budget Arrangement

• To declare firm expectation/ target formally, so can

avoid ambiguity and gives aim to what do want to be
reached by management.
• To communicate management expectation other
parties.
• To provide details of company’s plan.
 Purpose of Budget Arrangement

• For coordinating, to make the point or method for

maximizing resources.
• To provide grader and retain individual and group
performance, and provides information for needs or
not to take an action for correctting.
 Factor that Regard Budget's Arrangement

• Intern's factor
One that intended with factor intern is data,
information and experience that exists in firm.

• External factor
To cover, data, information and experience that exists
outside firm, but has influence to corporate life.
 Process implicated activity in Budgeting

Data collecting and information required just for

arranges budget.
Processing and data and information analyzing that
to arrange estimate in order to arrange budget.
Arranging budget and presenting regularly and
systematic.
Coordinating budget's performing
Processing that data analyzing to arrange
interpretation and gets conclusion, in order to
arranges estimation (evaluation) to job already being
performed and arranges policies as follow-up( follow
up ) of that conclusion.
 Budget's content

Budget was necessarily ranges all

corporate activities, so budget's function
will be worked. Budget that
comprehensive namely Comphrehensive
Budget.
 Comprehensive Budget

Activity covers all corporate activity in marketing,

production, financial, personnel and administration order.

comprehensive budget's component:

• Forecasting budget
• budget's variable
• statistic's analysis and mathematics
• budget's reporting( budget report)
 BUDGET ARRAGEMENT REQUISITE

 Realistic: not very opt. but also not very persst.

 Lithe: not very stiff, and have opportunity to be
adjusted by situation who may changed.
 Continue/ perpetually: need attention that
perpetually and not constitutes an effort that
incidental.
 Master Budget?

• MB is
– a comprehensive expression
– of management’s operating and financial plans
– for a future time period

• MB includes ‘Operating’ & ‘Financing’.

 Master Budget Components
• Financial budget
– Capital budget
– Cash budget
– Budgeted balance sheet
– Budgeted statement of cash flows
The Master Budget
Sales
Budget

Selling and
Administrative
Budget
 The Master Budget
Sales
Budget

Ending Selling and

Production
Inventory Administrative
Budget
Budget Budget

Direct Direct Manufacturing

Materials Labou Overhead
Budget r Budget
Budg
et
 The Master Budget
Sales
Budget

Ending Selling and

Production
Inventory Administrative
Budget
Budget Budget

Direct Direct Manufacturing

Materials labour Overhead
Budget Budget Budget

Cash
Budget

Budgeted Financial Statements

 MASTER BUDGET
Sales Budget
Sales Budget
Production Budget

Direct Material Direct Labor Mft. Overhead Operational

Budget Budget Budget Budget

Budgeted schedule Selling, General

cost of goods Cash budget and Administrative
manufactured and sold Budget

Budgeted income R&D

Statement Budget
Marketing
Capital Budget Budgeted balance Budget
Statement
Customer Service
Budgeted Budget
Financial Budgeted Statement
Statements of Cash Flows
Master Budget Components

• Operating budget
– Revenue budget
– Production budget in units
– Direct materials purchase budget
– Direct labour budget
– Cost of goods sold budget
– Nonmanufacturing costs budget
– Budgeted income statement
 Budget tips
• Don’t spend every penny you receive
• Keep excellent records
– Track income and expenses
– Develop filing system
• Review your budget regularly
– Revise and update as needed
– Track over/under and adjust
• Personalize your budget
• Evaluate trade-offs
 Budget Tips
• Keep it simple and flexible
• Don’t follow someone else’s budget
• Don’t put unnecessary items in the budget
• Make sure to have an emergency fund
included (2-3 months’ salary)
• Keep it realistic!
 Sample Budget

Category Budgeted Actual Over/Under

Income
SALARY 1,500 1,498 -2
Fixed expenses
RENT 800 795 5
Flexible expenses
UTILITIES 300 320 -20
Savings
SAVINGS 100 100 0
Income Less 300 283 -17
Expenses and
savings