BUDGETING SYSTEM

Lecturer: Quoc Viet Phung (MPAcc)

 Learning objectives

Recall and explain the Recall and able to work on Able to draw up budgets of
concept of budgeting budgeting excercises businesses
 Contents

The purpose Budgeting

of budgeting concepts

Illustrations of Discussions
budgets about budgets
The purpose of budgeting

Mission Vision Aims Goals

Objectives Strategy CSF KPI/OKR

What’s the difference?

BUDGETING
◦ Budgeting is the
calculation and
projection of the
required economic
resources, the way
in which economic
resources are used
to perform a certain
job or goal, which is
set in a certain time,
space and time.
expressed by a
system of quantity
and value indicators.
BUDGETING
◦ Monetary Budget: is
an estimate directed
to the calculation
and projection of a
budget, the amount
of money to obtain
economic resources,
to use economic
resources to
perform a certain
job or goal. set in a
certain time and
space.
 ◦ Budgets are used for two distinct purposes—planning
and control.
◦ Planning involves
The purpose developing goals and preparing various budgets to
achieve those goals.
of Budgeting ◦ Control involves
gathering feedback to ensure that the plan is being
properly executed or modified as circumstances change.
To be effective, a good budgeting system must provide
for both planning and control. Good planning without
effective control is a waste of time and effort.
In a business cycle, when do you start
budgeting?

Business Yearly Periodic Periodic

strategy planning budgeting performance

6-months Quarterly Monthly Weekly

Yearly budget
budget budget budget budget
 CHOOSING A ◦ What is the most common period to come up with a
budget?

BUDGET PERIOD ◦ Continuous or perpetual budgets can be used at times to

keep managers aware of upcoming years.
Budgeting
approaches
◦ The success of the budget is greatly
influenced by the budgeting approach.
◦ There are 2 approaches to produce a
budget.
◦ Each form of budgeting
implementation has its own
advantages and disadvantages in terms
of technology, but in the end, people
are still the decisive factor for the
success of the budget balance.
Budgeting approaches
◦ The Top-down approach
◦ Advantage: showing the concentration of
the direction of senior management,
concentrating resources in implementation,
but often hidden pressure.
◦ Disadvantages: for subordinates,
sometimes there is a conflict between the
aspirations of senior managers and low-
level managers, and those who execute,
sometimes the motivation of subordinates
to participate is not good, sometimes there
is a lack of integrity, authenticity, or even
practicality.
Budgeting approaches
◦ The Self-Imposed budget is prepared with the full
cooperation and participation of managers at all
levels. (GNB 2018)
◦ Advantages:
1. All levels of the company are valued.
2. Budget estimates are more accurate.
3. Boost morale.
4. Managers cannot blame their superior if they fail
to meet the budget.
◦ Disadvantages:
1. Suboptimal recommendations.
2. Budget slacking.
 The budget
report system
◦ Budgeting is
associated with a
system of detailed
estimates of business
activities related to
each other to finally
combine and present
into a cash budget, a
budgeted income
statement and a
budgeted balance
sheet.
SALES
BUDGET
◦ Forecasts the
number of
units that the
company
expects to sell
◦ Forecasts the
amount of
money that
the company
expects to
receive
 ◦ The goal of the production budget: ensure there is

The Production sufficient products for selling continuously

◦ Desired units of ending finished goods
inventory= Desired percentage x Next period’s
Budget demand
DIRECT MATERIALS BUDGET
Projects the number of raw materials that must be purchased to meet production needs.
 Predetermined Direct Materials Cost
Direct Materials cost standard

DM predetermined price x DM predetermined amount

Useful Natural loss Acceptable

Purchase Transportation Other
amount of amount of loss amount
price costs costs
materials materials of materials
 What is the purpose of budgeting?

A. Planning and control

MCQ B. Organizing and executing

C. Control and evaluate

D. All the above are correct

 MCQ

How often do you develop a budget?

A. Yearly

B. Monthly

C. Whenever, Wherever

D. Quarterly