Professional Documents
Culture Documents
Budget
Budget
It is a plan for saving, borrowing and spending.[1] A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods. In other terms, a budget is an organizational plan stated in monetary terms. In summary, the purpose of budgeting is to: 1. Provide a forecast of revenues and expenditures, that is, construct a model of how our business might perform financially if certain strategies, events and plans are carried out. 2. Enable the actual financial operation of the business to be measured against the forecast.
Contents
[hide]
1 Why do we produce budgets? 2 Business start-up budget 3 Corporate budget 4 Event management budget 5 Government budget o 5.1 United States o 5.2 United Kingdom o 5.3 India o 5.4 Philippines 6 Personal or family budget 7 Budget types 8 See also 9 References 10 External links
To control resources To communicate plans to various responsibility center managers. To motivate managers to strive to achieve budget goals. To evaluate the performance of managers To provide visibility into the company's performance
The other school of thought holds that its not about models, its about people. No matter how sophisticated models can get, the best information comes from the people in the business. The focus is therefore in engaging the managers in the business more fully in the budget process, and building accountability for the results. The companies that adhere to this approach have their managers develop their own budgets. While many companies would say that they do both, in reality the investment of time and money falls squarely in one approach or the other.
[edit] India
Main article: Union budget of India The budget is prepared by the Budget Division of Department of Economic Affairs of the Ministry of Finance annually. This includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery is in operation in relation to a State or a Union Territory, preparation of the Budget of such State. The railway budget is presented separately.
[edit] Philippines
The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution),
performance (budget accountability), and zero-based (budget preparation). The Department of Budget and Management prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representative to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate. After both houses of Congress approves the GAB, the President signs the bill into a General Appropriations Act (GAA); also, the President may opt to veto the GAB and have it returned to the legislative branch or leave the bill unsigned for 30 days and lapse into law. There are two types of budget bill veto: the line-item veto and the veto of the whole budget.
Sales budget an estimate of future sales, often broken down into both units and dollars. It is used to create company sales goals. Production budget an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies. Cash flow/cash budget a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing. Marketing budget an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service. Project budget a prediction of the costs associated with a particular company project. These costs include labor, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. Revenue budget consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies. Expenditure budget includes spending data items.
Basic Concepts in Budgeting There are 3 main elements of a budget. These are: 1. Sales Revenue This is the cornerstone of a budget. It is crucial to estimate future sales as accurately as possible because everything else in the budget revolves around these figures. Your estimates of future sales can be based on past sales figures and track record. Once you have your target sales in place you can calculate all the related expenses necessary to achieve those sales figures. 2. Total Costs Total costs include the main areas of fixed and variable. Fixed costs are the costs incurred whether or not the business turnover increases or decreases. Variable costs are the costs that vary with the level of business turnover. When you are estimating these costs you need to take into account the changes, which come about due to the various market forces, including inflation and rising prices. 3. Profit Profit is the amount left over after all the costs have been deducted from the sales. Your profit should be sufficient to at least make a retur...