B.

COM (H) EAFM

I SEM
BUSINESS BUDGETING
DR. RICHA SINGHAL

AUTHOR:-
AGRAWAL, VIJAY, SEROLIYA
OR
M.R.AGRAWAL
Code PBBA 504 BUSINESS BUDGETING
Section-A
BUDGET AND BUDGETING (THEORY)
Operating Business Budget (PRACTICAL)
Cash Budget (THEORY AND PRACTICAL)
Section-B
Capital Budgeting (THEORY AND PRACTICAL)
Section-C
Performance Budgeting (THEORY)
Zero Base Budgeting(THEORY)
 BACHELOR OF COMMERCE (HONS.)
SUBJECT: ECONOMIC ADMINISTRATION AND FINANCIAL MANAGEMENT
SEMESTER-I
PAPER-IV: BUSINESS BUDGETING
UNIT-I
BUSINESS BUDGETS AND BUDGETING (THEORY)
TYPES OF BUDGETS (PRACTICAL)
ZERO BASE BUDGETING (THEORY)
UNIT-II
BUSINESS FORECASTING (THEORY)
PERFORMANCE BUDGETING (THEORY)
BUDGETARY CONTROL: MEANING, CHARACTERISTICS, OBJECTIVES AND BENEFITS OF BUDGETARY CONTROL.(THEORY)
BUDGETARY CONTROL V/S STANDARD COSTING. SALES VARIANCE, MATERIAL VARIANCE, LABOUR VARIANCE. (PRACTICAL)
UNIT-III
CASH BUDGETING (THEORY AND PRACTICAL)
BUDGETING AND MANAGEMENT REPORTS (THEORY)
FINANCIAL FORECASTING AND INVESTMENT DECISIONS (THEORYU AND PRACTICAL)
COST OF CAPITAL. (PRACTICAL)
IMPORTANT TOPICS
• BUDGET- BUDGETING
• DEFINITION DEFINITION
• CHARACTERISTICS CHARACTERISTICS
• OBJECTIVES TECHNIQUE/ PROCESS OF BUDGHETING
• CLASSIFICATION PRINCIPLES OF BUDGETING
• ESSENTIALS OF AN EFFECTIVE BUDGET ADVANTAGES AND DISADVANTAGES
• BUDGET- AS A TOOL OF MANAGEMENT DIFFERENCE B/W BUDGET AND BUDGETING
BUDGET
• BUDGET IS THE QUANTITATIVE STATEMENT PREPARED FOR DEFINITE PERIOD OF TIME FOR ATTAINING SPECIFIC OBJECTIVE.
BUDGET IS A FINANCIAL DOCUMENT WHICH REFLECTS THE PLAN IN ACTION FOR THE ACHIEVEMENT OF PRE-DETERMINED
OBJECTIVES.
WHEN A BUDGET IS PREPARED FOR A BUSINESS FIRM THEN IT IS TERMED AS BUSINESS BUDGET.

• INTEGRAL PART
• MONETARY UNITS /FINANCIAL TERMS
• PLAN OF FIRM’S ACTIVITIES AND RESOURCES
• IT CAN BE RE-EVALUATE ON A PERIODIC BASIS.
• DETAILED PLAN
• WRITTEN DOCUMENT
• DEFINITE TIME PERIOD
• BUDGET AS A STANDARD
OBJECTIVES OF BUDGET
• TO MAXIMISE THE BUSINESS PROFITS
• OPTIMUM UTILISATION OF PHYSICAL AND FINANCIAL RESOURCES
• TO FIX THE DUTIES AND RESPONSIBILITIES OF DEPARTMENTS
• TO INCREASE BUSINESS EFFICIENCY
• TO PROTECT THE BUSINESS FROM FUTURE RISKS AND UNCERTAINTIES
• TO USE AS A SOURCE OF BUSINESS COMMUNICATION
• TO USE AS A STANDARD FOR MEASURING PERFORMANCE
• TO ESTABLISH COORDINATION BETWEEN VARIOUS DEPARTMENTS
• TO REDUCE THE PRODUCTION COST.
CLASSIFICATION OF BUDGET
ESSENTIALS OF AN EFFECTIVE BUDGET
• FIXED PERIOD OF TIME
• SOUND FORECASTS
• PROPER ACCOUNTING SYSTEM
• EFFICIENT ORGANIZATION
• AUTHORITY AND RESPONSIBILITY
• WELL-DEFINED BUSINESS POLICIES
• BUDGET ORGANIZATION/ COMMITTEE
• FLEXIBLE
• ECONOMICAL
• FORMULATION OF MASTER BUDGET
BUDGET- AS A TOOL OF MANAGEMENT

• BUDGET AND PLANNING

• BUDGET AND CO-ORDINATION
• BUDGET AND CONTROL
BUDGETING
• BUDGETING IS AN OPERATIONAL PLAN, FOR A DEFINITE PERIOD USUALLY A YEAR. EXPRESSED IN FINANCIAL
TERMS AND BASED ON THE EXPECTED INCOME AND EXPENDITURE.

• SHOULD BE CONTINUOUS MANAGERIAL PROCESS

• A TECHNIQUE OF FORMULATING A DETAILED PLAN.
• SHOULD BE FLEXIBLE
• SHOULD BE SYNTHESIS OF PAST, PRESENT AND FUTURE
• SHOULD PREPARE IN JOINT VENTURE MANAGEMENT AND DEPARTMENT AT A DIFFERENT LEVEL OF
MANAGEMENT.

• SHOULD BE IN THE FORM OF STATISTICAL STANDARDS LAID DOWN IN THE SPECIFIC NUMERICAL TERMS.
BUDGETING PROCESS
• STEP 1- ESTABLISHMENT OF OPERATIONAL GOALS AND OBJECTIVES AND POLICIES
• STEP 2- GOALS MUST BE TRANSLATED INTO QUANTIFIABLE MANAGEMENT OBJECTIVES FOR ORGANIZATIONAL UNITS .DEPARTMENTAL GOALS
ARE MADE.

• STEP 3-FORMAL PLAN FOR BUDGET PREPARATION AND REVIEW INCLUDING ASSIGNMENT OF RESPONSIBILITIES AND TIMETABLE IS PREPARED.
• STEP 4- DEPARTMENTAL BUDGET ARE REVISED AND MASTER BUDGET IS PREPARED.
• STEP 5- FINANCIAL FEASIBILITY OF MASTER BUDGET IS TESTED AND FINAL DOCUMENT IS APPROVED AND DISTRIBUTED TO ALL PARTIES
INVOLVED.

• STEP 6- EVERY HEAD OF THE OFFICE REQUIRED TO PREPARE BUDGET ESTIMATE IN RESPECT OF SALARIES OF ESTABLISHMENT CONTINGENT
EXPENDITURE AND OTHERS E.G. TELEPHONE, OFFICE EXPENSES, RENT OF BUILDING ETC.
PRINCIPLES OF BUDGETING
• SPONSORED BY TOP MANAGEMENT
• RESPONSIBILITY CENTRES AND CONTROLLABLE COSTS
• PARTICIPATION OF RESPONSIBLE SUPERVISORS
• CONTINUOUS BUDGET EDUCATION
• TIME PERIOD
• UNIFORMITY IN TERMINOLOGY
• ATTAINABLE GOALS
• MANAGEMENT BY EXCEPTION
• COST OF BUDGET
• CLEAR DISTINCTION BETWEEN STAFF AND LINE ORGANIZATION
• FLEXIBLE
• APPROVAL
• REVIEW
 ADVANTAGES DISADVANTAGES
• HELPFUL IN MANAGERIAL FUNCTIONS • BUDGETS ARE ONLY ESTIMATES
• PROFITABILITY ANALYSIS • LACK OF FULL KNOWLEDGE
• COST ANALYSIS
• HELPFUL IN COMPARISON • PERSONAL BIAS
• PARTICIPATION • INEFFECTIVE
• DETERMINATION OF FUNCTIONS AND RESPONSIBILITIES • NON CO-OPERATION
• REGULAR ACCOUNTING AND ITS ADVANTAGES • EXTRA BURDEN
• OPTIMUM USE OF BUSINESS RESOURCES
• MOTIVATION
• EMPHASIS ON BUDGET OBJECTIVES ONLY
• ACCOUNTABILITY AND EFFICIENCY • LOWER LEVEL OF EMPLOYEES IS IGNORED
• DEVELOPMENT OF CO-OPERATION SPIRIT
DIFFERENCE BETWEEN BUDGET AND BUDGETING
BUDGET
• 1- BUDGET IS A PLAN
• 2-IT SHOWS BUSINESS OBJECTIVES AND
MEANS TO ACHIEVE THEM
• 3-IT ESTIMATE REVENUE AND EXPENDITURE
• 4- IT IS A KIND OF STANDARDS
• 5- BUDGET IS A CONCERN OF BUSINESS
ACTIVITIES
• 6- IT IS RELATED TO A DEFINITE FUTURE
PERIOD.
BUDGETING
• 1- BUDGETING IS A MANAGERIAL PROCESS
• 2- IT IS A PROCESS OF BUDGET PREPARATION
AND DECIDES THE OBJECTIVES OF A BUDGET.
• 3- IT SHOWS THE PLAN OF A BUDGET AND ITS
IMPLEMENTATION AND EVALUATION.
• 4-IT PREPARES BUDGET FOR STANDARDS
• 5-IT IS CONCERNED WITH BUDGET
ACTIVITIES
• 6-IT DOES NOT WORK FOR FIX PERIOD.
DIFFERENCE BETWEEN FIXED AND FLEXIBLE BUDGET
FIXED FLEXIBLE
THANK YOU