Thursday, 14 November 2019

Unit 7: Budgeting

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                                                            Unit 7: Budgeting   




Budget is an estimate prepared for defi nite future period either in terms of fi nancial or non-fi nancial terms.

Budgeting means the process of preparing budgets.

In other words, budgeting refers to the management action of formulating budgets.

Cost control contains two different processes one is the preparation of the budget and another one is the control of the prepared budget.

The production budget is a statement of goods, how much should be produced.

The ultimate aim of the production budget is to fi nd out the volume of production to be made during the year based on the sale volume.

Sales Budget is an estimate of anticipation of sales in the near future prepared by the responsible person for the sale of a product by considering the various factors of infl uence.

The expected increase or decrease in the sales volume should be incorporated at the time of preparing the sales budget from the yester periods sale fi gures.

Cash budget is nothing but an estimation of cash receipts and cash payments for specifi ed period.

It is prepared by the head of the accounts department, i.
e.

Chief Accounts Offi cer.

Constant budget is mainly meant for the fi xed overheads of the fi rm, which are constant in volume irrespective level of production.

Zero-base budgeting is one of the renowned managerial tools, developed in the year 1962 in America by the Former President Jimmy Carter.

The Zero-base budgeting considers the current year as a new year for the preparation of the budget but the yester period is not considered for consideration.

Budget: A fi nancial statement prepared for specifi ed activity for future periods.

Budgeting: Activity of preparing the budget is known as budgeting.

Budget Control: Quantitative controlling technique to assess the performance of the organization.

Cash Budget: It is a statement prepared by the organization to identify the future needs and receipts of cash from the yester activities.

Flexible Budget: It is a fi nancial statement prepared on the basis of principle of fl exibility to identify the cost of the unknown level of production from the existing level of operational capacity.







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