Skip to main content

Unit IV - Budget


Meaning and Need for Budget:

A budget is a blueprint of the plan of action to be followed during a specified period of time for the purpose of attaining a given objective.
According to CIMA Terminology, budget is “a plan quantified in monetary terms prepared and approved prior to a defined period of time, usually showing planned income to be generated and/or expenditure to be incurred during that period and the capital to be employed to attain a given objective”.

Features:

An analysis of the above definition reveals the following essential features of a budget:
(i) It is prepared beforehand based on a future plan of actions;
(ii) It is related to a definite future period and is based on the objectives to be attained;
(iii) It is expressed in financial terms;
(iv) It shows planned income to be generated;
(v) It shows probable expenditure to be incurred;
(vi) It indicates the capital to be employed during the period;
Thus, a budget sets the firm’s goals in clear formal terms to avoid confusion and provides a detailed plan of action for achieving the goals. It is a means of communication by which the top management uses the budget as a vehicle to communicate their ideas to the subordinates who are to give them the practical shape.
It coordinates the various activities (such as sales, production, purchases etc.) of the organization in such a way that the use of resources is maximized. It also provides a means of measuring and controlling the performance of the organization, and supplies information to the management, on the basis of which necessary corrective actions may be taken.

Types of budget:-

1. Sales Statement:

It includes a forecast of total sales during a period expressed in money and/or quantities in the organization. The forecast relates to the total volume of sales and also its break-up product-wise and area-wise in the organization. The responsibilities for making the sales budget lies with the sales manager in the organization.

2. Cash Budget 2:

In the organization, the cash budget usually gives detailed estimates of (a) cash receipts and (b) cash disbursements for the budget period. In the organization, it is prepared (i) to ensure that cash is available in time for meeting the financial commitments and (ii) to use cash available in the best possible manner.

3. Production Budget:

It includes a forecast of the output during a particular period analyzed according to (a) products, (b) manufacturing departments, to schedule its production according to sales forecast in the organization.

4. Flexible budget:

A flexible budget is a budget that adjusts or flexes with changes in volume or activity. The flexible budget is more sophisticated and useful than a static budget. (The static budget amounts do not change. They remain unchanged from the amounts established at the time that the the static budget was prepared and approved.

Video Lecture Links:
https://youtu.be/2LKHzjgncNk


Contents   1   2   3   4   5
Labels:

Comments

Post a Comment

Popular posts from this blog

Unit I - Economic Development

1.1 Meaning and Definition of Underdevelopment Underdevelopment is a low level of development characterized by low real per capita income, widespread poverty, lower level of literacy, low life expectancy and underutilisation of resources etc. The state is the underdeveloped economy fails to provide acceptable levels of living to a large fraction of its population, thus resulting in misery and material deprivations. We need to note here that underdevelopment is a relative concept but it sustains absolute poverty. The original meaning of the term indicated that existing resources had not been exploited. The word is now close in meaning to ‘poverty’, although some oil-rich underdeveloped countries have high incomes which are enjoyed by the few. Indicators of underdevelopment include high birth rates, high infant mortality, undernourishment, a large agricultural and small industrial sector, low per capita GDP, high levels of illiteracy, and low life expectancy. 1.2 Economic de...
2 comments
Read more

Unit II - B2C Internet Marketing

No business-to-consumer (B2C) company could survive — never mind thrive — without doing some kind of marketing. B2C marketing, which differs from business-to-business (B2B) marketing in that it focuses on promoting goods and services to individual consumers (rather than other organizations), is the wizardry that makes a company both visible and attractive to their target audience.  It’s how you create interest in your offering, how you bring in new customers (acquisition), how you hold onto existing ones (retention), how you boost sales, and how you turn your hard work into profit. It is, in many ways, the lifeblood of a business. But “doing” B2C marketing isn’t as simple as shouting from the rooftops about your new clothing line or app. You need to know who you’re talking to. You need to be familiar with the channels available to you. And fortunately, thanks to digital transformation, there are now plenty.  The rise of online media and technologies has la...
Post a Comment
Read more

Poem 1 - On His Blindness - by John Milton (Sem IV)

John Milton ’s poem “On His Blindness” is an autobiographical sonnet in which Milton meditates on his own loss of sight. For most of his life, Milton had been able to see perfectly, but his late-night reading and writing on behalf of the government of the short-lived English Republic, in which he held a very prominent position, helped ruin his eyesight. This sonnet—written in the “Petrarchan” rhyme scheme associated with the fourteenth-century Italian poet Francesco Petrarca—is divided into an eight-line “octave” and a six-line “sestet.” The octave rhymes  abba abba . The sestet rhymes  cde cde . The sonnet is, therefore, a typical Petrarchan sonnet in form, but in subject matter, the poem departs from the topics usually associated with Petrarchan poems. Petrarch (the English version of Petrarca’s name) was most famous for writing about love; Milton departs from that conventional topic to deal with a very practical, very physical problem, but a problem with many broa...
Post a Comment
Read more