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Budget Preparation

Budget is a commitment to accept the responsibility accomplishing the stated objectives the budget normally approved by top management the budget may be changed according to circumstances the budget will compared with actual performance and variances or analyzed and explained. Differences between forecasting and budgeting budget is a management plan whereas forecast simply prediction about the future.

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PUTTU GURU PRASAD SENGUNTHA MUDALIAR
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446 views

Budget Preparation

Budget is a commitment to accept the responsibility accomplishing the stated objectives the budget normally approved by top management the budget may be changed according to circumstances the budget will compared with actual performance and variances or analyzed and explained. Differences between forecasting and budgeting budget is a management plan whereas forecast simply prediction about the future.

Uploaded by

PUTTU GURU PRASAD SENGUNTHA MUDALIAR
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Budget preparation

Prof. GURU PRASAD


FACULTY MEMBER
INC GUNTUR
[email protected]
Budget preparation

• Characteristics/features of budget
 It estimates the profit potential of the
enterprise
 It always express in monetary terms
 The period is usually one year
 The budget is a management commitment to
accept the responsibility accomplishing the
stated objectives
 The budget normally approved by top
management
 The budget may be changed according to
circumstances
 The budget will compared with actual
performance and variances or analyzed and
explained
The strategic planning and
budgeting
 Both involve planning
 The types of planning activities
 Budget is for one year and strategic
to 3-5 year
 Strategic planning proceeds
budgeting and budgeting is done on
the basis of strategic plan
 Product lines and programs structure
strategic plan, whereas budgeting
structured by responsibility centers.
Differences between forecasting and
budgeting
 Budget is a management plan whereas forecast
simply prediction about the future.
 Budget always states in monetary terms
whereas the forecast may be stated monetary
and non-monetary terms.
 Budget is for a period of 1 year but forecast for
any period.
 Budget is a commitment but forecasting is not.
 Higher authorities approve budget but forecast
does not.
 Forecast for not analysis but budget is for
analysis, explanation & comparison.
 Forecasting is a planning activities but
budgeting is planning and controlling activities.

Purpose of budgets
 To fine-tune the strategic plan
 To coordinate the activities of several
parts of the organization
 To assign the responsibility to managers
 To authorize the amounts they are
permitted to spent
 To inform the managers about the expect
performance
 To obtain a commitment from a managers
for Evaluating their actual performance
Types of budget

 Operating budgets
 Capital budgets
 Budgeted balance sheet
 Budgeted cast flow statement
 Management by objective (MBO)
Operating budget

 It is prepared for the organization


as a whole & for each business unit
 It is classified by responsibility
centers
 Prepared for one year divided into
quarter, month task Control.,
 It reconcile to strategic plan
Contents of operating budget

 Revenue budget
 Production cost budget /cost of sales
budget
 Marketing expense budget
 Logistics expense budget
 General and administrative budget
 Research & development budget
 Taxes budget
 Net income budget
Functions of budget department

 It publishes the procedures & forms for the


preparation of budget.
 It coordinates & publishes the assumptions
about the economy for the preparation of
budget
 It provides help & assistance in preparation of
budget.
 It analyzes the proposed budget & makes
recommendations
 It administers the process of making and
revising the budget
 It analyzes the reported performance against
budget, interprets the results & prepares
summary report to senior manager
Budget committee

The budget committee consists


 CEO
 CFO
 Chief operating officials
 Members of senior Management
 Board of directors
Functions of the budget
committee
 It reviews and either approves or
adjusts each of the budgets submitted
by all the departments or units of the
organization.
 It approves measure budget revisions
made during the year.
Budget preparation process

 Budget dep’t
 Set p a budge committee
 Issue guidelines
 Issue of initial budget proposal
 Negotiation
 Approval
 Revision
Types of Budgets
 On the basis of Participation
 Top down
 Bottom up

On the basis of reference


• Zero based

• Incremental
Target Difficulties
• Easier targets

• Impossible

Senior Management Involvement

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