Budgeting and Planning
Budgeting & planning is important for the operation of the business. Budgeting & planning helps to maintain the strategic planning for management of a company. Budgeting & planning is beneficial for continuous improvement and also help in anticipating problems.
A fixed budget is the financial plan designed and implemented by the management that is not changed or altered throughout the accounting and budgeting period. It remains same and uniform even if the level of activity changes within the business. However in actual situation
Zero based budgeting is a budgeting approach where each and every line of budget is started and planned from the scratch. Unlike common budgeting methods in this method every expenditure is justified from scratch instead of using the same baseline and only justifying the
As the name indicates the internal rate of return method indicates the rate of return associated with the project. This is the rate of return that an investor can expect to be returned from the project. In other words the internal rate of return
Budgeting is an important aspect of financial planning of a business. With the help of capital budgeting techniques a business decides the allocation, funding and the management of capital for long term projects, short term projects and other operations within the business. There are
A business can lead to bankruptcy due a number of factors that may be under the control of management or beyond management control. Most of the time a business goes bankrupt due to financial mismanagement of the cash and assets. Some external factors
A budget can be defined as a written estimate of the future financial performance of a business, project or a particular financial unit. With the help of budgeting one can effectively deploy financial resources, equipment and workforce to the business and can estimate the
Learning Objectives: Define and explain the terms “profit planning” and “budgeting”. What is the difference between planning and control? What are the advantages and disadvantages of budgeting? Contents: Definition and Explanation of Profit Planning and Budgeting Difference Between Planning and Control Advantages and Disadvantages
Inventory Purchases Budget for a Merchandising Firm: Learning Objectives: Define and explain an inventory budget. Prepare an inventory budget or merchandising purchase budget. Manufacturing firms prepare production budget but merchandising firms prepare merchandising purchase budget instead. Merchandising purchase budget shows the amount of goods
Zero Based Budgeting (ZBB): Learning Objective of the article: Define and explain the term “zero based budgeting” and “incremental budgeting” in managerial accounting. Explain the importance and use of zero based budgeting in business. What are advantages and disadvantages of zero based budgeting? Contents:
Selling and Administrative Expense Budget: Learning Objectives: Define and explain selling and administrative budget. Prepare selling and administrative budget. Definition and Explanation: Selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing. In large organizations this budget would be a
Manufacturing Overhead Budget: Learning Objective of the article: Define and explain manufacturing overhead budget. Prepare a manufacturing overhead budget. The manufacturing overhead budget provides a schedule for all costs of production other than direct materials and direct labor. Example of a Manufacturing Overhead Budget:
Participative Budgeting or Self Imposed Budgeting: Learning Objective of the article: Define and explain the term “self imposed or participative budgeting” in managerial accounting. Explain the importance and use of a participative or self imposed budget in business. What are advantages and disadvantages of
Material Budgeting | Direct Materials Budget: Learning Objective of the article: Define and explain direct materials budget or Materials Budgeting. Prepare a direct material budget including a schedule of expected cash disbursements for purchases of materials. Definition and Explanation of Direct Materials Budget: Direct
Direct Labor Budget: Learning Objectives: Define and explain direct labor budget. Prepare direct labor budget. Definition and explanation of direct labor budget Example Definition and Explanation: The direct labor budget is developed from the production budget. Direct labor requirements must be computed so that
Ending Finished Goods Inventory Budget: Learning Objective of the article: Define and explain ending finished goods inventory budget. Prepare a manufacturing overhead budget. After preparing sales budget, production budget, direct materials budget, direct labor budget, and manufacturing overhead budget the management has all the
International Aspects of Budgeting: A multinational company faces special problems when preparing a budget. The problems arise because of fluctuations in foreign currency exchange rates, the high inflation rates found in some countries, and local economic conditions and governmental policies that affect everything from
Human Factors in Budgeting: The success of a budget program also depends on: The degree to which top management accepts the budget program as a vital part of the company’s activities. The way in which top management uses budgeted data. If a budget program
