ECON1010 Lecture Notes - Cash Flow Statement, Income Statement
Lecture 2 - Budgeting
Friday, 2 March 2018
12:00 PM
<<L02 Lecture Budgeting(2).pptx>>
• Budgeting is part of the ongoing business planning process
• A budget is a report that gives a financial description of one part of a business' planned
activities for that budget period
• There are different types of budgets for different activities
• Budgeting gives the planning process order and detail
• Budgeting helps to identify and avoid potential problems
• Budgeting involves quantifying a business' planned activities in relation to its operating
cycle
• An operating cycle is the average time it takes for a business to buy/produce a good or
service with cash and then sell the good/service with cash
• Example of operating cycle:
• Master budget refers to the overall structure used to organise the budgeting process
• The master budget is a set of interrelated reports showing:
o Goals to be met
o Activities to be performed in the operating cycle
o Resources to be used
o Expected financial results
• A master budget and supporting CVP analysis are usually included in the financial section
of a business plan
• Master budget would include:
o Sales budget
o Purchases budget
o Selling expenses budget
o General and admin expenses budget
o Cash budget (projected cash flow statement)
o Projected income statement
o Projected balance sheet
• Use slideshow to view budgeting example
• Header will have who, what and time
• Cash budget is essential for cash management so that there is enough on hand, a buffer,
and there isn't too much cash
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