ACC1200 Lecture Notes - Lecture 8: Cash Cash, Income Statement, Participatory Budgeting
22 May 2018
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Week 8: Budgeting
Budgeting: internal reports of an organisation, generally not information that is made available to
the public in its entirety.
A company's forecast is expressed via their budget.
What is a budget?
• A financial framework (plan) for the future. It sets out the objectives and aims the business
hopes to achieve in the coming periods
• Budgets are important as a planning tool, they assist in evaluating performance, signal when
problems may arise, assist in coordinating different departments of a business and can assist
with staff motivation
• Budgets, however are time consuming and expensive to prepare
An ongoing process, should generally have a past history as a basis for estimates. Is hard to get the
estimates if doing it for the first time.
Steps to prepare budgeting reports:
1. Look at data from the past
2. Take into account business and environmental conditions
3. Initial budget estimates are prepared for review
4. Departmental managers give feedback on initial estimates, prompting some adjustments
5. Formal budgets are prepared and distributed
6. As actual results becomes available, compare to budget to identify variances
7. Adjust the budget during the period if necessary
Types of Budget
a. Sales budget: budget according to the expected demand of goods, based off customer demand
b. Production budget: in order to satisfy demand, the company plans to have satisfy the amount
ordered by customers, including wages of employees, inventory etc.
c. Operating expenses budget: leads to the making of "Budgeted income statement" by
combining the 2 together
d. Cash budget: forecast the cash to be received and the outflow of cash to be paid, based upon
the estimates and determine when the cash is going to be receieved or paid.
e. Services fees budget
f. Purchases budget
g. Manufacturing overhead budget
h. Budgeted balance sheet
i. Capital budget
j. Program budget
k. Zero based budget: there are no actuals, estimating the quantity that is able to be sell at each
price and with the sales effort that goes with it
Examples:
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Budgeting: internal reports of an organisation, generally not information that is made available to the public in its entirety. A company"s forecast is expressed via their budget. What is a budget: a financial framework (plan) for the future. An ongoing process, should generally have a past history as a basis for estimates. Is hard to get the estimates if doing it for the first time. Income statement: anticipated amount of revenue and expense, thus the amount of profit: when revenue and expenses are incurred and earned. Cash: inflows and outflows of cash: cash movement, no adequate receipts. Important to compare the budget with the actual results, through variances and explain the results, sometimes variances highlight the need for a budget to be altered during a period. Importance of budgets: actual results are compared against budgets to identify variances, assists in evaluating performance and promotes efficiency, management use them to determine if business objectives have been met.
