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Lazy Notes Budget

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Angeline Miparanum
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41 views2 pages

Lazy Notes Budget

Uploaded by

Angeline Miparanum
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MANAGEMENT ADVISORY SERVICES

FINANCIAL PLANNING AND BUDGETS


BUDGET – a plan expressed in quantitative terms, on how to acquire and use the resources of an
entity during a budget period a certain future period of time.

USES/ADVANTAGES OF BUDGETING
1. It compels periodic planning.
Strategic Budgeting – a form of long-range planning based on identifying and specifying
organizational goals and objectives
2. It enhances cooperation, coordination, and communication.
3. It forces quantification of plans and proposals.
4. It provides a framework for performance evaluation.
5. It enables members of the organization to be aware of business costs.
6. It satisfies some legal and contractual requirements.
7. It directs the activities toward the achievement of organizational goals.

LIMITATIONS OF BUDGETING
1. Since budgeting means planning for the future, the plan itself, as well as the figures therein,
are merely estimates, requiring a certain amount of judgment.
2. To be successful, a budgetary system requires the cooperation and participation of all
members of the organization.
3. Some managers think that budget restricts their investments and limits their decision-
making power, making it difficult to sell the idea of budgeting to some people in the
organization.
4. The development and installation of a good budgetary system may be time-consuming and
too costly for some organizations, such that the benefits that can be derived from budgeting
may be outweighed by its costs.

THE BUDGET COMMITTEE – usually composed of the sales manager, production manager, chief
engineer, treasurer, and controller.

THE BUDGET COMMITTEE’S PRINCIPAL FUNCTIONS:


1. Formulate and decide on general policies relating to the firm’s budgetary system.
2. Request, review, and revise (if necessary) individual budget estimates from the different
segments of the organization.
3. Approve budgets and subsequent revisions therein.
4. Receive, evaluate, and analyze budget reports.
5. Recommend necessary actions to improve operational efficiency and effectiveness.

Master Budget – represents the overall plan of the organization for a given budget period.
– consists of all the individual budgets for each of the segment of the
organization aggregated or consolidated into one overall budget for the
entire firm.

Budget Report – compares actual performance with budgeted performance.


Continuous (Rolling) Budget – one that is revised on a regular (continuous) basis;
typically, the budget is extended for another month or quarter in
accordance with new data as the current month or quarter ends.
Fixed (Static) Budget – based on only one level of activity or production
Flexible (Variable, Dynamic) Budget – a series of budgets prepared for many levels
of
activity.
Zero-base Budgeting (ZBB) – a budget and planning process in
which each manager must justify a department’s entire budget from
a base of zero every period; all expenditures must be justified
regardless of the variance from the previous periods; the objective
is to encourage periodic re- examination of all costs in the hope
that some can be reduced or eliminated.
Life-cycle Budget – estimates a product’s revenues and expenses over its entire life
cycle beginning with research and development, proceeding through
the introduction and growth stages, into the maturity stage, and
finally, into the harvest or decline stage.
VALUE CHAIN: R & D – design – production – marketing – distribution –
customer service.
Activity-based Budgeting – applies activity-based costing principles to budgeting
Kaizen Budgeting – assumes the continuous improvement of products and processes,
usually by way of many small innovations rather than major
changes; it incorporates expectations for continuous improvement
into budgetary estimates.

- END –

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