This PPT on budgeting types with special focus on cash and flexible budgeting is part of Sawyam course Academic Writing

1. ACADEMIC WRITING :ugc19-ge03
Name: Dr. Shweta Jain
Id: 287f0c7ae91e11e9935d3569adb9362d
Course Name: Budgeting types with special focus on cash and flexible
budgeting
Application Number: 287f0c7ae91e11e9935d3569adb9362d
Affiliation: Pratibha Institute of Business Management, Chinchwad, Pune
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2. Source: https://www.flickr.com/photos/cafecredit/27432402060/

3. Meaning
• A budget is a financial plan for a defined period, often one year. It
may also include planned sales volumes and revenues, resource
quantities, costs and expenses, assets, liabilities and cash flows.
Companies, governments, families and other organizations use it
to express strategic plans of activities or events in measurable
terms. A budget is a financial or quantitative statement prepared
prior to a defined period of time, of the policy to be pursued
during that period for the purpose of attaining a given objectives
Source: https://en.wikipedia.org/wiki/Budget
• The process of preparation, implementation and the operation of
budgets is known as budgeting.
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4. • Budgetary control is system of controlling cost which includes
the preparation of budgets,coodinting the department and
establishing responsibilities, comparing actual performance with
the budgeted and acting upon results to achieve maximum
profitability
Steps in budgetary control
1. Preparation of the budgets
2. Publishing the budget
3. Measuring the results
4. Comparing the results with the budget
5. Reporting the results
6. Correcting the unfavorable variable
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5. Types of budget
Classification on the basis of time
• Long term budget
• Short term budget
• Current budget
Classification on the basis of function
• Operating budget
• Financial budget
• Master budget
Classification on the basis of flexibility
• Fixed budget
• Flexible budget
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6. Classification of budget as per the organization
chart
• Personnel manager
Labor budget
Purchase manager
Purchase budget
• Production manager
Material budget
Production budget
Plant utilization budget
• Finance manager
Financial budget
Capital budget
Cash budget
Production cost budget
Administrative cost budget
Master budget
• Sales manager
Sales budget
Advertisement budget
Selling and distribution cost
budget
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7. Types of Budgets
Source: https://businessjargons.com/budget.html

8. Cash budget
Cash budget is an estimate of cash receipts and
disbursements for a future period of time
Why to prepare cash budget
• It helps in determining future cash requirements
• It helps in making plans
• It helps in planning suitable investment of surplus
cash
• It helps in cash control and liquidity of the
enterprise
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9. Sources
cash receipts
• Cash sales
• Collection from debtors
• Sale of fixed asset
• Issue of shares and
debentures
• Loans and borrowings
• Interest and dividend received
• Miscellaneous receipts
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Cash payments
• Cash purchase
• Payment to creditors
• Labor cost
• Factory overhead
• Loan repayment
• Purchase of market securities
• Interest and dividend paid
• Tax payment
• Payment for wages and
salaries
• Miscellaneous expenses

10. Cash budget.
Particulars Jan Feb March April May
Opening cash balance
Estimated cash receipts(1)
Cash sales
Collection from debtors
Sale of fixed asset
Issue of shares and debentures
Loans and borrowings
Interest and dividend
Estimated cash payment(2)
Cash purchase
Payment to creditors
Labor cost
Factory overhead
Loan repayment
Interest and dividend paid
Tax payment
Payment for wages and salaries
Closing cash balance(1-2)
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11. problem
• From the following forecast of income and expenditure prepare a cash
budget for the months January to April 2019
months Sales
credit
Purchase
credit
wages Manu. Exp. Admi.exp
.
Selling
exp.
2011 nov. 30000 15000 3000 1150 1060 500
Dec. 35000 20000 3200 1225 1040 550
2012 jan 25000 15000 2500 990 1100 600
feb 30000 20000 3000 1050 1150 620
march 35000 22500 2400 1100 1220 570
april 40000 25000 2600 1200 1180 710
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12. .Additional information is as follows
• The customers are allowed a credit period of two months
• A dividend of Rs. 10000 is payable in April
• Capital expenditure to be incurred: plant purchased on 15th january,a
building has been purchased on 1st march and the payments are to be
made in monthly installments of Rs. 2000 each
• The creditors are allowing a credit of 2 months
• Wages are paid on the 1st of the next month
• Lag in payment of other expenses is 1 month
• Balance of cash in hand on 1st January 2019 is Rs.15000 CC BY-SA-NC

13. Cash budget
For the month from January to April,2019
Details January February March April
Receipts
Opening balance of cash 15000 18985 28795 30975
Cash realized from debtors 30000 35000 25000 30000
Total receipts 45000 53985 53795 60975
Payments
Payment to creditors 15000 20000 15000 20000
wages 3200 2500 3000 2400
Manufacturing exp. 1225 990 1050 1100
Administrative expenses 1040 1100 1150 1220
Selling expenses 550 600 620 570
Payment of dividend 10000
Purchase of plant 5000
Installment of total building loan 2000 2000
Total payments 26015 25190 22820 37290
Closing balance 18985 28795 30975 23685
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14. Flexible Budget
Image Courtesy: By vectorstockcompany
• A flexible budget is defined as a budget which
by recognizing the difference between fixed ,
semi fixed and variable cost is designed to
change in relation to the level of activity
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15. Difference
Fixed budget
• Under changed
situations cost can not
be found out
• Forecasting is difficult
• In fixed budget cost are
not classified
• Assume that conditions
will remain constant
• Rigid
Flexible budget
• The cost can be easily calculated
under different levels of activity
• Helps in making accurate forecast
• The costs are classified as per their
nature i.e. Fixed, variable and semi
variable
• Believes that conditions will
change in future
• Not rigid
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16. Format of flexible budget
Flexible budget
Normal level of activity
Period ending--------
Capacity 60% Capacity 80% Capacity 100%
Prime cost
Variable overheads
Marginal cost (A)
Sales (B)
Contribution (D=B-
A)
Fixed cost (C)
Profit (D-C)
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17. Problem
• For production of 10000 XYZ co. ltd. The following are
budgeted expenses
• Prepare a budget for production of 6000,7000 and 8000
units. Show distinct marginal cost and total cost
Per unit
Direct materials 60
Direct labour 30
Variable overheads 25
Fixed overheads(Rs. 150000) 15
Variable expenses(Direct) 5
Selling expenses(10% fixed) 15
Administration exp.(Rs. 50000 rigid for all levels of production 5
Distribution expenses(20 % fixed) 5
Total cost of sales per unit 160
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18. Flexible budget of XYZ co. ltd.
Production 6000 units 7000 units 8000 units
Particulars Total Per unit Total Per unit Total Per unit
Direct materials 3,60,000 60 4,20,000 60 4,80,000 60
Direct Labour 1,80,000 30 2,10,000 30 2,40,000 30
Direct variable expenses 30,000 5 35000 5 40,000 5
Variable overheads
Production 1,50,000 25 175,000 25 2,00,000 25
Selling 81,000 13.50 94,500 13.50 1,08,000 13.50
distribution 24,000 4 28000 4 32,000 4
Marginal cost 8,25,000 137.50 9,62,500 137.50 11,00,000 137.50
Fixed production overhead 1,50,000 25 1,50,000 21.43 1,50,000 18.75
Administrative overhead 50000 8.33 50000 7.14 50000 6.25
Selling overhead 15000 2.50 15000 2.14 15000 1.88
Distribution overhead 10000 1.67 10000 1.43 10000 1.25
Fixed cost 2,25,000 37.50 2,25,000 32.14 2,25,000 28.13
Total cost( marginal cost +
fixed cost)
10,50,00
0
175 11,87,500 169.64 13,25,000 165.63
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19. Working notes
Calculation for Variable selling expenses per unit
• Total variable selling expenses
1,50,000*90/100=Rs.1,35,000
• Variable selling expenses per unit
135000/10000=Rs.13.5 per unit
Calculation for Variable distribution expenses per unit
• Total variable distribution expenses
50000*80/100=Rs.40000
• Variable distribution expenses per unit
40000/10000=Rs.4 per unit
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20. Acknowledge &Feed Back on
Academic Writing
• Academic Writing Course had really enriched my knowledge especially for
journal metric and author metric. I had published various research papers
and sorry to say in TDH journals due to lack of knowledge. Now onwards I
will focus on only reputed journals. Secondly got very useful information
about various OER available. Earlier I used to take information, image from
any where without thinking that I am doing plagiarism. Knowledge about
the Plagiarism was the other important learning. I had done lots of
plagiarism without knowing.
• I truly believe in importance of ethics in education field. With the
knowledge gained through this course I can follow ethics.I strongly
recommend this course as Course work for PhD and M Phil studies
• I sincerely thank the AW course coordinators Dr. Ajay Semalty & Dr. Mona
Semalty, H.N.B. Garhwal University (A Central University), Srinagar, Garhwal
Uttarakhand for their well developed course. They had delivered this
content filled course with so much ease .Special Thanks to the wonderful
team working with them.