1. 03/27/15 1S Kacker,IHM Mumbai

2. BUDGETBUDGET
A Financial and/or Quantitative Statement,
prepared & approved prior to a defined period of
time, of the policies to be pursued during the period
for the purpose of attaining a given objective.
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3. CHARACTERISTICSCHARACTERISTICS
Budget is expressed in Quantity or Money or Both.
Budget is prepared in advance of the period during
which it is to operate.
Budget relates to a definite future period.
It is prepared for the implementation of policy
formulated by the management.
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4. TYPES OF BUDGETTYPES OF BUDGET
Budgets are classified on the following basis
03/27/15 4S Kacker,IHM Mumbai

5. FUNCTIONAL BUDGETSFUNCTIONAL BUDGETS
Relates to a specific function of Business:
1. Sales Budget
2. Production Budget
3. Purchase Budget
4. Personnel Budget
5. Capital Expenditure Budget
6. Administration Budget
7.Cash Budget
8. Research & Development Budget
03/27/15 5S Kacker,IHM Mumbai

6. MASTER BUDGETMASTER BUDGET
Master Budget is a consolidated summary of all
functional budgets.
PURPOSE:
To produce Budgeted Profit & Loss A/C
&
Budgeted Balance Sheet
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7. Definition
The establishment of budgets relating the
responsibilities of the executives to the requirement of
a policy, and the continuous comparison of actual
with the Budgeted results, either to secure by
individual action, the objectives of that policy or to
provide a firm basis for its revision.
BUDGETARY CONTROLBUDGETARY CONTROL
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8. 1 Establishment of Budgets for each function &
section of the Organization.
2. Recording of the Actual Performance.
3. Continuous comparison of the Actual Performance
with Budgeted performance.
CHARACTERISTICS OFCHARACTERISTICS OF
BUDGETARY CONTROLBUDGETARY CONTROL
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9. 4. Ascertaining Deviations of Actual Performance
with Budgeted Performance.
5. Analyzing the causes of deviations.
6. Reporting to the Management for corrective
Action.
7 Revision of the Budgets under the changed
circumstances.
CHARACTERISTICS OFCHARACTERISTICS OF
BUDGETARY CONTROLBUDGETARY CONTROL
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10. OBJECTIVES OF BUDGETOBJECTIVES OF BUDGET
CONTROLCONTROL
1.Planning
A budget is a plan of the policy to be pursued during
the defined period of time to attain a given objective
Production schedules
Sales goals
Inventory levels
Labour
Capital,
Advertising , etc.
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11. OBJECTIVES OF BUDGETOBJECTIVES OF BUDGET
CONTROLCONTROL
2. Co-ordination:
The Budgetary Control co-ordinates the various
activities of the firm and secure co-operation of all
concerned, so that the common objective of the firm
may be successfully achieved.
3. Control:
Control consists of the action necessary to ensure
that the performance of the organization conforms
to the plan and objective.
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12. ESSENTIALS OF AN EFFECTIVEESSENTIALS OF AN EFFECTIVE
BUDGET CONTROLBUDGET CONTROL
1.Co-operation of top management.
2. Maximum profit
3. Budget committee
4. Preparation of budgets by responsible executives.
5. Constant vigilance
6. Reasonable attainable goals
7.Adequate accounting system
8.Clearly defined organization chart
9. Cost of operation
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13. STEPS IN INSTALLATION OF ASTEPS IN INSTALLATION OF A
BUDGET CONTROL SYSTEMBUDGET CONTROL SYSTEM
1. Establishment of Budget centers.
2. Preparation of an organization chart.
3. Preparation of Budget Manual.
4. Appointment of Budget Officer.
5. Formation of Budget committee.
6. Fixation of the Budget period.
7. Determination of the Key Factor.
8. Determination of the Level of the Activity.03/27/15 13S Kacker,IHM Mumbai

14. ZERO BASE BUDGETINGZERO BASE BUDGETING
The Zero Base budgeting starts from zero it is not on
the basis of trends or historical levels of expenditure.
1.Responsibility of the Manager to spend money.
2.It shows which activity is essential.
3.It gives choice of alternatives.
4.Important to events.
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15. ADVANTAGES OF ZEROADVANTAGES OF ZERO
BASE BUDGETINGBASE BUDGETING
1.Out of date and inefficient areas of operations are
identified.
2.Allows managers to promptly respond to changes.
3.It creates a challenging attitude.
4.Allocation of resource as per the needs and benefits.
5.Psychological impact on all levels of management.
03/27/15 15S Kacker,IHM Mumbai

16. PROBLEMPROBLEM
Jack and Jill are equal partners and operators of a
“Bucket Restaurant”. They started a business in
December__________________ each partner paid
Rs 1,50,000 into their Bank A/C
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17. SUMMARY OF INITIAL CASHSUMMARY OF INITIAL CASH
TRANSACTIONTRANSACTION
Capital by Jack 1,50,000
Capital by Jill 1,50,000
Total 3,00,000
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18. EXPENSESEXPENSES
Building (life 20 yrs) 1,50,000
Furniture (life 10yrs) 40,000
Equipment (life 10yrs) 80,000
China, Silver 10,000
Food Inventory 5,000
Total Expenses 2,85,000
Bal Cash 15,000
In Bank
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19. Given are Budgeted figures forGiven are Budgeted figures for
first 6 Monthsfirst 6 Months
Food sales:
40,000 in Jan
80,000 in Feb
1,20,000 in March, April, May. June respectively.
50% of sales are in Cash. Other 50% is Credit
Credit Period is 1 Month
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20. Gross profit : 60%
Purchases: Half the food cost is paid in cash,
other half is on credit of one month.
Inventory level : Rs. 5,000
Wages and Salaries : Rs 25,000/month
Depreciation:
1. Bldg, furniture and equipment on straight line.
2. China & glassware on 20%
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21. Other Expenses:
Rs 20,000 per month paid in time lag of 1 Month.
Prepare Cash budget ,
Budgeted P & L Statement and
Budgeted Balance sheet for first 6 Months.
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22. Solutions
Cash Budget for 6 Months- JFMAMJ
Opening Bal : 15,000
Cash inflow:
Cash Sales __________
Credit Sales__________
Total __________
Cash Outflow:
Cash Purchases
Credit Purchases
Wages & Salaries
Other Expenses
Total ________________
Closing Balance
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23. Budgeted Profit & Loss Statement for 6
months ending
1)Food Sales:
2) Less Cost of Sales:________
3) Gross Profit:_________
4) Expenses:
a)Salaries & Wages:
b) Other Expenses:
5) a+b Total Expense __________
3-5 Profit before Depri _________
6) Dep : Bldg + furniture + kitchen equip +
china ______
7) Total Dep __________
5- 7 Total Net profit _________
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S Kacker,IHM Mumbai

24. Budgeted Balance sheet as on
___________a)Assets
Current Assets
Cash
A/C Receivable
Food inventories ________
Total Current Assets_________
b) Fixed Assets
Building – dep
Furniture --- dep
Equipment--- dep
China, glass– dep______
Net fixed assets__________
a+ b Total Assets _________________
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25. Liabilities
1)A/C Payable
Total liabilities _______________
2)Partnership
Cap Jack
Cap Jill
Total Equity ________________
3) Net income
Profit __________________
1+2+3
Total liabilities & equity _____________
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