about what is planning,elements of budgets and types of budgets

1. PRESENTED BY
EKTA PANTOLA
GBPUA&T PANTNAGAR
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2. Planning involves specifications of basic
objectives and fundamental policies
In operational term it involves four stages
 Objectives
 Goals
 Strategies
 Plans/budgets
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3. Planning is future oriented.
Planning involves making forecasts and
assumptions about the organization’s external
environment, which is uncontrollable.
Examples of uncontrollable factors in the
external environment are government actions,
consumer spending, interest rates. Thus plan
consists of what management is going to do
with the variables it can control
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4. The planning phase of budgeting consists of
work that,generally,must be done in the
last half of the year preceding the budget
year in order to provide the framework for
budget preparation.
The long range plan identifies problems ,
opportunities, turning points as they relate
to capitals, expenditures and long term
financing .
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5. Budgeting is the periodic planning to
implement the alternatives during a
particular fiscal period, usually one year
Budget is defined as a comprehensive and
coordinated plan, expressed in financial
terms, for the operations and resources of an
enterprise for some specified period in the
future.
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6. 1) Plan – it includes two aspects which have a
bearing on the operations of an enterprise.
i) One set of factors, which determine a firm’s
future operations are wholly external and
beyond its control.
Included in this category of factors are
general business conditions, government
policy and size and composition of
population.
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7. ii) Second set of factors affecting future activities are
within the firm’s control and discretion that is they
are internal.
Budgeting as a plan, covers both these aspects. It not
only suggests what should happen but should also
make things happen.
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8. 2) Operations and resources- a budget is
mechanism to plan for the firm’s operations and
resources.
The operations are reflected in revenues and
expenses.
The plan also covers the resources of the firm. The
planning of resources means the planning of the
various assets and the sources of capital to
finance these assets.
3) Financial terms- budgets are prepared in
financial terms like rupee, dollar. The reason is
monetary unit is a common denominator.
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9. 4) Specified future period – a budget relates to a
specified period of time usually one year.
5) Comprehensiveness – A budget is comprehensive
in that all the activities and operations of an
organisation are included in it.
6) Coordination – budgets are prepared for the
different components/segments of an organisation
so as to take care of the situations and problems of
each component.
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10. The main objectives of budgeting are:
 Explicit statement of expectations
 Communication
 Coordination
 Expectations as framework for judging
performance

11. 1) Operating budgets- relate to physical
activities/operations of a firm such as
sales,production,purchasing etc.
it has following components:
a) Sales budget
b) Production budget
c) Purchase budget
d) Direct labour budget
e) Manufacturing expense budget
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12. 2) Financial budgets- are concerned with expected
cash receipts, financial position and results of
operation. It has the following components :
a) Budgeted income statement
b) Budgeted statement of retained earnings
c) Cash budget
d) Budgeted balance sheet
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13. 3) Special decision budgets - they relate to
inventory levels, break-even analysis.
4) Master budget – is the set of financial and
operating budgets for a specific accounting period,
usually the next fiscal year.
5) Static budget- is the budget at the expected
capacity level. Because it is fixed it is used by
stable companies.
6) Flexible budget – estimates cost at several levels
of activity. The nature of a flexible budget is that
instead of one estimate it contains several
estimates/plans in different assumed
circumstances.
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14. 1)http://www.flexstudy.com/catalog/schpdf.c
fm?coursenum=95075
2) M Y Khan and PK Jain.Management
Accounting .5th ed. Tata Mc Graw Hill 2011
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