Академический Документы
Профессиональный Документы
Культура Документы
2) Budget manual
The budget manual is a written document or booklet which specifies the
objectives of the budgeting organisation and procedures. The chartered institute of
management accountants, London defines it as “a document which sets out, the
responsibilities of the persons engaged in, the routine of, and the forms and
records required for, budgetary control.” Following are some important matters
covered in a budget manual:
1) A statement regarding the objectives of the organisation and how they can
be achieved through budgetary control.
2) A statement regarding the functions and responsibilities of each executive
by designation both regarding preparation and execution of budgets.
3) Procedures to be followed for obtaining the necessary approval of budgets.
The authority of granting approval should be stated in explicit terms.
Whether one, two or more signatures are to be required on each document
should also be clearly stated.
4) Time-tables for all stages of budgeting.
5) Reports, statements, forms and other records to be maintained.
6) The accounts classification to be employed. It is necessary that the
framework within which the costs, revenues and other financial accounts
are classified must be identical both in the accounts and the budget
departments.
There are many advantages attached to the use of budget manual. It is a formal
record defining the functions and responsibilities of each executive. The
methods and procedures of budgetary control are standardised. There is
synchronisation. There is synchronisation of the efforts of all which results in
maximisation of the profits of the organisation.
4) Budget procedure
After the establishment of budget organisation and fixation of the budget period the
actual work of budgetary control begins. The procedure followed in designing and
operating a budgetary control system largely depends upon the nature of the business.
However, the usual pattern is as follows:
1) Determination of key factor – key factor is that factor the extent of whose
influence must first be assessed in order to ensure that functional budgets are
reasonably capable of fulfilment. This is also termed as ‘principal budget’ or
‘limiting’ or ‘governing’ factor. It is essential to consider this factor before
preparing the budgets. In some concerns the key factor may be sales; while
governs the whole process of materials, labour, machinery or capital. This
most important factor which governs the whole process of preparation of
budgets should be predetermined. The budget relating to this particular
factor should be prepared first and other budgets should be base upon it. Co-
ordinated plans should be finally approved.
The following is a list of principal budget factors, which can be one or more in any
organisation:
Internal
FORECAST BUDGET
1) Capacity- As per capacity, the budgets may be fixed budgets and flexible
budgets.
2) Conditions- As per conditions, budgets may be classified as basic budgets and
current budgets. The budget remaining unaffected by length of time is a basic
budget; while a budget relating to current conditions and established for use
over a shot span of time is termed as current budget.
3) Period- According to periodicity, the budgets can be prepared for long-term
and short-term periods. if the period of preparation is one year or less, the
budget is a short-term budget; whereas if the period is more than one year, the
budget is a long-term one. Both have their respective utilities and sphere of
operation.
4) Coverage- According to coverage, the budgets can be functional budgets and
master budget. Business policy for a defined period is represented by the
master budget. Details of master budget are contained in a number of budgets
relating to individual functions in an organisation. The same are called
functional budgets. These can be further grouped as under:
a) Physical budgets- Budgets containing targets of production, sales,
materials, labour etc in terms of physical units are known as physical
budgets.
b) Cash budgets- Budgets comprising information about the cost e.g.
material cost, labour cost, overhead cost-manufacturing, office, selling
etc are cost budgets. Material and labour budgets can be both in terms
of physical units and costs.
c) Profit budgets- Budgets enabling profit ascertainment can be
designated as profit budget. Sales budget, profit and loss budget are
examples of such budgets.
d) Financial budgets- Budgets which direct the financial position are
financial budgets such as cash budget, capital expenditure budget and
budgeted balance sheet.
FIXED BUDGET FLEXIBLE BUDGET