How budgets are prepared in a company?

HI,

More suggesitons are welcome.

thanks

Hi,

Please tell me, what are all the questions asked in interviews related to budgets for an accountant ?  thanks in advance.

The process of calculating the costs of starting a small business begins with a list of all necessary purchases including tangible assets (for example, equipment, inventory) and services (for example, remodeling, insurance), working capital, sources and collateral. The budget should contain a narrative explaining how you decided on the amount of this reserve and a descripttion of the expected financial results of business activities. The assets should be valued with each and every cost. All other expenses are like labour factory overhead all freshmen expenses are also included into business budgeting.

Following are the types of budgets:

Sales budget – an estimate of future sales, often broken down into both units and currency. It is used to create company sales goals.

Production budget – an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies.

Capital budget - used to determine whether an organization's long term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.

Cash flow/cash budget – a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short term future. The cash flow budget helps the business determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.

Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.

Project budget – a prediction of the costs associated with a particular company project. These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.

Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Tax revenues are made up of taxes and other duties that the government levies.

Expenditure budget – includes spending data items.

Step 1: Cost centres are analysed on the basis of organisational structure of the organisation.

Sub Department (i.e Sub Committe) will report thier Cost related data to deprtment head (i.e. Budget committee)

Step 2: On the basis of data  flowing from lower level deptartment to upper level dept., these Budget are presented to Cost managers in Committe meeting, the Cost & management accountant will prepare the Flexible Budget of each Cost Centres at different normal capacitis of Production considering the behaviour of cost(i.e. Variable cost, Fixed Cost, semi variable cost).

Step3: Prepare the Budget manual i.e. incorporate infos relating to flexible budget into a book called budget manual.

Step4: Identify Principal Budgeting Factor (for ex: Machine Dept. say max production will be 1000 units but Sales Dept says that max to max 900 units can be sold, so here Sales is the PBF and Performance evaluation will be  conducted by comparing PBF of 900 with actual.

Step5:Prepare Functional Budget i.e. the budget is to be followed for each & every responsible manager. For ex; For Sales dept. Cost Centre & Revenue centre will control their cost at 900 units level.

Functional Budget Includes: Production Budget, Material Budget,Labour Budget,Expenses & OHs Budget, Cap exp Budget.

Step6: Prepare Master Budget: which includes:

                                   a) Cash Budget or Projected Cash Flow Statement

                                   b) Projected Profit & Loss A./c

                                   c) Projected Balance Sheet.

After these Budget Procedures, Pricing Decisons(using various techniques like Absorption, marginal,Relevant costing,etc),Cost Reduction, Performance Evaluation,etc will be conducted in order to achive mgmt objectives.

Now my dear jafer, think which type of budget r u talking about.

If u talking about the main Budgeted data which are supplied by lower level depts. to Budget committee,(flowing from Sub Committe to Main Budget Committe) then u have to consult a professional who had worked or presently working in a manufaturing industry as becoz only practical exposure can clear these doubts.

I have tried my level best to give a basic idea ( bird eye view)..so that u can now undertsnd the concepts of how cost is being controlled in a mfg co through Budgets..

Hi

Can anyone help me to provide the format for Financial Budget

Thanks & Regards,

Yahya