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Bugdet Development Environment - Coggle Diagram
Bugdet Development Environment
Role of Budgets
Budget
Financial or non-financial expression of an organization's plan of actions for the acquisition of assets through financial and other resources over a specific period of time.
Budgeting
Process of projecting operations and it's impact on the financial health of the organization
Importance of
Budgeting
Since budgets are plans in the future, they allow managers to define goals and objectives, while understanding the management of crucial resources. Additionally, it can serve as motivation device and frame of reference.
Strategy, the Long-Term Plan,
and the Master Budget
Importance of
Strategy in Budgeting
Strategies define the future and objectives of an organization. Having clear strategies and budgeting can help organizations to achieve their goals in an efficient way.
Formulation
of Strategy
External factors + Internal Factors =
Reachable strategies and objectives
Budgets
Capital Budgeting
Often used for long-term objectives (5-10 years), where evaluation, selection and financing are needed for major projects; like purchasing new equipment or construction of a factory.
Master Budget
Often used for short-term objectives or goals. Master Budgets help to helps to translate the organization's objectives into actions over a specific short period of time.
Operating Budget
Plans for all phases of operations
Financial Budget
Helps to identify sources of financing and funds for budgeted operations.
Budgeting Process
Budget Commitee
Checks all budget matters. Is usually seen as
the authority regarding all matter related to budget
Budget Period
All budgets have a specific period of time; depending
on the period of time specified by the project or objectives
Budget Guidelines
Considers the general outlook of the economy and the market, settled strategic goals, long-term objectives, expected operating result of the period, among others.
Initial Budget Proposal
Each department prepare a budget according to the guidelines and present any changes in the internal and external factors.
Negotiation, Review and approval
Revision
Budgets must go under revision and if required, adjustments must be made
Master Budget
Sales Budget
Manufacturing Budget
Production Budget
Direct Materials Usage
Direct Materials Purchase Budget
Direct Labour Budget
Factory Overhead Budget
COGM & Sold Budget
Merchandise Purchase Budget
Selling and General
Administrative Expense Budget
Cash Receipt Budget
Cash Budget
Budgeted Income Statement
Budgeted Balance Sheet