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Meant of budget

Putting of the company's objectives in a digital image (usually these objectives include the elements of the income statement ) aim to achieve it in the future period (usually a fiscal year ) to serve as the plan in order to compare what has been done with what is planned in this budget to find out the deviations and its causes and work on the treatment of those deviations.

The objectives of preparing the budget

1 - Budget gives opportunity to compare with what has been done with what was planned in the Budget to find out the deviations and the causes and treatment of those deviations.

2 - Put everyone in the company in front of the responsibilities entrusted with.

3 - Budget helps in making decisions on reward and punishment based on what has been achieved from Budget.

Requirements for the preparation of Budget

Data entry form includes on the required elements for the preparation of budget are as following.

In the case of the preparation of the budget for one product

1 - The value of the sale price of the product per unit

2 - The value of product cost per unit

3 - The share of the product ( for example A ) of general and administrative expenses , including depreciation for the full year

4 - The share of the product ( for example, A ) from total fixed and current assets.

5 - Choose the degree of efficiency of the preparation of the budget which aimed to be achieved ( Good degree is the start point of safety - or very good degree – or high very good degree)

Example

1 - The selling price of the product ( A) = 12 pounds

2 - The cost of the product ( A) = 8 pounds

3 - The share of the product ( for example A ) of the total general and

administrative expenses including depreciation for a full year , which amounted to 600,000 pounds estimated 200,000 pounds equal to one third

4 - The share of the product ( for example, A ) from total fixed and current assets which amounts to 2500000 pounds estimated 833 333 pounds equal to one third

5 - the company targeted to achieve a good degree budget.

The program will prepare the budget for the coming year in the product ( A) in accordance with the previous data as follows Budget for the product ( A) with good degree

Sales value = 912,499.86

(-)The value of purchases = 608,333.24

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Gross Profit = 304,166.62

(-)expenses = 200,000

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Net profit = 104,166.62

In the case of the preparation of the total budget for all products

1 - Total price values ​​of company's products

2 - the total cost values ​​of the company's products

3 - Total general and administrative expenses , including depreciation for the full year

4 -Total fixed and current assets.

5 - Choose the degree of efficiency of the preparation of the budget which aimed to be achieved ( Good degree is the start point of safety - or very good degree – or high very good degree)

Example

1 - The sale price of the product ( A) = 12 pounds

The sale price of the product ( B) = 20 pounds

The sale price of the product ( C) = 26 pounds

Total price values of ​​the company's products = 58 pounds ( enter in the data entry form )

2 - The cost of the product ( A) = 8 pounds

The cost of the product ( B) = 17 pounds

The cost of the product ( C) = 21 pounds

Total costs of the values ​​of the company's products = 46 pounds ( enter in the data entry form )

3 - Total general and administrative expenses , including depreciation for the full year , which amounted to 600,000 pounds ( This value is included in the data entry form )

4 - Total fixed and current assets, which amounts to 2,500,000 pounds (This value is included in the data entry form )

5 - The company targeted to achieve a good degree budget

The program will prepare total budget for the coming year in accordance with the previous data as follows Budget for the company's products with good degree

Sales value = 4,410,416.66

(-)The value of purchases = 3,497,916.66

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Gross Profit = 912 500

(-) Expenses = 600000

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Net profit = 312500