Budget Preparation

MOCH AKBAR PRASETYO 135020307111045

IVAN PRADIPTA 135020307111042
HARDIKA MAS HIMAWAN 135020307111043
 Budget

An important tool for effective short term planning and

control in organization.

Operating budget usually covers one year and states the

revenues and expenses planned for that year.
 Characteristics of budget
Estimates the profit potential.
It is stated in monetary terms.
It generally covers a period of one year.
It is a management commitment.
The budget proposal is reviewed and approved by an authority
higher than budgetee.
Once approved, the budget can be changed only under specified
conditions.
Periodically, actual financial performance is compered to budget,
and variances are analyzed and explained.
 Relation to Strategic
Planning
Strategic planning and budget preparation involves
planning, but its have the different types in the process.
(budgeting process focuses on a single year, strategic planning
focuses on activities that extend over a period of several years)

Strategic plan is structured by product line or other programs.

Budget preparation is structured by responsibility centers.

 Contrast with Forecasting
Budget is a management
plan, with the implicit
assumption that positive Forecast is merely a
steps will be taken by the prediction of what will
budgetee to make actual most likely happen,
events correspond to the carrying no implication
plan. that the forecaster will
attempt to so shape events
that the forecast will be
realized.
 Use of a Budget
Preparation of an operating budget has 4 Operating budget categories:
principal purposes:
1. Revenue Budget; unit sales projection
1. To fine tune the strategic plan. multiplied by expected selling prices.

2. To help coordinate the activities of the 2. Budgeted production cost and cost of
several parts of organization. sales.

3. To assign responsibility to managers. 3. Marketing expenses; expenses incurred

to obtain sales.
4. To obtain a commitment that is a basis
4. General administrative expenses;
for evaluating managers actual bookkeeping cost in the accounting
performance. department.

5. Research and development expenses.

6. Income taxes.
 Budgeting Purpose
The purpose of Budgeting are:

To adjust strategic Planning

To help coordinating activities from several part of

Organisation

To give responsibilities to Manager

To gain commitment which is the basic to evaluate

Managers actual Performance.
 Category of Operational
Budgeting
Revenue Budgeting : Contains Projection of Sales unit multiplied to
estimated Price.

Production Cost Budgeting, and Sales Cost.

Marketing Expense is an Expense Which is spent to gain sales.

Logistic Expense, warehouse, and Decision-making, and Orders

Pick-up, Transportation to costumer and Debt Collectors.

General Expense and Administration

Research and Development Expense

Income tax.
 Other Budgetings
Equity Budgeting

Balance Sheet Budgeting

Cash Flow Budgeting

Management based on Target.

 Budgeting Process
Organisation

1. issue procedures and forms for Budget Framing.

2. Coordinating & issuing each year

3. assure that information delivered correctly to each organisations unit

4. Give help to Budget Planner in Creating budget.

5. Analyze proposed budget and give recommendation

6. Handle the Process of Create Budgeting Revision

7. Coordinating work from Budgeting Department to Lower echelons.

8. Analizing performance that is reported with the budget, Interpret the

result. And create report to senior management.
 Budgeting commitee

Budgeting Committee Consists of Senior Management

seniors such as Chief Executive officer, Chief Financial
Officer.
 Aspect Behaviour
One of the Purpose of Management Control System is
to push Manager in order to achieve organisations goals
effectively and efficiently

Participation Approach Increase Personal

commitment to realize the budget, and to increase
effectiveness of informations exchange.

Senior Manager Involvement Senior Manager

Involvement on Budgeting system will push Budget
Planners motivation.
 Quantitative Technic
Simulation Create a Model that looks like real
condition/situation, then do manipulation so that some
Conclusions could be gathered about the real
condition/situation.

Estimated Probability each number or amount of

Budgeting is estimated, a number which most-likely
amount.