1. What is Budget Manual?

Budget Manual is a document which standardized methods and procedures required in relation to budgetary control. It also sets out the responsibility of persons engaged in the process. A budget manual should contain the following particulars:

Principles and objectives of the budgetary control:

-Duties and responsibilities of the various executives

-Organisation chart

-Duties of budget office and budget committee

-Accounts codes and budget centre codes

-Budget diagrams

2. Explain what are the major categories under which budgets are divided?

There are major four categories under which budgets are divided:

Sales/Marketing Budget:
- Sales Budget
- Selling and Distribution Cost Budget
- Advertising Cost Budget

Production Budget:
- Production Budget
- Purchases Budget

Finance Cash budget is the budget which is prepared under this functional area. It is an estimation of the expected cash receipts and cash payments during the budget period.

Personnel budget - The budget which is prepared under this area takes the form of a personnel budget, which indicates the requirement of personnel or labour force to conform to the production budget.

Miscellaneous
-Overheads Cost Budget
-Capital Expenditure Budget

3. What are the different methods to prepare cash budget?

Following methods are used to prepare cash budget:

-Receipts and payments method: This method is useful for short term estimations. Under this method items should be categorised in two ways- Operating Cash Flows and Non Operating Cash Flows
-Balance Sheet method: This method is useful for long term estimations.
-Adjusted Profits/Losses Method: This method is useful for long term estimations.

4. What is a cash budget?

Cash budget is the budget which is prepared under the finance budget. It is an estimation of the expected cash receipts and cash payments during the budget period. By preparing cash budget it becomes possible for the organisation to predict whether at any point of time there will be excess or shortage of cash. Two main points should be remembered before preparing cash budget: Time period of the cash budget and the items to be included in the cash budget.

5. Explain what is a production budget? Why is it prepared?

Production budget is a forecast of production for the budget period. It is prepared from two angles: In terms of quantity and in terms of money. Following budgets are prepared under the production budget:

-Material Budget to estimate the material cost

-Direct Labour Cost Budget to estimate the labour cost which are required to product the quantity as specified in the production budget.

-Overhead Budget to estimate production overheads.

Production budget is prepared after taking various budgets into consideration. For a proper estimation of various costs associated with the production process makes it important to prepare production budget for the period in which production will take place.

6. What is Miscellaneous Budget?

-Overheads Cost Budget
-Capital Expenditure Budget

7. What is Personnel budget?

Personnel budget - The budget which is prepared under this area takes the form of a personnel budget, which indicates the requirement of personnel or labour force to conform to the production budget.

8. What is Finance Cash budget?

Finance Cash budget is the budget which is prepared under this functional area. It is an estimation of the expected cash receipts and cash payments during the budget period.

9. Explain Production Budget?

- Production Budget
- Purchases Budget

10. Explain Sales/Marketing Budget?

- Sales Budget
- Selling and Distribution Cost Budget
- Advertising Cost Budget

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