Financial Concepts

Monthly accounts of a student (Feb 09)

Receipts Payments
Op. Balance 1000 Monthly Fixed Expenditure
Recurring Income 000 (hostel, mess, transport, mobile 9000
Monthly Assistance (father) 9000
Monthly Variable Expenditure
Funds for B-day (mother) 1000
Hotelling, Movies 1000
Consumables 1000
Special assistance from Father per Purchase of Flowers, Ring 2000
term 5000 Birth day party 2000
Sale of Cricket Kit 3000
Loan from Canteenwala 2000 Purchase of Hard Disk 2000
Collection on behalf of friend 4000 Loan to Friend 1000
Investment 1000
Return to Friend 3000
Total 25000
Closing Balance 3000

Total 25000
 Personal Finance Structure
Receipts Side Payment Side

Opening Balance Permanent (Fixed) Expenditu –

Receipt from Revenue consumption, maintenance
sources – salary, sale Variable expenditure
Income from Assets Interest paid/finance cost
Recurring Assistance Donations Given
Receipt from Capital Acquisition of New Properties –
Sources – Reduction in Increase in Asset
Asset – Sale of Assets Repayment of Loan –Reduction
Receipt from Loan in liability
Sources – Increase in Extra-ordinary – amounting to
Liability reduction in liability
Capital Grant Received Closing Balance
Extra-ordinary – increase
in liability
Monthly accounts of a student (Feb 09)
Receipts Payments
Op. Balance 1000 Monthly Fixed Expenditure
Recurring Income 2000 (hostel, mess, transport, mobile 8000
Monthly Assistance (father) 9000 Monthly Variable Expenditure
Hotelling, Movies 500
Consumables 500
Funds for B-day (mother) Purchase of Flowers, Ring 1000
1000
Special assistance from Father Birth day party 2000
per term 5000 Purchase of Hard Disk 2000
Sale of Cricket Kit 3000 Loan to Friend 1000
Loan from Canteenwala Investment 1000
2000
Return to Friend 3000
Collection on behalf of friend 4000
Closing Balance 8000

Total 27000 Total 27000

 Improving personal finance

Expenditure – Income = deficit

Deficit creates charge on assets, leads to erosion of asset
base and finally bankruptcy
Way out of this ?????
Only two ways out = increase income, reduce expenditure
Income – Expenditure = surplus
Surplus is one form of asset can be used to acquire other
assets or to discharge liabilities
Sustained surplus and its judicious investment in productive
assets leads to wealth formation
 Municipal Budgeting
Municipal Finance Structure
Receipts Side Payment Side

Opening balance Establishment

Tax Revenue O&M
Non Tax Revenue Administrative
Revenue Grants Loan Interest

Capital Expenditure
Capital Receipts
Loan Repayment
New Loans
Extra –ordinary
Capital Grants Closing Balance
Extra – ordinary
 Municipal Budgeting
BMP Finance 2002-03
Receipts Side Expenditure Side

Rs. In Crores
Opening balance 51.27 Establishment 128.62
Tax Revenue 189.08 O & M , Other 82.36
N Tax & Others 43.43 Loan Interest 32.16
Revenue Grants 121.91 Sub- total 243.14
Sub total 354.42 Capital Expenditure 260.96
Capital Receipts 21.29 Loan Repayment 60.59
New Loans 69.93 Extra –ordinary 83.32
Capital Grants 47.40 Closing Balance 35.25
Extra – ordinary 138.94 Total 683.25
Total 683.25
 Municipal Budgeting
BMP Finance 2002-03
Rs. In Crores
Amount Available for Amount Spent on
Development Development
Revenue Surplus 111.28 Capital Expenditure 260.96
Capital Receipts 21.29
Thus large part of capital
Loan Account 9.34 expenditure is achieved by
Capital Grants 47.40 diverting extra-ordinary
Total 189.31 receipt which is liability
Extra-ordinary a/c 55.63 Opening Balance stands
Reduction in OB 16.02 reduced
Total 260.96 Does not tell quality of
capital expenditure
 Municipal Budgeting
BMP Finance 2003-04 Rs. In
Receipts Side Payments Side Crores
Tax Revenue 201.17 Establishment 133.64
N Tax & Others 61.98 O & M , Other 122.20
Revenue Grants 72.54 Loan Interest 31.13
Sub total 335.69 Sub- total 286.97
Capital Receipts 23.18 Capital Expenditure 263.10
New Loans 147.50 Loan Repayment 47.77
Capital Grants 24.13 Sub-total 310.87
Extra – ordinary 143.58 Extra –ordinary 74.52
Total 674.08 Total 672.36
Op. balance (40.98) 35.25
Cl. Balance (42.70) 36.97
Grand Total (715.06) 709.33
Grand Total(715.06) 709.33
 Municipal Budgeting
BMP Finance 2003-04
Rs. In Crores
Amount Available for Amount Spent on
Development Development
Revenue Surplus 48.72 Capital Expenditure 263.10
Capital Receipts 23.18 Thus large part of capital
Loan Account 147.50 expenditure is achieved by
Capital Grants 24.13 increase in loan liability
Total 243.53 Opening Balance stands
increased nominally
Extra-ordinary a/c 19.57
Does not tell quality of
capital expenditure
Total 263.10
 Improving Municipal Finance

Higher Higher
Development Requires Revenue
Expenditure Surplus
D
THROUGH

P
E
N
D
S
Increase
in Loans & Decrease Decreas
Increase
Other in Revenue e in
in Own
Liabilities Surplus Revenue
Revenue
Income Expendi-
ture
Financial Concepts

Thank You