Budgeting / Financing

By: RARG Ranaweera

BSc (Industrial Management)

Some more facts on

Investment appraisal
Replacement problem
Taxation (Tax will be paid in the next
year)

Sales
budget

Production budget

Direct
material
cost
budget
Factory
overhead
budget

Direct
labor cost
budget

Direct
material
purchasi
ng
budget

Direct
material
cost
budget

Production cost budget

Stock
budget

Budgeted profit & loss account

Administratio
n budget

Selling and
distribution
budget

Capital
expenditure
budget

Research and
development
budget

Budgeted
Balance
sheet

Cash budget

Important steps of budgetary

control
Set targets for anticipated
performance
Identify actual performance
Compare anticipated with actual
performance
Determine the variance
Determine the reasons
Take actions

Important points ..
Adopt a suitable strategy like
Management by Objective to allow
active participation of all the parties
to the preparation process

Standard Costing
Standard
The amount or level set for the performance of
a particular activity

Standard cost
Planned cost for a particular level of activity

Variance
Difference between the standard cost and the
actual

Variance analysis
Investigation to the variances

Sources of Finance
Short term

Trade credit
Bank overdraft
Factoring
Bills of exchange
Commercial paper

Medium term

Bank loan
Credit sales
Hire purchase
Leasing*

 Long term
Debentures
Other types of loans
Shares
Preference shares
Ordinary shares