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Budget Statements
Introduction to Finance (FIN2303)
Algonquin College
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Budget Statements
A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.
Types of Budgets
Decisions are made in various areas of the organization and for that reason managers use different approaches to budgeting
FIVE CATEGORIES OF BUDGETING
OPERATING BUDGETS: are the budgets used to prepare the projected statement of income
- sales budget
- manufacturing budget
- overhead(staff) budget
STRATEGIC BUDGETS: Used mainly by organizations within the marketing, production and administrative fields.
- zero based budgets
- balance score card
COMPLEMENTARY BUDGETS: are the offspring of the Operating budget. They use the operating budget data and present it in a different way. Complementary budgets fall into four categories.
- product budgets
- program budgets
- item-of-expenditure budgets
- cash budgets
COMPERHENSIVE BUDGETS; are the cumulative budgets placed together by the controller to prepare the projected financial statements.
- Statement of Income
- Statement of Changes in Equity
- Statement of Financial position
CAPITAL BUDGETS: reveals the amount of investment required in non-current assets- or capital assets.
This budget breaks down the capital assets by category:
- amount of funding needed
- location of the asset
- reasons for spending
Capital budgets include some or all of the following types of investments
- research and development
- expansion of manufacturing operation
- replacement of outdated equipment
- construction of buildings (warehouse, manufacturing etc...)
Rules for good budgeting.
- Pinpoint authority
- Integrate all planning activities
- Insist on sufficient and accurate information
- Encourage participation
- Link budgeting to monitoring
- Tailor budgeting to the organization’s needs
- Communicate budget guidelines and planning assumptions
- Relate costs to benefits
- Establish standards for all units
- Be flexible
Business Plans and Budgets
Many companies whether they are start-up companies or long time established companies will prepare a business plan.
The business plan gives a complete picture of a company’s goals, plans and operating activities, financial needs and financing requirements. Budgets are only a tool used in the process of preparing the Business plan.
Business plans are a tool used to present a company snapshot to potential investors.
How the Business Plan benefits the company and the investor
Benefits of a Business Plan
Company Investor
Budget Statements
Course: Introduction to Finance (FIN2303)
University: Algonquin College
