Types of Budget

History of Indian Budget Indias first pay Minister Sir R. K. Shanmugham Chetty, presented the first pay Budget of independent India on November 26, 1947. Since soce, 28 differentUnionFinanceMinisters have been presenting the work out year after year. Initi completelyy, major anxiety was paid towards the agriculture sector but as the economy evolved, the centre shifted from agriculture to other sectors resembling industrial, financial etc. During the early the fifties, Indian figure highlights revolved around the public sector and public finance and hence, back then taxation, inflation, public savings etc were much talked about topics.This geld continued till the finance compute 1985-86. The reassign in the barbel began with Mr. Manmohan Singh who served as the Union Finance Minister under the leadership of Mr. P. V. Narsimha Rao. Mr. Singh was subservient in headstarting the new phase of economic liberalization. He reduced the secure of G everywherenment over public sector wholes through disinvestment. The liberalization encourage which he started years back is still happened and is seen in interim cypher and Indian figureannouncements both year.This year to a fault live northern calculate 2011 will be announced by Pranab Mukherjee. Facts Bite * get-go Finance Minister Shanmugham Chetty * Number of Finance Minister Since Independence 28 * Maximum Number of Budgets Presented by Morarji Desai * Economic Liberalization Started by Mr. Manmohan Singh ( Finance Minister 1991) * Current Finance Minister Mr. P. Chidambaram Explain the different types of reckons in detail, with the help of suitable examples. In every business political platformning is the more or less important function to perform. Planning of different firms depends upon so many factors.Planning is do for comparing the actual performance with received performance. Budgets atomic number 18 also prompt in advance. Budgets be prepared to check the availability of finance c onsort to the demand of project. So computeary control is also essential shaft of management to control address and maximizes profits. Meaning of reckon A budget is a detail plan of operations for a specific flowing of time. In the present era everyone is with the term budget because it essential in life. A budget is prepared for the effective utilization of resources, which will help in achieving the set objectives.Budgets are also very important in individual life, as it is important in business firms. The chase are the essential of budget (a) It is prepared in advance and is based on emerging plan of action. (b) It relates to a future spot and is based on objectives to be attained. (c) It is a statement expressed in monetary or physical unit prepared for the formulation of policy. Types of budgets. 1. Functional basis of budgets. a. gross revenue budget Sales budget is the primary budget. It is the virtually important budget to prepare and the other budgets are prepared on the basis of gross revenue budget.In this budget the in charge or expert forecast the future expected bargains of the firm. The gross sales private instructor is responsible for the accuracy of the budget. The sales budgets may prepare on basis of produce, type of customers, salesman, locality etc. for the preparation of sales budget the following things should be take under care like past sales, sales man portends, plant capacity, unprocessed substantive, orders in hand, seasonal fluctuations, competition etc. USES Sales budget is the most important budget while making the overall budget for the institution for a pecuniary year.It is important in this sense that how would anybody make financial budget for organization if he dont know about how much to sale or what are the organizations sale would be. If you know the sales volume of units of product you want to sale in a fiscal year then you will make occupation budget harmonize to that sales unavoidableness in mind you will have drudgery information in mind you will purchase raw substantive, hire labour according to requirements. So if you dont know about how much you want to sale then how would you budget other things and how would you compare your performance at the end of fiscal year. . Production budget After preparing sales budget the next budget will be action budget. In this budget works manager prepare schedule of production by breaking large production in small units to fulfill the target production. A meetly operated budgets leads to fund control, improved maintenance of production schedules and production targets. Suppose, if the estimated opening stock is 5000 units and estimated sales are 25000 units and closing stock of the product is 3000 units the estimated production will be 25000 + 3000 5000 =23000 units (sales + closing stock opening stock).USES A production budget is an be procedure used to both record and propose manufacturing supply outgos. belongings an organiz ed production budget ensures that the supply of raw materials to the production trend continues uninterrupted and amasss consumer demand. Maintaining a detailed post-purchasing production budget also helps to draw for material losses due to shrinkage. b. Material budget In the production budget material is the first requirement to be get a lineed. Materials are basically divided into two categories as rent and in rule material.It includes the preparation of estimates of different types of the raw material essential for various products and purchasing raw material in required number at a required time. at that place are few factors which should be taken under care like requirement of raw material play alongs stocking policies, price trend, and cost of raw material. USES Schedule showing how much material will be required for production and how much material must be bought to meet this production requirement. The purchase depends on both expected usage of materials and coat up takes.For example, assume expected production of 790 units, 3 lbs. of material needed per unit, craved ending inventory of material 216 lbs. , beginning inventory of material 237 lbs. , and unit cost per lb. of $2. Then lbs. of material to be purchased and purchase cost follow Labour budget labour is an important factor in every production organization. Labour plays an important role in converting raw material into finished product. The labour requirement budgets prepared on basis of production budget. Labour may be of two types direct and validating labour.In this budget company has to budget the required number of hours and the expected pay scales of the employees. This budget gives information about personnel specifications for the job for which workers are to be recruited, the tip of skill and experience required and rates of pay. USES The direct elbow grease budget is typically presented in either a monthly or quarterly format. The basic calculation used by the direct labor budget is to import the number of units of production from the production budget, and to multiply this by the standard number of labor hours for each unit.This yields a sub gibe of the direct labor hours needed to meet the production target. You can also add more hours to note for production inefficiencies, which increases the amount of direct labor hours. Then multiply the total number of direct labor hours by the fullyburdeneddirect labor cost per hour, to arrive at the total cost of direct labor. e. Manufacturing Overhead budgets this budget gives the works overhead outlays to be incurred in a budget period to achieve the production target. The cost of mediate material, indirect labour etc can be calculated with the help of this budget.For making proper control it can be divided into departmental overhead budget. unsettled expenses are estimated on the basis of the budgeted output because these expenses are bound to reassign with the change in output. USES The manufact uring overhead budget show the expected manufacturing over head be for the budget period. The budget distinguishes between protean and stock-still overhead cost. Companies fluctuate with production volume on the basis of the following rates per direct labor hour indirect materials $1. 00, indirect labor $1. 0, utilities $0. 40, and maintenance $0. 20. Thus, for 6,200 direct labor hours budgeted indirect materials are $6,200 (6,200 x $1), and budgeted indirect labor is $8,680 (6,200 x $1. 40). The company recognizes that some maintenance is intractable. The amounts reported for fixed cost are assumed. f. Administration Expenses budget The budget covers the expenses incurred in frame in policies, directing the organization and controlling the business operations. In budget an estimate of expenses is prepared regarding central office and of management salaries.The budget may be prepared at department level for effectiveness in budgeting system. The budget can be prepared with the past experience and anticipated changes. USES The merchandising and administrative expense budget is comprised of the budgets of all non-manufacturing departments, such as the sales, merchandise, accounting, engineering, and facilities departments. In aggregate, this budget can rival the size of theproduction budget, and so is fitting of considerable attention. The selling and administrative expense budget is typically presented in either a monthly or quarterly format.It may also be split up into segments for a separate sales and marketing budget and a separate governing budget. G. Selling and Distribution budgets This expense is related to the selling and distribution of material. In this budget experts have to plan for the expected selling and distribution expenses of the firm. Certain items of selling and distribution costs as cost of transportation, salesman salaries etc. USES The selling and administrative expense budget is comprised of the budgets of all non-manufacturing d epartments, such as the sales, marketing, accounting, engineering, and facilities departments.In aggregate, this budget can rival the size of theproduction budget, and so is worthy of considerable attention. The selling and administrative expense budget is typically presented in either a monthly or quarterly format. It may also be split up into segments for a separate sales and marketing budget and a separate administration budget. h. Cash budget this budget is prepared to predict the inflow and making water of gold during the budget period. In hard cash receipt we consider cash sales, credit collection and other receipts in cash payments we consider cash payments, tax payable, dividend payable etc.Without cash organizations cannot work so expectancy about cash is very important. A cash budget makes furnish for a minimum cash balance which will be visible(prenominal) at all times. USES After a company has prepared its operate budget, it will often draw up a separate cash budg et as a means of tracking income and cash expenditures end-to-end the year. Such a budget has a number of practical uses, all of which center around being able to accurately predict when the company will be flush and when cash flow may be restricted. 2. On the basis of flexibility a.Fixed budget This is the rigid budget and it is move on the assumption that there will be no change in the budgeted time period. A fixed budget will be helpful only when actual level of activity is equal to budgeted level of activities. According to charted institute of management accountants. A fixed budget is specify as a budget designed to remain unchanged irrespective of activity actually attained. b. Flexible budget It is also called as variable budget. A flexible budget gives different budgeted costs for different budgeted costs for different levels of activities.This budget is applicable in where activity levels vary from period to period. Where the business is new and it is difficult to predi ct. Where industry is influenced by change in fashion. Where there are changes in sales. 3. On the basis of period a. longsighted time budgets long-term budgets are prepared for those organizations, which deal in unshakable product line. here organizations are not suppose to change their proceeding in short time periods. b. Short time budgets Short-term budgets are prepared for small time periods which work for seasonal product line. Here products may change in near future.