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Preparing Budgets

   

Added on  2020-02-12

8 Pages2065 Words66 Views
Management Accounting

Table of ContentsINTRODUCTION...........................................................................................................................11. Defining and explaining Budgets............................................................................................12. Process of Preparation of Budgets..........................................................................................23. Controlling the budgets...........................................................................................................24. Defining and preparing a flexible budget................................................................................35. Importance of flexible budgets................................................................................................4CONCLUSION................................................................................................................................5REFERENCES................................................................................................................................6

INTRODUCTIONBudget can be determined as an estimation regarding the revenues that are generated andexpenditures incurred by an organisation over a specific time period. It projects the detailedfinancial results that are expected by a company for a given time frame (Cinquini and Tenucci,2010). Budgets may be prepared for short term or long term i.e. it can be either monthly,quarterly or yearly. The present assignment focuses on preparation and controlling of budgetswithin X Star Management Services Ltd. which is engaged in the business of dealing and sellingof auto-mobiles. Moreover, the report provides an understanding of flexible budgets prepared bythe company and its distinctive features over other types of budget. 1. Defining and explaining BudgetsBudget can be determined as an estimation regarding the revenues that are generated andexpenditures incurred by an organisation over a specific time period. It projects the detailedfinancial results that are expected by a company for a given time frame. It provides an expressionof requirements of quantified resources such as amount of capital, raw materials, labour etc. in XStar Management Services Ltd. that are needed for achieving time phased goals and objectives.The main objective of a business is to earn profits which is a yardstick for measuring the successof the organisation (Fullerton, Kennedy and Widener, 2013). The profitability of the companydepends upon proper planning, coordination and controlling of activities by management. Thus,the management is required to plan and control future requirements of financial and physicalresources for maintaining profitability and productivity of an organisation which is known asbudgeting. Budgeting is a planning and controlling tool which encompasses a number of activitiesneeded for preparing a budget. It consists of various steps including – identifying short termobjectives, specifying programs and these will be expressed in budget. Different aspects of thecited firm like sales, finance, production and distribution are involved in budgeting. A budget is a quantitative, coordinated and comprehensive plan that defines the resourcerequirements and operations of an organisation over a specified period of time. It is anexpression of managerial plans in the form of forecasted financial statements. It is a numericaland written plan of action for the future designed by X Star Management Services Ltd. to carryout different functions of the firm.1

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