KARACHI: Budget means to evaluate the expenditures and revenues for specified period to state the organizational policies related to measure the capacity of business activity.
A budget comprises the following aspects:
Profit planning: Forecast of revenues and expenses.
Cash budgeting: Forecast of cash requirements and sources.
Balance sheet Forecasting: Anticipating future assets, liability and owner’s equity.
Profit Planning: The sales forecast and corresponding costs and expenses are the major inputs to a Profit Plan. It enables the entrepreneur to see the complete picture and to analyze how each cost and expenses behave in relation to change in the level of sales. Budgeted amounts are then compared with actual results and variances are analyzed and corrected.
Cash Budgeting: A Cash Budget is used to determine anticipated cash inflows and outflows so that the business maintain the optimum level of cash.
Balance Sheet Forecasting: It involves estimating assets level to support the forecasted sales target.
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