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Budgeting and Forecasting
Budgeting and forecasting are business processes essential to a company’s operations. Budgeting involves planning for revenues and expenses. Forecasting is a method of predicting trends based on historical and current events.
1,416 Questions
What are the key features of diversity?
Personality and internal dimension are two key features of diversity. Other features include external, geographical location, experience, and organizational dimensions.
Under recovery is when you don't "restore" your body after working out. This causes fatigue and a lack of performance.
No. The choice of depreciation method has an impact on net asset value and taxation. A simplistic example follows for a generic corporation:
* The company has a fixed asset that cost $1,000, has a useful life of 5 years and no salvage value
* Corporate earnings before interest, taxes, depreciation and amortization (EBITDA) is $500 which is represented in a cash asset
* The company does not have any debt, interest expense or interest income
* The company does not generate/lose cash flow from financing or investing
For the first year, the following key metrics are noted for the company
Item Using Straight-Line Using Double-Declining
EBITDA $500 $500
Depreciation ($200) ($400)
EBT/PBT $300 $100
Taxes at 40% ($120) ($40)
PROFIT $180 $60
EBIT $300 $100
+ Depreciation $200 $400
- Taxes ($120) ($40)
CASH FLOW FROM OPS $380 $460
Non-Cash Net Assets $800 $600
Cash $380 $460
TOTAL NET ASSETS $1,180 $1,060
So, in the first year, the book value of the business is higher by using straight line depreciation.
The following results are summarized for all five years of useful life:
Item Using Straight-Line Using Double-Declining
BOOK VALUE yr 1 $1,180 $1,060
yr2 $1,360 $1,216
yr3 $1,540 $1,430
yr4 $1,720 $1,678
yr5 $1,900 $1,900
So to summarize, the different techniques produce different book values on a year-to-year basis, however, by the end of the useful life of the asset, the book values are the same. All things being equal, if one earns interest on the cash balances, the double-declining method produces a higher book value by the end of the useful life of the asset.
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How do you get started in tally after creating account?
after creating account
gateway of tally
Accounting Vouchers
pass the entry.
What should be considered when reviewing a budget?
The answer to this question can very depending on what type of budget you are talking about ... But the golden rule when making a budget is to see what you need and what you can do with out ... Now also you need to have some "Rainy day" money(s) as will ...
Characterstics and essentials requirements of good budgetary control system?
Essentials of budgetary control:
1) Establishment of budgets for each function and section of the organisation.
2) Continuous comparison of the actual performance with that of the budget so as to know the variations from budget and placing the responsibility of executives for failure to achieve the desires results as given in the budget.
3) Taking suitable remedial action to achieve the desired objective if there is a variation of the actual performance from the budgeted performance.
4) Revision of budgets in the light of changed circumstances.
List 3 factors that affect the budget?
uncertain events
wrong forcasting
budget is not based on history
What information does sales budget provide?
Sales budget provides the information about how many units of products needs to be sold and it is the basic information on which remaining budgets are prepared like production budgets or proforma financial statements.
What will the overall change in cash calculated on the statement of cash flow be always the same as?
The difference between the beginning and the ending cash balance on balance sheet.
How do you lower average collection period?
Start by determining your days average collection ratio. If the ratio is >14 days past your net terms the process you are currently using is broken.
Establish your weighted credit extension policy. What $ amount you will extend to each customer. Use past history to establish this value and build quantifiable criteria based on you financial statements. Once the weighted process is defined establish the process that will be followed from the (buy) date until the net term date.
Establish this collection policy in writing (very important) now pass along the accountability to a staff personnel that can be quantifiably measured to your newly defined policy. Full benchmarks and accountability should be give to that staff personnel, because that will be a criteria for the individual to cover his/her labor burden and provide profitable value for their results to your bottom line.
Is the budgeted income statement prepared before the sales budget?
Budgeted income statement is prepared at the last after preparing all other budgets and sales budget is the starting point of budgeting process.
How do you work out cost of goods sold?
The cost of goods sold depends on (1) the inventory system used, and, (2) whether or not a cost flow assumption is used (and if so, which one).
Inventory systemsThere are two inventory systems: the perpetual inventory system and the periodic inventory system.
The perpetual inventory system
With the perpetual inventory system, the inventory is updated with every purchase and expense. This implies that cost of goods sold is increases with every sale, at the time of each sale. The cost bases depends on the cost flow assumption used (see below)
The periodic inventory system
With the periodic inventory system, purchases are expensed, while with sales, cost of goods sold is not calculated. Hence, there is no system in place that can tell how much inventory there is.
The inventory is counted at the end of the period. At this point in time, the cost of goods sold can be computed.
Because:
beginning inventory + purchases = ending inventory + cost of goods sold
this implies:
cost of goods sold = purchases + beginning inventory - ending inventory
The end of period count is a physical count. The $ value of the goods depend on the cost flow assumption (discussed next)
Cost flow assumptionWhen goods are similar in nature (the company is trading coffee, oil, etc), the company can decide to assume some 'flow' of the goods for cost purposes. Common assumptions are:
LIFO: Last in, first out: the most recent purchases are sold first
FIFO: First in, first out: the oldest inventories are sold
Average cost: An average cost is computed
The alternative is 'specific identification', meaning that no cost flow is assumed but the actual cost for the goods is determined (this requires some sort of information system).
The cost of good soldDepending on choices (1) for inventory system and (2) cost flow assumption different values for cost of goods sold and ending inventory can be possible.
For FIFO, the perpetual and periodic inventory will lead to the same cost of goods sold (as well as ending inventory value).
For LIFO (as well as average cost), the cost of goods sold could very well differ for the perpetual inventory system and the periodic inventory system. With the periodic inventory system the cost of goods sold is determined at the end of the period. This means that for example purchases after the last sale are included for determining the cost of goods sold. This is not the case with the perpetual inventory system. With the perpetual inventory system this is done for each sale at the time of sale.
Does the statement of cash flows classifies cash receipts and payments into four categories?
i have four years of balance sheet and income statement and now want to prepare cash flow statement from assets
1 List four essential steps involved in the budgetary control function?
1. Predicting the effect of planning decisions on profit 2. Recording actual performance 3. Comparison of actual or budget performances 4. Management action as a consequence o the above
Identify and describe the major differences between budgeting and long-range planning?
A budget is management's written plan for the future, stated in financial terms. While a budget may cover any length of time, the typical budget period is one year, with supplemental budgets as desired by the organization. A budget should not be confused with a long-range plan, which typically covers at least 5 years. In addition to the difference in time period involved, budgets and long-range plans also differ in their emphasis and the amount of detail presented. Budgets are more detailed and focus on achieving short-term goals. In contrast, long-range plans are considerably less detailed and focus on long-term goals and the strategies to achieve those goals.
Budgets represent the primary means of communicating goals throughout the company. They also provide several distinct benefits to an organization. They require management to plan ahead and state specific goals. Budgets alert management to potential problems before they escalate to extreme levels. They can also motivate personnel by providing the objectives for performance evaluation. However, there are some disadvantages as well. Managers may perceive the budget to be unfair, particularly, if they are not included in the budgeting process. In addition, unrealistic budgets may lead employees to conduct themselves unethically in order to meet the objectives.
Why do costs need to be controlled and Why is it important to monitor budgets?
Costs need to be controlled because your costs cannot exceed your budget or you will have a negative balance; thus you would not be making any money. you also need to monitor your budgets as your budget always needs to be more than your costs or your business will go out of business.
What is the purpose of a Budget review?
Meet security objectives while operating within a fiscally constrained environement.
What are some common examples of computerized accounting systems?
Quickbooks and Peachtree are probably the most common.
What does short or over budget mean?
Short means you are under your planned budget. Over means you have exceeded your planned budget. If your budget was planned correctly, the best place to be is as close to your budget as possible. If you are under budget too much, you might not be spending where you should to grow or protect your business. If you constantly are over budget, then you may be in danger of going out of business, because of lack of money to spend on the things you need to stay in business.
A sales budget should be prepared before the production budget?
Yes sales budget is the starting point for budeting process as it provides the important information about how many units needs to be sell.
What is accounts payable aging report?
An accounts payable aging report is a list of amounts owed to creditors (people you owe money to) and this list shows how overdue the debt is. The report tells you whether the debt is current, 30 days overdue, 60 days overdue, 90 days overdue,etc.
