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BUDGET CONCEPT
A budget is called the advance calculation and negotiation of the income
and expenses of an economic activity (personal, family, a business, a
company, an office, a government) during a period, usually on an annual
basis.
It is an action plan aimed at meeting a planned goal, expressed in values and
financial terms that must be fulfilled in a certain time and under certain
planned conditions. This concept applies to each responsibility center of the
organization.
The budget is the annual development instrument of the
companies or institutions whose plans and programs are formulated
Indicates for each product:

□ the estimated sales quantity and □

oisinamuú

the expected unit sales price

Sales Budget = estimated sales volume x

expected unit price

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When estimating the amount of sales for each product, past
sales volumes are normally used as a starting point.
These amounts are reviewed for factors that are expected
to affect future sales .

FACTORS AFFECTING THE

FUTURE SALES
Accumulation of sales orders
finished

Productive capacity
Promotion and planned
advertising

Price projection policy

Expected industry conditions and
of the economy in general
Findings in marketing research
studies

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THE EXAMPLE: ADVANTAGES
Below shows theOF THE
sales SALES
budget BUDGET
for the company
Accesories Vista, SA

Accessories Vista, SA
Sales Budget
1- Improve market penetration
For the Year Ending December 31, 2008

Increase sales effectiveness

Product and Region Volume in Units Unit Sales Price Total sales

Anticipate consumer requests

Briefcase:
Know the need for new products
This 287,000 $12.00 $3,444,000

1- Know about
West the competition's
241,000 strategies
12.00 2,892,000

1- Evaluate
Total distribution 528,000
channels $6,336,000

1- Anticipate
Hand bag:
orders to subcontractors
This
+ Set the156,400 $25.00
level of business activity $3,910,000

West 123,600 25.00 3,090,000

Total
+ Size
280,000
the sales team $7,000,000

Total Sales Revenue $13,336,000

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COST BUDGET
PRODUCTION

The production budget is linked to the sales budget , since it consists of

calculating how much it will cost to manufacture the quantity of products that a
firm plans to sell. This allows costs to be analyzed and compared to the expected
revenues and profits.

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PURPOSE
> Planning of own production.
> Review of factory production capacity.
> Schedule raw material needs.
> Schedule labor needs.
(These points relate to the production volume budget)

> Determine the cost of production.

> Calculate financing needs.
(The latter are related to the production cost budget)

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ADVANTAGES OF A BUDGET
PRODUCTION:
1. Allows inventories to be maintained at optimal levels
2. It allows having low inventories that, through an increase in
turnover, presents greater liquidity in the company.
3. Scheduling of raw material needs.
4. Production is concentrated on the fastest-moving items.

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CALCULATION

units expected to be sold

+ the units that are intended to be in the final inventory
– the units expected in ending inventory
= total number of units that must be produced.

To estimate the cost itself of what must be

manufactured, the costs of raw materials and their transformation must
be considered, including the use of technological resources and human
resources .

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EXAMPLE:
Accessories Vista, SA
Production Budget
For the Year Ending December 31, 2008
UNITS

Sales (from Sales Handbags

Budget) 528,000 280,000

More final inventory 80,000 60,000

desired as of Dec 31,
Wallets 340,000
Total 608,000
48,000
Less initial inventory
estimated as of 1/1/2008 88,000

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EXPENDITURE BUDGET
OF OPERATION
They include everything related to sales, distribution, packaging, shipping,
administration, financial, royalties, technical services, etc. and other
deductions from income.

As part of the formulation of this budget, certain

resources must be applied you
.

technical and take into account the circumstances that specifically affect the
entity, as well as the influence of other budgets from which data for the
operating expenses budget is derived.

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The formulation of this budget must basically consider the following issues: the
effects of sales budgets, production, capitalizable and non-capitalizable projects,
personnel requirements, etc. Apply the following technical resources:
• Accounting by responsibility centers.
• Management by Objectives
• Separation of direct, period, installed capacity, policy and semi-fixed expenses.
❖ Meter system.
BUDGET OF
FINANCIAL EXPENDITURE/PRODUCT

It is usually prepared after the results and cash budgets so that the cost of
money and capital can be estimated. That is, the expense or benefit from
financing.

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STATE BUDGET OF
RESULTS

The budgets for sales, cost of goods sold, and selling and
administrative expenses, combined with information on other
income, other expenses, and taxes, are used to prepare the
budgeted income statement .

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The budgeted income statement includes estimates for all
Accessories Vista, SA
Budgeted Income Statement
For the Year Ending December 31, 2008
Example:
phases of operations. This allows management to advise on the
Sales revenue budget
$13,336,000

Cost of sales budget

effects of each budget on the following year's profits. If the

9,047,780
Gross profit
$4,288,200

budgeted net profit is too low, management may revise

Administrative and selling expenses budget:

Selling expenses
$1,190,000

operating plans in an attempt to improve profit.

Administrative expenses
695,000

Total sales and administrative expenses

$1,885,000

Income from operations

$2,403,220
Other income:

Interest income
$98,000

Other expenses:

Interest expense
90,000 8,000
Profit before taxes
. ( and 2 • $2,411,220

* , and ■. l / J
Taxes 600,000
R7
Net profit
$1,811,220

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BUDGET CONTROL ,
It allows the organization in a simple way to
keep track of the financial movements
carried out as well as the income and expenses caused by
transactions that affect its different areas.
th
e

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It is a useful tool for the department in charge of the financial control of
any company as it facilitates comparisons between budgets and the real
items reflected in the accounting.

CHARACTERISTICS
> Creation and control of budget items that will be used in the definition of budgets.
> It allows adequate control of operations that require requesting funds, access and
execution of budgets by user.
> Possibility of generating expansions or reductions of the budgeted amounts without
losing the original budget.
> Ability to define, structure and distribute the initial budget.

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> Balance and movement inquiries.
> Copy of accounting accounts to budget items.
> Definition of the structure and distribution of the initial budget.

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> Management of multiple budgets both by budget statements and by periods;
These can be variable and there is the possibility of expanding them.
> Management of double impact budget transactions with the following options
for the registration of movements that affect budgets:
> a) Budget allocation and modification movements (increases or decreases to a created
budget).
> b) Budget section movements.
> c) Movements that recognize transactions, which produce income or expenses pending
receipt or payment (sales and purchases on credit).
> d) Movements for cash collections or payments and for credit collections or payments
previous.
e) Movements that affect the availability of sections defined in a budget and
reclassification.

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ACCOUNTING II

FLOW
TEACHER: CP LAURA LILI VENUS ROCHA STUDENT: MA. LUISA SOBERANIS

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RAMIREZ
CASH FLOW BUDGET
CASH
Also known as projected cash flow , it is a budget that shows the
forecast of the future inflows and outflows of cash (cash) of a
company, for a given period of time.

The importance of the cash budget is that it

allows us to predict the future availability of
cash (know if we are going to have a deficit or
surplus of cash) and, based on this, be able to
make decisions.

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The cash budget allows us to know • the future scenario of a
-iAA>
project or business: knowing if the future project or business will be profitable
(when future income is greater than future expenses), or knowing if we will be
able to pay a debt incurred in a timely manner.

Information that we may present to third parties, for example, by wanting W- U

Ammmm 4/ ' m dmaEF TM
demonstrate the profitability of the future business (for example, to potential
investors), or when wanting to demonstrate that we will be able to pay
. . . . L3 =9g4 , . ...... , .
timely a debt incurred (for example, when requesting a loan from a financial
institution).
THE FOUR BASIC PRINCIPLES FOR
CASH MANAGEMENT
There are four basic principles whose application in practice leads to correct cash flow management in a given company.
These principles are aimed at achieving a balance between positive flows (money inflows) and negative flows (money
outflows) in such a way that the company can consciously influence them to achieve maximum benefit.
The first two principles refer to money inflows and the other two to money outflows.
FIRST PRINCIPLE: "Whenever possible, cash inflows should be increased"
Example:
- Increase sales volume,
- Increase sales price
- Improve the sales mix (promoting those with the highest contribution margin)
- Eliminate discounts.
SECOND PRINCIPLE: "Whenever possible, cash inflows should be accelerated"
Example:
- Increase cash sales
- Ask clients in advance
- Reduce credit terms.

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THIRD PRINCIPLE: "Whenever possible, money outflows should be reduced"
Example:
- Negotiate better conditions (price reduction) with suppliers)
- Reduri waste in production and other company activities.
- Do things right the first time (Reduce the costs of not having Quality)
FOUR PRINCIPLE: "Whenever possible, money outflows should be delayed"
Example:
- Negotiate with suppliers the longest possible terms.
- Acquire inventories and other assets at the time closest to when they will be needed

It should be noted that the application of one principle can contradict another, for example: If you sell only in
cash (cancelling credit sales) you can accelerate the inflow of money, but there is a risk that the sales volume
will decrease. . As you can see, there is a conflict between the application of the second principle and the first.
In these and similar cases, it is necessary to evaluate not only the direct effect of the application of a principle,
but also the additional consequences that may affect cash flow.
The cash flow budget is made up of the Cash Income, which are all the cash inflows
of a company that occur in a given financial period, among the most common are
cash sales, the collection of accounts receivable or on credit and all those that in
the short term are likely to represent an inflow of cash; and Cash Disbursement,
which are all cash expenses made by the company during a specific financial
period, among the most common are cash purchases, cancellation of accounts
payable, payment of dividends, leases, salaries and salaries, payment of taxes,
purchase of fixed assets, payment of interest on liabilities, payment of loans and
credits to sinking funds and the repurchase or retirement of

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The cash flow budget provides figures that indicate the ending balance
in cash, which is analyzed to determine whether a deficit or surplus is expected
and based on this, the necessary measures must be taken to request
maximum financing, if necessary, indicating in the cash budget
due to the uncertainty in the final cash values, which are based on the

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