Question

Overview: Our main objective in Packet 10 is to begin to think about more complex issues associated with budgeting. Now, that we're working with transactions in which cash flows don't necessarily occur in the same period as the event, budgeting is a bit more complicated. Additionally, as we turn back to budgeting make sure you're keeping track of your own transactions for September. Don't forget that you'll eventually be comparing the budget you completed last month against your actual results. Semester case Now that he's completed his first year of operations, W.T. would like to work on his budget for the next year of operations. However, he realizes his business is now more complex than it was since he completed his initial budget last summer. Not only is he handling cash receipts and payments a bit differently, but he now purchases supplies and also recently purchased his first long-term asset (equipment). As you read, think about what W.T. will need to do in order to properly budget for the upcoming year.

Answer 1

Ques: diff between capital budgeting and operations budgeting:

Ans:

capital budgeting

operations budgeting

Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Capital budgets are developed for two main reasons: expansion and replacement The capital budget is used for long term investments Capital budget time frames are always multiyear, typically spanning between two and ten years. Planning the eventual returns on investments in machinery, real estate and new technology are all examples of capital budgeting

Operating budgets facilitate planning of anticipated income and expenses for a specified budget period. Operating budgets are generally created on an annual basis to minimize time spent creating and managing capital resources. The operating budget covers the day-to-day expenses required to deliver services to residents. Operating budgets can be both short-term (one year or less) and mid-term (between one and two years). The operating budgets include the budgets for sales, manufacturing costs (materials, labor, and overhead) or merchandise purchases, selling expenses, and general and administrative expenses

Ques Why does budgeting process usually begins with formulation of sales budget?

Ans: Budgeting process usually begins with formulation of sales budget because firstly we need to estimate the sales because the total activity of the organisation depends on the sales. Preparation of sales budget requires assesmet of market conditions and projections of what the market needs are . Projections are based on various internal and external factors .Sales budget relects the sales volumes and is generally influenced by previous yerars sales patterns, expected economic condtions,activities of comeptitors , market trends,etc.Sales can be of cash sales or credit sales so budget is prepared considering the time delay between the actual sales and cash collections patterns.

Ques Proforma financial statements

Ans: A pro forma financial statement is prepared on the basis of certain hypothetical conditions or events that may have occurred in past or can occur in future. These are used to project the most likely outcomes of corporate results. It serves as a present view of future projects related to an investment or lending proposal. It also facilitates the comparisons of historic data and projections of future performance.