Implementation of budget

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 2021

The implementation of budget is the responsibility of the budget director. The success of the entire exercise of budgeting depends on two important factors.
First, proper and clear communication to all key people involved in the implementation of the budget. They should clearly know what is expected of them and how to achieve the goals.
Second, the co-operation and encouragement by the top management in achieving the targets as identified in the budgets. The top management should be willing to reward people who meet budget goals.
Ideally, top management and the lower level of management should work together to prepare and implement the budget successfully.

Example

Budgeted statement of cash receipts and cash disbursements for the XYZ Company for the year ended 30th June 20×1.

Total First Quarter Second Quarter Third Quarter Fourth Quarter
Opening cash balance 85,000 20,000 15,000 30,000 20,000
Cash receipts 60,000 15,000 6,000 26,000 13,000
Total Cash Available 1,45,000 35,000 21,000 56,000 33,000
Cash Disbursements:
Inventory 25,000 5,000 6,000 9,000 5,000
Assets Purchase 60,000 30,000 15,000 5,000 10,000
Operating Expenses 15,000 5,000 5,000 2,500 2,500
Total 1,00,000 40,000 26,000 16,500 17,500
Disbursements:
Minimum Cash Balance Required 20,000 5,000 5,000 5,000 5,000
Total Cash Needed 1,20,000 45,000 31,000 21,500 22,500
Excess of Cash available over Cash Disbursements 25,000 (10,000) (10,000) 34,500 10,500

 
 

Budgeted Balance Sheet, 30th June 20×1
Current Assets
Cash $25,000
Accounts Receivable 10,000
Inventory 20,000
Fixed Assets
Land 30,000
Total 85,000
Liabilities and owner’s equity
Current Liabilities
Accounts payable 20,000
Accrued expenses 5,000
Owner’s equity 40,000
Reserves and Surplus 20,000
85,000

Leave a Comment