accounts_final_project prof chopde

8/2/2019 Accounts_Final_Project Prof Chopde

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MET Emba-2011-2013

Preparation of a budget for eMBAProgramme

A report submitted to the institute in partial fulfillment of

the requirement for the award of eMBA for the year 2010-2011

Submittedto:

Prof: L. N.Chopde

Submitted By:

Rahul Gandhi (129)

Rima Tellis (132)

Sneha Sawant (158)


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MET ICSs PGDM 2010-2012

[

CERT I FI CAT E

This is to certify that project titled Preparation of a budgetfor eMBA Programme a case study for student at XYZCollege is based on the original study conducted by

Rahul Gandhi (129)

Rima Tellis (132)

Sneha Sawant (158)

Under my guidance and this had not formed a basis for the

award of any other degree of this institute.

Place

DateFaculty Sign

(L.N. Chopde)


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Certificate from theOrganisation

This is to certify

that:

Rahul Gandhi

(129)

Rima Tellis (132)

Sneha Sawant

(158)

Have successfully completed a study on Preparation of

a budget for eMBA Programme a case study for student

at MET College and have submitted the project report onthe same.

The study conducted was satisfactory. We wishthem all the best.


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(Sign of the Officer)


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P R E FACE

In the following project we as a group have highlighted theimportance of budgeting for a eMBA Programme.

The calculation of a budget for an educational programme

has gained utmost importance over the recent years as the

increasing expense of the fees and other study related

material has increased in its prices. Against comparison of

this, the job market has been too lucrative either. The joboffers at hand after an educational programme at a

management institute have been all the more important to

recover the expenses of the education atleast within the first

few years in the industry.

To understand this concept, we have studied the

educational expenses for a Emba course at MET Institute ofManagement as an example from a students perspective

and have brought forward a few points to the best of our

ability.


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A CKNOW L E D G EME N T

We would also take this opportunity to express our deepgratitude towards our Coordinator Professor Gupte who is aconstant source of motivation and for their never endingsupport and encouragement during this project.

We would like to express our sincere thanks to Prof. L.N.

Chopde who provided us an opportunity to do this project.

And last but not the least, the librarian of MET, for helping usfind the books and scan through the same for understandingthe selected topic, our families, friends and colleagues whowere a constant encouragement.


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CONTENTS

SERIALNO

TITLE

PAGE NO

1 What is a Budget 7

2 Types of Budgets 8

3 Advantages of Budgets 11

4 Problems in Budgeting 13

5 Development of Budget for MBA 14

6 Development of Budget for MBAPro ramme II

19

7 Summa 22

8 Bibliograh

23


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What is aBudget?

A budget (derived from old French bougette, purse) is a list of all

planned expenses and revenues. It is a plan for saving and spending. It is also

the amount of money or resources earmarked for a particular institution,activity or time-frame. It is an itemized summary of intended expenditure;

usually coupled with expected revenue. A budget is a financial document

used to project future income and expenses. The budgeting process may be

carried out by individuals or by companies to estimate whether the

person/company can continue to operate with its projected income and

expenses.

In other terms, a budget is an organizational plan stated inmonetary terms.

Objectives of Budgeting:

The two major objectives of budgetingare to -

1. Provide a forecast of revenues and expenditures i.e. construct a model

of how our business might perform financially speaking if certain

strategies, events and plans are carried out.

2. Enable the actual financial operation of the business to be

measured against the forecast.

Characteristics of abudget:

A good budget is characterized by thefollowing:

1. Participation - involve as many people as possible in drawing up abudget.

2. Comprehensiveness - embrace the whole organisation.

3. Standards - base it on established standards of performance.

4. Flexibility - allow for changing circumstances.

5. Feedback - constantly monitor performance.

6. Analysis of costs and revenues - this can be done on the basis


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MET ICSs PGDM 2010-2012of product lines, departments cost centers.


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Types of Budgets:

1. Sa l e s bud g e t:

The sales budget is an estimate of future sales, often broken down intoboth - units and

Rupees/ Dollars. It is used to create companysales goals.

To enable us to forecast sales for the budget period one can use a

number of methods and some are listed below:

CustomerSurveys

Customer surveys include surveys of past customers as well as future

customers and groups identified as being possible customers. These

groups can provide information that will assist in predicting futuretrends in sales, such as whether sales demand will increase, decrease or

remain stable.

MarketResearch

Market research can be carried out by organisations that specialise in

this field and are skilled in market research techniques.

Market research will enable those preparing the budget to make

decisions on possible changes in the market and to identify new markets

to move their products and services into.

StatisticalAnalysis

Statistical analysis will enable those preparing the budget to predict

possible future demand. Statistical analysis can be as simplistic as

calculating averages based on past sales to identify trends that can be

extrapolated into the future. It can also include more complex

regression analysis that takes into account changes in past sales and

converts these into expectations on the basis of sales forecasting.

2. P r odu c t i o nbud g e t:

Product oriented companies create a production budget which estimates

the number of units that must be manufactured to meet the sales goals.

The production budget also estimates the various costs involved with


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MET ICSs PGDM 2010-2012manufacturing those units, including labor and material.

Once the sales budget has outlined the volume of sales that are

required we need to set a budget for the expenses that will be incurred

in producing that volume. The expenses


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budget separates expenses into two main areas: the first being factory

expenses and the second being what we will call administration.

Factory, or operational costs, includes such things as the components

and supplies used to produce the product, or services we provide. The

raw materials used in production are called inventory. The salesbudget provides an indication of the inventory that will be required to

meet the projected volume of production. Factory costs will also include

expenses such as power, machinery costs, and direct labour within the

factory or operational side of the business itself. The administration

costs are non-operational costs and will include things such as

marketing, human resources, rents and vehicle costs as well as

general administration.

3. C a s h F lo w /C a s h bud g e t:

The cash flow budget is a prediction of future cash receipts and

expenditures for a particular time period. It usually covers a period in

the short term future. The cash flow budget helps the business

determine when income will be sufficient to cover expenses and when

the company will need to seek outside financing.

Generally not all revenue from sales is received in cash and other cash

may be received from sources other than sales, such as when plant and

equipment is sold.

In the case of the cash flow budget not all expenses represent cash and

there may be cash to be outlaid for things such as dividend payments,capital requisitions, and loan or lease payments, which are not

expenses.

These things need to be combined to report cash receipts and

payments which, when adjusted for the cash at hand figure at the

beginning and end of the period, will give you the cash-flow budget for

the year.

Also, the cash budget is for cash planning and control. It presents

expected cash inflow and outflow for a designated time period. The

cash budget helps management keep cash balances in reasonablerelationship to its needs and aids in avoiding idle cash and possible cash

shortages.


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The cash budget typically consists of four major sections:

a) Receipts section, which is the beginning cash balance, cash collections

from customers, and other receipts

b) Disbursement section, comprised of all cash payments made by purpose

c) Cash surplus or deficit section, showing the difference between cash

receipts and cash payments

d) Financing section, providing a detailed account of the borrowings

and repayments expected during the period.

4. Ma r k e t i n g bud g e t:

The marketing budget is an estimate of the funds needed for

promotion, advertising, and public relations in order to market the

product or service.

5. P r oj ec t bud g e t:

The project budget is a prediction of the costs associated with a

particular company project. These costs include labor, materials, and

other related expenses. The project budget is often broken down into

specific tasks, with task budgets assigned to each.

6. R e v enu e bud g e t:

The Revenue Budget consists of revenue receipts of government and

the expenditure met from these revenues. Tax revenues are made up oftaxes and other duties that the government levies.

7. E xpend i t u r e bud g e t:

A budget type which include of spending data items.

8. P r o f i t B ud g e t:

This budget is used to predict financial performance. The budgeted

figures for sales and expenses from previous budget calculations are

required and these are included in the profit budget. The profit budgetwill require figures that are converted into percentages so that

management can easily assess how well the business is meeting its

objectives.


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Advantages of budgeting andbudgetary control:

1. It compels management to think about the future, which is probably the

most important feature of a budgetary planning and control system.

Forces management to look ahead, to set out detailed plans forachieving the targets for each department, operation and (ideally) each

manager, to anticipate and give the organisation purpose and direction.

2. It promotes coordination and communication.

3. It clearly defines areas of responsibility. Requires managers of

budget centres to be made responsible for the achievement of budget

targets for the operations under their personal control.

4. It provides a basis for performance appraisal (variance analysis). A

budget is basically a yardstick against which actual performance ismeasured and assessed. Control is provided by comparisons of actual

results against budget plan. Departures from budget can then be

investigated and the reasons for the differences can be divided into

controllable and non-controllable factors.

5. It enables remedial action to be taken as variances emerge.

6. It motivates employees by participating in the setting of budgets.

7. It improves the allocation of scarce resources.

8. It economizes management time by using the management by exceptionprinciple.

Purpose of creating aBudget:

A budget is something that is necessary and something that can help you

control your finances. But to become dedicated to keeping a budget, one

needs to understand why one is creating it in the first place. By knowing the

purpose of creating a budget, one can adjust to putting in the time and effort

required to make it work.

1. Organization

A budget lists all of your expenses for the month, including your

monthly bills, and allows you to pay your bills on time and in full.


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MET ICSs PGDM 2010-2012Without a budget, it can be difficult to keep your bills organized and you

may lose bills that wind up not getting paid. One purpose of a budget is

to give a structure to your personal finances that allows you to


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account for all of your bills and maintain a good credit rating by

making sure your bills are paid.

2. Control

When you are putting together a budget, you need to analyze your

monthly spending on expenses such as food and gasoline. You can also

examine your bills to see which ones can be altered to lower your

monthly obligation. For example, by reducing your cable television bill to

just basic cable and renting movies when you feel like watching them

you can save money on your monthly entertainment expenses. A

budget allows you to gain control of your spending, which can increase

the amount of extra money you have each month. With your budget

planning, you can then determine the best ways to use that extra

money.

3. Planning

A budget will allow you to see where all of your money goes each

month, and it will also help you to plan for saving for large purchases or

plan on paying down debt. When you use a budget you are engaging in

a form of financial planning for yourself. Use that tool to save for a

child's education, apply additional funds to paying off existing debt

or saving for a family vacation.

4. Emergencies

A financial emergency can cause problems for a family that is not

prepared. Using a personal budget will help you to immediatelyunderstand your financial situation and make plans to deal with an

emergency. One of the contingencies you can include in your budget

each month is to set aside money in a savings account that can be used

for emergencies only.

Budgeting:

Budgeting is the formal procedure of preparing budgets.

It involves the following basic steps:

1. Identifying expenses:

Fixed expenses like rent/mortgage, utilities, administrative

expenses, taxes and insurance of premises.


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variable expenses like raw material cost, direct labour,direct expenses

2. Determining different sources of income

3. Preparing the budget

4. Establishing the budget period

5. Laying down the budget procedure

6. Allocating income for expenses

7. Monitoring the efficiency of the budget

8. Re-assessing the budget

Problems in budgeting

Whilst budgets may be an essential part of any marketing activity they do

have a number of disadvantages, particularly in perception terms.

1. Budgets can be seen as pressure devices imposed by management, thusresulting in:

a) bad labour relations

b) Inaccurate record-keeping.

2. Departmental conflict arises

due to: Disputes over

resource allocation

Departments blaming each other if targets are not attained.

3. It is difficult to reconcile personal/individual and corporate goals.

4. Waste may arise as managers adopt the view, "we had better spend it or

we will lose it".This is often coupled with "empire building" in order to enhance the

prestige of a department.

5. Managers may overestimate costs so that they will not be blamed in

the future should they overspend.


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Development of Budget for MBA program in XYZ College

Case 1: Resident student preparing for the MBA Course

S c h e du le : C o s t o f E n t ra n c e E x a m

Cost for Entrance Exam & others

Serial

No. Particulars Amount (inRs.)

1 Cost of Tuition classes for PreparatoryExams 20,000

2 Cost of Books & Stationary 3,000

3 Cost of Mock Tests 10,000

4 Cost of Forms for different Colleges 15,000

5 Cost of Food 5,000

6 Cost of Travelling 10,000

7 Other Miscellaneous Expenses (5% ofTotal)

3,150

Total 66,150

Assumptions - The individual starts preparing for the exam a year before

from his Local place and an individual stays at his own residential house,

hence not taken into account the Rents and other major expenses (food,

travelling, etc).

Sr. No. 4 - Cost of Forms fordifferent Colleges

Here individual applies for 10 different colleges and costs him Rs 1500 /-per form

So, total expense incurred by him Rs 1500*10 Rs 15,000/-


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Sr. No. 5 & 6 - Cost of Food & Travelling

As he is resident and stays with family so expense incurred is minimal

assumed Rs 5000 /- per annum.

And assumed Rs 30 per day of travelling so Total cost per annum adds up to

around Rs 10,000 /- Now, the individual has been selected to PGDM (E-

Business program) for a XYZ College

Assumption - His initial cash balance is of Rs 10 lakhs (from his earnings andprovided by his

family)

So, his total expenditure occurred during the 1st

year

Cost for the budget of PGDM (E-business Program)

Serial No. Particulars Amount (inRs.)

1 Cost of registration expense 1,000

2 Cost of documentation andattestation

100

3 Tuition Fees 207,000

4 Travelling expenses 71,420

5 Food Expense 91,250

6 Books and stationery 7,123

7 Cost of formal blazer 4,000

8 Cost of formal shoes 3,000

9 Miscellaneous expenses (10% of total)

38,489

Sum total 423,382


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Schedules:

Sr. No. 4 Travelling expenses

Serial No. Particulars Amount (inRs.)

1 Railway fare (quarterly pass - First class)

Rs. 2540 x 8 20,320

2 college being 52 weeks a year for 2

years

21,900

Auto Rickshaw fare Bandra R.S - MET-

R.SRs. 30 x no of trips

3 Auto Rickshaw fare house - R.S. - House

29,200Rs. 40 x no of trips

Total 71,420

Sr. No. 5 Food Expenses

Serial

No.

Particulars Amount (in

Rs.)1 Cost of breakfast / day = Rs. 25

18,250Cost of breakfast for 2 years

2 Cost of lunch / day = Rs. 50

36,500Cost of lunch for two years

3

Cost of Dinner / day = Rs. 50

36,500Cost of dinner for 2 years

Sum total 91,250


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Note: miscellaneous snacks have been considered to

have costed and offset at rounding of the amount for

lunch and dinner on the higher side

Sr. No. 6. Books and stationary

Serial

No. Particulars

Amount(in

Rs.)1 Total number of Subjects = 37

Cost of books / subject assumedat Rs.

150 including the return amount

facility available at the leading

book stores across the city

5,550

2 Cost of 1 notebook = Rs. 25

Cost of notebooks for 37 subjects 925

3 Miscellaneous stationery = 10% of total

648

Sum total 7,123


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Cash Budget

Cash Budget for 3 years

Particulars Year 1 Year 2 Year 3

Cash Balance 1000000 1233850 858670

Cash Receipts

Salary Received 300000 0 10000

Total Cash 1300000 1233850 868670

Cash Payments

Schedule for Budget for PGDM E Business 66150 423382 423382

Total Cash Balance 1233850 858670 493490


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Case 2 : Non Resident student preparing for the MBA Programme

Cost for the budget of PGDM (E-business Program)

Serial No. Particulars Amount (in Rs.)

1 Cost of registration expense 1,000

2 Cost of documentation andattestation

100

3 MET Fees 207,000

4 Travelling expenses 71,420

5 Food Expense 91,250

6 Books and stationery 7,123

7 Cost of formal blazer 4,000

8 Cost of formal shoes 3,000

9 Miscellaneous expenses (10% of

total)

38,489

Sum total 423,382


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Schedules:

Sr. No. 4 Travelling expenses


1 Railway fare (quarterly pass - First class)

Rs. 2540 x 8 20,320

2 college being 52 weeks a year for 2

yearsAutoRickshaw fare Bandra R.S - MET- R.S

Rs. 30 x no of trips 21,900

3 AutoRIckshaw fare house - R.S. - House

Rs. 40 x no of trips 29,200

Total 71,420

Sr. No. 5 Food Expenses


1 Cost of breakfast / day = Rs.25Cost of breakfast for 2 years 18,250

2 Cost of lunch / day = Rs. 50

Cost of lunch for two years 36,500

Cost of Dinner / day = Rs. 50

3 Cost of dinner for 2 years 36,500

Sum total 91,250


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Note: miscellaneous snacks have been considered to

have costed and offset at rounding of the amount for

lunch and dinner on the higher

side

Sr. No. 6. Books and stationary

Serial

No. Particulars Amount (inRs.)

1 Total number of Subjects = 37

Cost of books / subject assumed

at Rs.150 including the return amount

facility available at the leading

book stores across the city

5,550

2 Cost of 1 notebook = Rs. 25

Cost of notebooks for 37 subjects 925

3 Miscellaneous stationery = 10% of total

648

Sum total 7,123

Now, the individual has been selected to PGDM (E-Business program)

Assumed his initial start cash balance of Rs 10 lakhs (from his earnings and

provided by his family)

So, his total expenditure occurred during the 2 years


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Summary:

Creating a budget plan has several benefits---it can help you organize

your individual and family expenses, track what is spent on unneeded

goods, and make sure you are living within your means by managingyour money and budget for the months ahead.

Currently we can find plenty of helpful tools online, such as budget

calculators, budget planners and home budget software.

Hence from Business point of view Budgeting plays a vital role by

looking into cash expenses for payroll, advertising and plant and

equipment exceeded the budgeted amounts the Company.


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Bibliography:

Managerial Accounts Khan & Jain

Fundamentals of Financial Management Van Horne

Financial Management site:www.fin a nc ialm a n age m e n t d e v elo pm e n t . c o m
http://www.financialmanagementdevelopment.com/http://www.financialmanagementdevelopment.com/http://www.financialmanagementdevelopment.com/http://www.financialmanagementdevelopment.com/http://www.financialmanagementdevelopment.com/

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