Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Administrative and
Operational
Expenses
Mark Dave R. Saan
BBM-MBA
Entrepreneurship Class
Objective
After studying this unit we should be able to:
Cash Budget
An estimation of the cash inflows and outflows for
a business or individual for a specific period of
time. Cash budgets are often used to assess
whether the entity has sufficient cash to full fill
regular operations and/or whether too much cash
is being left in unproductive capacities.
Source: Investopedia
Cash Budget
A cash budget is a prediction of future cash
receipts and expenditures for a particular time
period, usually in the near future. The cash flow
budget helps the business determine when its
income will be sufficient to cover its expenses
and when the company will need to seek
outside financing.
Source: Boundless. Components of the Cash
Budget.Boundless Finance. Boundless, 21 Jul.
2015. Retrieved 18 Aug. 2015 /
Time Period
The first decision to make when preparing a
cash budget is to decide the period of time
for which your budget will apply. That is, are
you preparing a budget for the next three
months, six months, twelve months or some
other period? In this Business Builder, we
will be preparing a 3-month budget.
However, the instructions given are
applicable to any time period you might
select.
Cash Position
The amount of cash you wish to keep on hand
will depend on the nature of your business, the
predictability of accounts receivable and the
probability of fast-happening opportunities (or
unfortunate occurrences) that may require you
to have a significant reserve of cash.
You may want to consider your cash reserve in
terms of a certain number of days sales. Your
budgeting process will help you to determine
if, at the end of the period, you have an
adequate cash reserve.
Operational Expenses
-are costs expended by a small company by each of
its different departments to produce a product or
services for customers. Examples of these
departments include manufacturing, advertising
and sales. Small companies have a variety of
necessary operating expenses. One example is
paying for the rent on a building. This space is
necessary to produce the product or services for
the business. Another example is the
manufacturing equipment. This equipment is
needed to produce the product being sold or to
assist in the services being provided to customers.
Administrative Expenses
-are costs incurred by a small business on a
more general basis and not associated with a
specific department. These expenses are
grouped with individuals who perform nontechnical support activities for a small business,
including secretaries and receptionists. One
example of an administrative expense would be
the salaries and benefits for secretaries and
receptionists. Another example would be the
office supplies, telephone bills and postage
used for the business.
Sales Budget
A sales budget is an estimate of sales for a future
accounting period. Sales budgets are often divided
into first, second, third and fourth fiscal quarter
estimates.
It is a key function of sales management. It
involves estimating future level of revenue and
selling expenses, and consequently the profit
contribution made by the sales function
The outcome of sales budget can be seen in two
form of documents:
1. The sales budget
2. The selling expenses budget
Projected Revenue
(Forecasted Revenue)
1. Projected revenue refers to the estimated money
a company will generate during a specific period.
The projections often refer to monthly, quarterly
or annual accounting periods. Companies project
revenue using a combination of research and
internal knowledge.
. For example, a business might review its previous
sales for the same period, contact customers to
ask about their future purchasing plans, review
trade association research that projects consumer
trends and ask sales staff what they estimate they
will sell during the period
Item
Cash balance
Budget
Actual
5,000
Variance
5,000
0%
Cash Receipts:
Cash sales
20,000
22,000
110%
Collection of accounts
receivable
15,000
13,500
90%
40,000
40,500
101%
Other income
Total cash
Cash payments:
15,000
15,000
100%
7,200
9,400
130%
500
500
100%
Advertising
500
1,000
200%
1,500
1,400
93%
500
500
100%
5,000
7,500
150%
30,200
35,300
116%
9,800
5,200
53%
Selling expense
Administrative expense
Lists of References
Investopedia
Boundless. Components of the Cash
Budget.Boundless Finance.
Boundless, 21 Jul. 2015. Retrieved 18
Aug. 2015 /
http://www.accountingtools.com/
http://dictionary.cambridge.org/
Google Dictionary