Finance Numericals

Budgets are prepared to forecast future course of action. Company uses different budgets to forecast the future activity and with the help of it company plans its action. Budgets are used to compare the forecasted action with actual action to identify the accuracy in performance of activity. Company classified its budget into two parts according to its flexibility that is fixed budget and flexible budget. The fixed budget does not consider any change in forecasted data and actual data. The assumption of fixed budget is that there is no change in any level of activity or in other words there is no change in sales and output level. All the cost is same in fixed budget whether it is fixed cost or variable cost. The other budget which is just opposite of fixed budget is flexible budget. Flexible budget considers changes in level of activity in future. It classifies the cost in three parts that is fixed cost, variable cost and semi-variable cost. The flexible budget is prepared for variou

As we know budget is a plan, which helps to control our expenses according to our income for fixed period of time. Budgets are not only prepared by companies but it is also prepared by individuals to know their monthly expenses. Some types of budget prepared by companies are: master budget, cash budget, fixed budget, flexible budget, operating budget, financial budget, capital expenditure budget etc. Let’s explain what are these types of budget? Master budget: This budget is prepared for quarterly or annually. The format of this budget is depends on companies nature and its type. It includes all the budgets in it. 1. Cash budget: It is a planning to manage cash operation efficiently. It is a cash inflow and outflow of business in fixed period of time. With the help of cash budget financial manager can predict the future cash inflow and outflow for fixed period. It is prepared for monthly, quarterly and annually period according the requirement of the company. The cash requiremen

Hire Purchase System: Under hire purchase system there is an agreement between vendor and purchaser in which goods are purchased in instalment after paying some immediate amount to vendor. After paying the last instalment the purchaser get the title of goods. Instalment Payment System: Under instalment payment system the high value of goods are purchased easily by purchaser. After entering into the agreement the purchaser gets the title of the goods and in case if purchaser is unable to pay any instalment amount then the vendor has a right to sue the purchaser in the court of law to get the default amount. There is a difference between hire purchase system and instalment payment system: S.No. Point of difference Hire Purchase System Instalment Payment System 1. What is hire purchase system and instalment payment system? Under hire purchase system the goods are purchased in instalment and in last instalment