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How to Do Budget Planning in a Proper Manner

by Jul 9, 2017Accounting

Budget is an important microeconomics concept.A budget can come in a big number of variations, starting from personal budget, family budget to event budget, corporate budget, institutional budget, start-up budget and even government level budget.Budget planning is about knowing the income source, by considering all future and current expenses, reaching one’s financial goals.

Hence, the first goal of a budget planner is to keep some savings after allocating money for all types of expenses. Budget planning homework answers should have a clear explanation of this concept, including steps of doing budget planning.

Steps to follow:

The steps should be explained as the following:

  • Step 1: Income calculation – This step should include income from all possible sources. It must include the paycheck (if it is a personal budget) and investments as well.
  • Step 2: Listing the bills or expenses–List all the certain expenses. For example, if it is a personal or family budget make sure to include spending like rent (if applicable), grocery, internet and phone, gas and car, eating out and calculate the possible expenses of each month,
  • Step 3: Calculate debts in total–This calculation also should include the interest not only the principal debt.
  • Step 4: List your other expenses that are not essential or certain–This might include expenses for gifts, trips or even eating outs, if it is not something essential.
  • Step 5: Calculate the possible savings–This should be done by simply subtracting the sum of step 2,3 and 4 from step 1.

Budget planning homework answers should also include advantages and disadvantages of budget planning.

This should be listed as follows:

  • Advantages: Budget planning helps to prevent It considers unforeseen expenses.
  • Disadvantages: Too much focus on savings might affect the current quality of life. If the planning too tight, sticking to it could be tough.

Some examples of budget planning:

Budget planning homework answers should also explain some real examples. It should start from a simple one to complicated ones. It could be in the following pattern:

  • Simple Budget – Example 1:
Income $4500
Expenses $1300
Balances $3200

 Sum of expenses:

Expenses Amount
Rent $750
Grocery $250
Utilities $150
Cell phone $50
Eating out $100
Total $1300

  • Institutional Budget for a project– Example 2:

Category Expenses Source/ Vendor Amount Requested
Equipment and material purchase DO & pH or ORP instrument: YSI
DNA Extraction Kit
YSI and
Personnel Support 1 undergraduate student Internal $2600
Travel and Shipment Gas and shipping cost $800
Total $8100

 Budget Justification:

We ask for support for the non- personnel support as equipment and material purchase (DNA extraction kit and Pro 1020 DO & pH or ORP instrument: YSI) as $ 4700. The personnel support will be ($2600 – $ 10 x 260 hours). In addition to that, there will be some domestic travel and shipping cost which might go up to $800.

Institutional budget is different from personal or family budget as generally they are made for the grant application. Therefore, it should include a justification of the budget. Also, it is important to remember; this will not have any savings or profits as this kind of budget is for accomplishing some project work not for making any money from it. A good budget planning homework answers should explain these minute differences.

  • Academic Club budget – Example 3:

 Budget Summary:

Budget Actual expenses Balance
Total Income $2800 $2700 $100
Total Expenses $2900 $ 2200 $700

 Revenue/ Income Summary:

Budget Actual expenses Under/Over balance
Total Member dues $2000 $2000 $0
Fundraising $400 $350 $50
Donations $300 $300 $0
Others $100 $50 $50
Total $2800 $2700

 Expense Summary:

Budget Actual expenses Under/Over balance
Monthly Mixers $ 1300 $1000 $200
Equipment $ 1100 $700 $400
Food and drinks $ 300 $300 $0
Travel $ 200 $200 $0
Total $2900 $2200

  • Business or Corporate Budget – Example 4:

Revenue/ Income Summary:

Budget Actual expenses Under/Over balance
Current operating income $7000 $6000 $1000
Category 1 $1500 $1000 $500
Category 2 $500 $200 $300
Category 3 $1000 $1000 $0
Category 4 $100 $100 $0
Category 5 $300 $200 $100
Category 6 $200 $200 $0
Category 7 $10 $10 $0
Total $10,610 $8710

 Expense Summary:

Current operating expenses Budget Actual expenses Under/Over balance
Accounting $1000 $900 $100
Legal $1000 $1000 $0
Advertising $500 $500 $0
Dues $200 $100 $100
Insurances $400 $400 $0
Depreciation $50 $50 $0
Maintenances $300 $300 $0
Taxes $200 $100 $100
Travel $150 $150 $0
Phone $60 $60 $0
Utilities $60 $60 $0
Total $3920 $3620

 A business budget is essential for any sized business. This will help you make important decisions for the growth of the company. It helps you take strategic decisions and assess the health of the company.A good budget planning homework answers should explain these characteristics well.

In conclusion, budget planning is not a very complicated issue.But different types have its own character. A personal or a family budget is the simplest ones, whereas an institutional or university budget does not include any profit balances. Corporate budget is more complicated than the examples illustrated before.

The trick in a corporate budget is to list down the expenses and revenues properly. If these categories are not separated properly, the budget can go complicated and may be wrong. Hence, a proper budget planning homework answers should have all these components included in the assignments with real life scenarios to understand how calculations should be done.