Question
Arrange the following steps in making a budget in a sequence :
I. Estimate the cost of desired items.
II. List down the commodities and services needed by the family.
III. Check plans to see that they have a reasonable chance of success.
IV. Estimate total expected income.
V. Bring expected income and expenditure into balance.
Codes :
The correct answer is
II, I, IV, V, III
Budgeting Sequence Steps
To effectively create a budget, the following steps should be followed in order:
- List Needs: Begin by identifying all the necessary goods and services the family requires. This forms the basis of your spending categories.
- Estimate Costs: Determine the anticipated cost for each of the items listed in the previous step. This involves researching prices and potential expenses.
- Estimate Income: Calculate the total amount of money expected to be received during the budget period. This sets the financial limit for spending.
- Balance Income and Expenditure: Compare the estimated income with the estimated costs. Adjust spending or look for ways to increase income until the budget balances, ensuring expenses do not exceed income.
- Review Plan: Finally, evaluate the drafted budget to ensure its feasibility and that it aligns with the family's financial goals and can realistically be followed.
The correct sequence is therefore II, I, IV, V, III.
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Important Questions from Financial Management
- The indicator which shows how much a company managed to get out of the capital they had put in the business.
- Which one of the following is NOT a method of handling income ?
- One of the internal constraint in implementation of a project is:
- Operating Leverage and Financial Leverage of a firm are 3 and 2, respectively. If sales increase by 6%, then earnings before tax will rise by :
Match the items of List - I with those of List - II and indicate the correct code :
List - I List - II (a) Net Income Approach (i) Working Capital Management (b) Profitability Index (ii) Over-capitalisation (c) Concentration Banking (iii) Capital Structure Planning (d) Lower Rate of Return (iv) Capital Budgeting Decision
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