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In: Accounting

How do I prepare a budget for a new plant being built compared to the existing...

How do I prepare a budget for a new plant being built compared to the existing plant data

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Expert Solution

In order to prepare a budget for a new plant being built compared to the existing plant data the following should be done.

1.MONEY IN:The first step would be to list out the sources of income for the new plant being built. The amount of cash flow and capital assets.

2.MONEY OUT:The second step would be to estimate the amount of expenses as compared to the existing plant,the bank statements of the amount of expenditure incurred can be helpful to asses the estimated future expenses.

3.Then the savings must be set as to how much saving in required to built in a new plant and the amount required to pat the debt off incurred for a new plant.

4. Recording of the amount spent under the new plant is very important, it must be recorded from day one so as to prepare an ideal budget with minimal discrepancies.The spending habits must be recorded also to minimise the unnecessary expenditure.

5.Track progress, this is essential so as to be able to understand what all can be expected in the future and accordingly the budget can be prepared so that minimum losses are incurred due to lack of track.

6.The 50/30/20 rule can also be followed, spending 50% on needs, 30% on wants and 20% on savings.

7.Goals must be set as to what kind of return is expected, a good goal should consist of both short term and long term objectives.

8.While preparing a budget a realistic approach is very important as very ambitious budget will result in downfall as the ambition is too high whereas in reality such returns cannot be expected. Being realistic is the key.

9.The utilisation and management of the budget is very important as just the preparation of the budget is not enough after preparing it must be utilised in the correct manner and accordingly managed as certain changes might occur with time.


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