Zero-based budgeting (ZBB) is a budgeting approach that starts from scratch, rather than relying on previous budgets as a baseline. In this method, the budget is constructed from zero, with all expenses requiring justification for each new period. Overview of Zero-Based Budgeting Zero-based budgeting (ZBB) necessitates that all expenditures be justified before inclusion in the…
A budget is a detailed financial plan that outlines expected income and expenses for a specific period. It serves as a roadmap for resource allocation and guides decision-making to achieve organizational objectives. Control is essential to ensure that the plans and objectives outlined in the budget are effectively achieved. When applied to budgeting, control becomes…
Budget preparation involves formulating financial plans, whereas budget monitoring ensures that expenditures remain aligned with the allocated budget and that financial objectives are achieved. How to Prepare a Budget 1. Establish Realistic Goals Prior to creating a budget plan, it is essential to evaluate the current financial situation. Set specific and measurable short-term, mid-term, and…
Budgeting is a continuous process involving the management of revenues and expenses to ensure financial responsibility and fiscal stability. Budget Concept A budget is a financial plan that outlines anticipated income and expenditures over a specified future period, such as a month or a year. It serves as a fundamental tool for financial planning and…
The Reserve Bank of India (RBI) has announced an increase in interchange fees on ATM transactions, resulting in higher costs for cash withdrawals starting May 1, as reported by Doordarshan News. This revision is expected to impact frequent ATM users by increasing withdrawal expenses. According to reports, customers will incur an additional charge of Rs…
The Reserve Bank of India (RBI) has issued revised guidelines on Priority Sector Lending (PSL) following a comprehensive review of existing provisions and stakeholder feedback. These updated norms introduce several significant changes, including an increase in loan limits for housing and renewable energy projects, as well as modifications to the classification criteria for priority sector…
The primary distinction between marginal costing and absorption costing lies in their treatment of fixed production costs. Marginal costing considers fixed production costs as period costs, expensing them in the period incurred. In contrast, absorption costing treats fixed production costs as product costs, allocating them to the units produced. Additionally, absorption costing emphasizes overhead recovery,…
Absorption costing, also known as full costing, is an accounting method used for inventory valuation. It incorporates all manufacturing costs, including direct materials, direct labor, and both variable and fixed manufacturing overhead, into the cost of a product. This approach is crucial for inventory valuation and profit reporting. Key Features of Absorption Costing Comprehensive Cost…
The Government of India has revised the classification criteria for Micro, Small, and Medium Enterprises (MSMEs), effective from April 1, 2025. This update was announced by Finance Minister Nirmala Sitharaman during the Union Budget 2025–26 presentation. The revision aims to facilitate business expansion, encourage the adoption of advanced technologies, and enhance access to financial resources…
Definition of Cost-Volume-Profit (CVP) Analysis Cost-Volume-Profit (CVP) analysis is a fundamental cost accounting technique used to assess the relationship between cost, volume, and profit. It enables businesses to determine how changes in variable and fixed costs impact overall profitability. Organizations utilize CVP analysis to calculate the number of units required to achieve a break-even point…
