Question 13 Marks
Write short notes on: (i) Purchase Budget (ii) Capital Expenditure Budget.
Answer
View full question & answer→(i) Purchase Budget:The purchase budget contains details about the quantity and quality of various things which the firm needs to purchase during the coming year. The total amount to be spent on purchases as well as the amount of each item of purchase are also given. Purchase budget serves a guide in making purchases from time to time. It also helps to ensure that the required items are available as and when needed for smooth functioning of the business.
(ii) Capital Expenditure Budget: This budget indicates the amount of capital required for procurement of capital assets during the budget period. This budget is prepared after taking into account the available production capacity, probable reallocation of existing assets and possible improvements in the techniques of production. Wherever necessary, separate budgets, may be prepared for each fixed asset, e.g., building budget, plant and machinery budget, etc.
(ii) Capital Expenditure Budget: This budget indicates the amount of capital required for procurement of capital assets during the budget period. This budget is prepared after taking into account the available production capacity, probable reallocation of existing assets and possible improvements in the techniques of production. Wherever necessary, separate budgets, may be prepared for each fixed asset, e.g., building budget, plant and machinery budget, etc.