Budgets

Tally allows you to create multiple budgets. There could be a budget for specific purposes, e.g., for the bank, for the head office, optimistic budget, realistic budget, pessimistic budget, etc. Departmental Budgets can also be created, e.g., Marketing Budget, Finance Budget, etc.

As usual, you first create budgets. You can of course alter them.

Budget figures are used to compare against actual and to display variances. This is done by bringing up a new column when displaying a statement and selecting the appropriate budget.

We shall now go through the creation and alteration of budgets.

Gateway of Tally > Accounts Info > Budgets

 

How to Manage and Operate Budgets?

Gateway of Tally > Accounts Info > Budgets Create

Name

Give the budget a name, in this case, Corporate Budget. As you may have other budgets as well, the name distinguishes them.

Under

In the true Tally tradition, you can have a hierarchical budget set-up. At the top level is the Primary Budget. You can set up more than one Primary Budget. Under each Primary Budget, sub-budgets can be created.

Period of Budget

Specify the period of the budget. The period could be a month, a year or any period starting from any date to any date.

Set/Alter Budgets of

You may want to set the budget for groups of ledger accounts or for ledger accounts individually or for cost centers or all of them. We shall take up budget for group only. Follow the same process for setting budgets for individual ledgers and cost centers.

Budget for Groups

Yes, if you want to set budgets for a group or groups of ledgers.

If yes, fill in the fields in the Group Budget sub-screen:

Account Name

Give the names of the groups for which the budget is being set.

Cost Centre

For each group name, a cost centre may be earmarked, i.e., Indirect Expenses for a particular cost centre or a group of cost centers only. If you select 'Not Applicable', then the budget is not for any particular cost centre but the company as whole.

Type of Budget

Budgets could be of two types:

On Net Transactions – where transaction amounts are to be monitored and not the balances. Net is net of debits and credits for the specified period. Hence, net transactions for Indirect Expenses would mean the debit amount for the specified period after reducing the credits for the same period. Opening and closing balances not withstanding.

On Closing Balance – where you wish to monitor the balance of the accounts and are not too keen on the transactions, e.g., balances of Bank Accounts, balances of debtors.

Amount

The budget amount for the account for the specific cost centre.

Budget for Ledger Accounts

Gateway of Tally > Accounts Info > Budgets > Create

You may choose Alter if a Budget exists for other entities like Groups and Cost Centers but not for Ledgers.

Name for the Budget

1.     Give the name of Budget. E.g. Corporate Budget under Primary Budget.

2.     Specify the period of the Budget. The period could be a Month, a Year or any period starting from any date to any date.

3.     Under Set/Alter Budgets of, you may set the budget for groups of ledger accounts or for ledger accounts individually or for cost centers or all of them.

4.     Here we shall take up Budget for ledgers. Hence, set Yes under Ledgers and let others remain No.

5.     Select the ledgers for which you wish to set the Budget.

Budget for an account allocated to a cost centre

A budget can be created for each ledger account pertaining to a cost centre, e.g. Accountancy Fees for Finance Group. Then, Accountancy Fees could be repeated for another cost centre, e.g., a Branch. However, if you select not applicable then the budget is not for any particular cost centre but the company as whole.

Type of Budget

Under the Type of Budget a pop-up of two different kinds of Budgets appears.

On Closing Balances

Where you wish to monitor the balance of the accounts and are not too keen on the transactions. For e.g., balances of Bank Accounts or Debtors. This means that the magnitude of transactions is ignored. You are concerned only with the amount remaining in the account. This is useful for Balance Sheet items.

On Nett Transactions

If you are concerned with the magnitude of transaction amounts use this option. Revenue items reflect the transacted amounts. Why nett? This is because you do not expect to have a negative figure in such accounts and if they exist, they are adjustments. E.g., an expense account like travel will always have debit entries only unless there is a reversal due to error or charge to a customer.

Caution

When using Nett Transactions, the Budget Closing Balances actually get adjusted even if you have not selected this type. The figures in the Profit & Loss Account will reflect the Closing Balance figures.

Note: For comparing closing balance figures in final statements, especially the Balance Sheet items, viz., assets and liabilities, choose Closing Balances.

For comparing transactions against budgets, especially revenue income and expenses, choose On Nett Transactions.

Apportionment of budget specified for periods longer than a month

o       Ledger Budgets are apportioned for each month on the basis of number of days.

o       Group Budgets do not get apportioned. Hence Budget for Current Assets will not automatically flow to sub-groups.

o       Closing Balances Budget: Each month will have the same budget value except that the actual Opening Balance is also taken into account.

o       Net transactions Budgets specified for a period get equally apportioned over the period.

o       Enter the budget amount for the specific ledger.

o       You can Budget as many ledger accounts as needed and finally accept the screen.