Difficulties in preparation of a Budget

It is really difficult to prepare appropriate and accurate budget for the 3^rd world country. And Bangladesh is not exception at all. The difficulties of preparation of a budget are as follows:

i.  Data/ information which are collected from different offices, departments, organizations etc. are not similar in nature; rather contradictory.

ii.  There is wide difference between exits of expenditure and income of country.

iii.  Revenue collection measures of the government are not effective.

iv.    It is difficult to determine the priority of the development programs of the country.

v.      Excessive expenditure of the country.

vi. Difficult of industrial failure, faulty and irregular supply of electricity which disrupts the production and services, damages or any destruction makes a serious problem to prepare an effective budget.

vii.  It is absolutely difficult to minimize the target fixed and progress achieved.

viii.  Uncertainty of foreign aid, grants, and loan are the crucial problem in preparing budget.

ix.    High rate of inflation, manipulates the training and development activities.

Types of Budget

On the basis of income and expenditure budget is two, these are:

1.      Development budget

2.      Revenue budget

Development budget

Development budget is the annual development budget (ADP) of the government. It is taken up for current and future capital formation. Broadly speaking- development budget launched for mobilizing country’s resources, credits, sources of direct income, developing service sector for aiding the sources of indirect income, developing energy and agriculture sectors. Necessary funds for preparing development budget comes from revenue surplus, revenue, internal resources, loan, external debts and grants, remittances and foreign trade.

Revenue Budget

Revenue budget includes the financing of administrative machinery of the government, defense service, law and orders, Public health, education and other services, it is also called operation and maintenance budget of the government. To maintain the aforesaid recurring expenses, the government imposes different types of taxes for meeting expenses of this budget, some of which are direct expenses including excise duties

Why we need budget? / Significance/ importance of budget.

The necessity of preparation of budget by the government of Bangladesh is explained below:

i.    Budget is the statement of annual income and expenditure of the government.

ii.    Budget is a document of guideline of economic activities of the country.

iii.   Budget determines the area of all activities of the government.

iv.  It helps to adopt the financial planning for a particular period.

v.   Budget is also the reflection of the government development programs.

vi.Buddget also determines the priority of development programs.it is the prediction of development of a country.

vii.  Budget helps to determine costs estimation for unseen items.

viii.  Budget indicates the statement of accounts of service sectors.

ix.  It is the prediction of the development of the country.

x.     Budget indicates the sources of revenue collection of the government.

xi.  Budget is the controller of public income and expenditure.

National Budget

Budget is the idea or design for future prospects. A national budget is the process which helps in preparing accurate statement of income and expenditure of a country. Therefore budget of any country is the statement of total income and expenditure of the subsequent year calculated on the basis of economic activities of the total population. That is why budget of any country is not only the statement of domestic income and expenditure but also the lists of income received through domestic resources, external remittances as well as foreign trade. And at the same time expenditure incur4ed for subsequent year in the various sectors of economy.

What is budget and Budgeting/ Define: Budget & Budgeting

Budget is a matter of future action. It must be quantitative but not qualitative. So, it is a numerical blueprint of future action which is related with economical activities.

On the other hand, budget is a law relating to one country’s economic activity. It is an important part of a country’s constitution.

On the other hand, the act of preparing budget is called budgeting.

Mathematical Problem (Simplex Model)

Problem 3: Dell Inc. manufactures two sizes of baseball- little league and major league. The company earns a profit of $2 of little league baseball and $3 per of major league baseball. Each product is assembled and packaged. There is a maximum of 1,800 hours available between the assembling and packaging department during a given time period. It takes 9 minutes to assemble a box of little league baseball and 15 minutes to assemble a box of major league baseball. A box of little league requires eleven minutes packaging whereas 5 minutes to major league. Dell Inc. seeks 2 combination of little league baseball and major league baseball that will maximize total profit within the available assembling and packaging time.

Requirement: Formulate this problem with simplex model and solve it.

Key column / Key Row / Key number

Key column: In a simplex table the column which contains the most positive number in the objective row is called Key column or pivot column.

Key Row: In a simplex table the raw which contains the lowest displacement ratio is called key row or pivot row.

Key number: In a simplex table the number which lies at the intersection of the key row and key column is called key number.