Guide to Investment Budgeting

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An investment budget is an integral part of the consolidated budget, it reflects all the inflows and outflows of funds from investing activities of an enterprise.

And the investment budget may include: ativities that provide a strategic development plan, projects to be implemented at the request of government authorities, projects related to implementation of the current budget or projects that aim at coping with emergencies, etc.

All activities can be divided into on-going and newly launched projects. Capital budgeting constitutes the main decision-making in investment decisions. It is responsible for pre and recalculation of independent investment decisions.

In addition it plays an investment appraisal role for the professionals, and as with any decision-making process, a range of factors are taken into consideration. These are technical, legal and economic in nature, or influenced by personal preferences.

Investment budget also includes portfolio investment, whenever provided for company’s development strategy in the forthcoming budget period.

In drawing up the investment budget aimed at financing investment projects, the financial capabilities of the company are carefully analyzed with a mandatory separation of sources of funding. If financial resources are limited, preference is given to: projects aimed at meeting the requirements of public authorities, projects whose non-implementation could result in a shutdown of the enterprise and ongoing projects.

As regards the ongoing projects, amounts are determined based on those works that are planned for the budget period, subject to earlier work. For each investment project, which is included in the budget, the source must be specified through which the project will be financed. The results of the investment budget are taken into account in budgeting DDS and in the preparation of balance sheets.

Investment calculations also include all procedures that enable a rational assessment of the computable aspects of an investment. In addition to the financial consequences of an investment to be quantified and summarized in order to frame and provide a decision recommendation.

From the perspective of the accounting system, it is an investment for the transfer of cash in property and financial assets. All static methods are based on this view.

Within the modern investment theory it is considered as a cash flow of all cash receipts and disbursements. The dynamic methods are based on this view.

Static methods use performance measures of cost and revenue accounting. The aim of the data collection effort is to minimize the computational cost. Instead of using the individual data from net payments and early payments, averages can be formed. In very different payment structures, an average observation may provide only an approximation.

 

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