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Current Category » Economics of Natural Resources & Farm Management

Farm Budgeting

After farm planning budgeting is undertaken. Budgeting is a method of analyzing plans for the use of agricultural resources at the command of the decision maker. Farm plan is a programme of the total farm activity of a farmer drawn up in advance. Farm plan serves as the basis of farm budgeting. Therefore farm plan can be prepared without a budget but budgeting is not possible without farm plan. Therefore the budge ting can be defined as under.

  1. The physical aspects of farm planning when expressed in monetary terms called budgeting.

  2. The expression of farm plan in monetary terms by estimation of receipts, expenses and net income is called budgeting.

  3. Farm budgeting is a process of estimating costs, returns and net profit of a farm or a particular enterprise.

  4. Budget is a statement of estimated income and expenditure.

We will be concerned with both planning and budgeting as the budget helps us to evaluate alternative plans and select the one that is most profitable. Therefore farm planning and budgeting go side by sides.

Types of farm budgeting: There are two types (methods) of farm budgeting.
a) Partial budgeting       b) Complete budgeting.

a) Partial budgeting: It refers to estimating costs and returns and net income of a particular enterprise. It refers to estimating the returns for a part of the business i.e. one or few activities for example

  1. To estimate additional cost and returns from growing one hectare of hybrid Jowar in place of local Jowar.

  2. To estimate additional cost and returns by adopting foliar application of chemical fertilizers instead of soil application.

b) Complete Budgeting: It is also called as total budgeting. It refers to preparing budget for the farm as a whole. Complete budgeting considers all the crops, livestock, methods of production and aspects of marketing in consolidated form and estimates costs and returns for the farm as a whole. Therefore complete budgeting can he specifically defined as “An estimation of the probable income and expenditure is made for the farm as a single unit of course, a complete budget is required when a farm plan is prepared for new farm or when drastic changes are suggested in the plan of the existing pattern on an established farm”. Complete budgeting can be prepared for short run (annual budget) and for long run.

The Different between complete and partial budgeting

Sr. No.

Complete Budgeting

 

Partial Budgeting

1

The whole farm is considered as one unit

1

It is adopted when a minor aspect of farm organization is touched.

2

All the aspects like crops, livestock, machinery and other assets are considered

2

It is practiced with in the existing resources structure of the farm.

3

Both fixed and variable costs are calculated for working out costs and returns.

3

Only variable costs are considered.

4

Net income is estimated by deleting fixed costs and costs of variable inputs from the value of the product

4

Net income is estimated by deleting only cost of variable inputs from the value of the product.

5

It requires more efforts and time for preparation.

5

It requires relatively less efforts and time for preparation.

Current Category » Economics of Natural Resources & Farm Management