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Project of Capital Budgeting
Project of Capital Budgeting
2012-13 PGP-GBM
XCELLON INSTITUTE SCHOOL OF BUSINESS 22/23, Shrimali Society, Opp. Navrangpura Police Station, Navrangpura, Ahmedabad-380009
ACKNOWLEDGEMENT
No task can be achieved alone. It took many special people to facilitate and support it. Hence, I would like to acknowledge all for their valuable support and convey my humble gratitude. I would like to thank Mrs. Dharini Shah (Visiting Faculty, Xcellon Institute School of Business ,AHMEDABAD.) without whose direction and guidance with constructive comments and encouragement throughout the interview. Mrs. Shah valuable advice, remarks and discipline insured that I was constantly on my feet. I am very thankful to her for provide support, knowledge about practical experience, which I got from him.
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CONTENTS:Chapter No.
1. 2. 3. 4. 5. 6. Introduction Finance and Accounts Department Introduction to Budgeting System in Wipro Capital budgeting in Wipro Summary and Conclusion Bibliography 4-6 7-7 8-9 10-15 16-16 17-17
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Introduction
In the year of 1945, in preindependent India, a vision was born, which would eventually stand out as a brand name synonymous with innovation and integrity. Starting off with consumer products business, Wipro then diversified into newer areas including IT hardware and IT services. Such has been the dynamic power of the organization that over the past 50 years, Wipro has evolved into a leading global IT company, a company which has pioneered many an innovation in the IT services, BPO and R&D services space. Headquartered at Bangalore, India, we at Wipro implement the philosophy of 'Applying Thought', thereby helping clients to "Do Business Better". Our path breaking innovations and ideas have culminated into the `Wipro Way' a process which directly impacts customer benefits by improving time-to-market, enhancing predictability and reliability, and cutting costs.
Wipro Global IT Business delivers winning business outcomes through its deep industry experience and a 360 degree view of "Business through Technology" helping clients create successful and adaptive businesses. A company recognized globally for its comprehensive portfolio of services, a practitioner's approach to delivering innovation and an organization wide commitment to sustainability, Wipro Technologies has over 130,000 employees and clients across 54 countries.
The Future
Looking into the future, what Wipro sees is a new world. It is one where paucity of resources calls for optimized utilization be it talent, capital or raw materials. It is also a world which is networked and connected and that mandates business model transformation. Both these worlds will be driven by an explosion in real-time information and analysis. We think that organizations will have to rapidly redesign themselves to enable them to be more responsive to changing customer needs. They will need a partner and co-innovator in this journey to help them transform their business, increase efficiency, enable new business models, innovate at the edge and not just at the core even as they drive experimentation through faster analytics and knowledge. Wipro seeks to be that go-to-company for businesses and help get their business future ready.
Types of budgets
The Budget is classified into two types, based on the nature of the expenditure. They are: Capital Budget - A plan for creation of facilities Performance Budget - For setting the targets for performance.
Budget committee
The budgeting, monitoring and review is a continuous process. It is therefore essential that there is a specific group to supervise the preparation and submission of budgets at appropriate times, monitoring and review of budgets at periodical intervals either monthly or quarterly. For this purpose, a Budget committee is constituted in the Division. Generally, Budget committee consists the representatives of the following groups under the Head of General Manager. Production Planning Project Management Product Assembly Finance Purchase Personal & Administration IT and Stores
Commitments In this head commitments made against facilities head will be projected.
Expenditure It is a head in which incurrence of actual expenditure incurred against each facility head will be projected.
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Preamble & General information of the capital budget, Reasons for preparing the capital budget heads
Capital budget is prepared every year. Organization structure & activities are considered while preparing Capital Budget. Items required for timely execution of projects and smooth operation of the company are considered. Reference of earlier approved items is considered while according fresh sanctions. Capacity utilization of machines is taken in to account.
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Budget Heads
New projects Existing projects Improvements & rationalizations Replacements Welfare Information Technology Customer funded projects
Existing sanctions
Closing sanction of last year will be the opening sanction of the Current year. Sanction for non project items will lapse after three years from the year of sanction. Items fully committed and expended could be deleted from the budget for nonproject items.
Fresh sanctions
New items added in the budget first time. Additional sanction required for existing items. PRC reference for all items projected under replacement head. Specific sanction accorded by the board. Regularization of emergency sanctions
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Justifications
Basis of cost estimate Basis of working of the estimates Capacity utilization Firmness of the estimation Reasonableness of the factors of escalation Incidence of duties and taxes Mode of financing Recovery of the investment Items of revenue nature will not be projected Item wise detail justification of all fresh items and incremental sanctions projected in the budget. Cost benefit analysis for plant & machinery items above Rs.1 cr. each Total projections under IR, replacement, welfare, IT is within the overall ceiling circulated by CO based on internal generation Clear approval is required for customer funded items
Commitment plans
Commitments plans are allowed only for RE and BE RE commitments are compared with actual Postponing of commitments will be taken up with the impact on project schedule Certification of outstanding commitments by System Audit
Expenditure plans
Capital expenditure plan is spread over RE and BE Planned expenditure is tied up with the capital expenditure plan approved in The Performance budget
Board approval
Preparation of board paper Information on internal generation Schedule of sanctions Schedule of savings/surrender Justifications
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To conclude
Wipro is having very good Budgeting system. As no separate section is available for this Budget, it is recommendable to shave a Budget wing allotted for effective budgetary control system
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BIBLIOGRAPHY
www.wipro.com www.thehindu.com www.articles.economictimes.indiatimes.com www.citehr.com
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