Farm budgeting

A farm plan is a program of the total farm activity of a farmer drawn up in advance. The
expression of such a farm plan in monetary terms is called farm budgeting. Simply it is a
process of estimating costs, returns and net profit of a farm or a particular enterprise.
Types of farm budgeting
1. Enterprise budgeting
An enterprise is defined as a single crop or livestock commodity being produced on the farm. An
enterprise budget is an estimate of all income and expenses associated with a specific enterprise
and estimate of its profitability.
Enterprise budget can be organized and presented in three sections income, variable costs and
fixed costs Income is estimated by expected the total production and output price.
Variable costs are estimated by knowing the quantities of inputs to be used (such as seed,
fertilizer, labour, manures) and their prices.
The fixed costs in a crop enterprise budget are depreciation on machinery, equipment,
implements, livestock, farm building etc., rental value of land, land revenue, interest on fixed
capital.

2. Partial budgeting
Partial budgeting is a statement of anticipated ( apekchhit) changes in costs, returns and profitability for a
minor modification
This technique is generally used to evaluate the profitability of
Input substitution: E.g. Machinery for labour, changing livestock rations, owning a machine instead of
hiring, increasing or decreasing fertilizers or chemicals.
Enterprises substitution: E.g. substitution of sunflower for groundnut.
Scale of operation: size of the farm business or in the size of the single enterprise, buying or renting of
additional land, expanding or decreasing an enterprise.
It consists of four important components like added costs, added returns, reduced returns, and reduced
costs.
1. Added costs: If proposed modification introduce the new enterprises or increase in size of
existing enterprises

2. Added return: proposed change may cause an increase in total farm income if a new enterprise is
being added, if an enterprise is being expanded or if the change will cause yield levels to increase.
3. Reduced costs : Costs may be reduced if the change results in elimination of an enterprise, or
reduction in size of an enterprise or some change in technology which decreases the need for variable
resources
4. Reduced income: Income may be reduced if the proposed change would eliminate an enterprise,
reduce the size of an enterprise or cause a reduction in yield.

Complete Budgeting
It is statement of expected income, expenses, and profit of the firm as a whole.
Cash flow budget
It is summary of cash inflows and outflows for a business over a given time period. Its primary purpose is
to estimate the future borrowing needs and loan repayment capacity of the farm business.
Difference between complete budgeting and partial budgeting