How Do I Calculate Finance Charges?

The financial expense budget refers to the expense plan incurred for raising funds required for production and operation during the budget period. The budget for financial expenses shall be prepared in accordance with the borrowing plan for the budget period, the estimated cash flow statement of foreign currency deposits and loans, and bonds issued. Enterprises should fully understand various financial instruments and financial policies, and choose the financial products that are most suitable for their enterprises to reduce their financial costs. The detailed items of the financial cost budget mainly include: interest expenses (minus interest income), exchange losses (minus exchange gains), borrowing fees and other financing costs. Expenses incurred to qualify for capitalization of asset borrowings shall be capitalized and not included in the budget for financial expenses. Qualified assets refer to fixed assets, investment real estate and other assets that require a considerable period of acquisition, construction or production activities to reach their intended use or sale. "A considerable period of time" refers to the time necessary for the purchase, construction, or production of an asset, and is usually one year or more. ^[1]

Financial expense budget

Financial cost budget refers to a budget that reflects the level of financial costs incurred due to the use of funds during the budget period. By its nature, this budget is a daily business budget, but because it must be prepared based on the relevant data on the financing and use of funds in the cash budget, it is included

As the financial expenses are mainly related to the

This budget is the most difficult to estimate, it involves the credit scale of the company for that year, and it involves a special decision budget. Therefore, first of all, a credit budget and a special decision-making budget should be carried out, and a financial expense budget should be carried out on this basis.

Financial expenses budget management expenses

The management expense items are relatively complicated and most of them are fixed costs. Therefore, each expense can first be reported to the department and reported to the expense budget.

The preparation of management cost budget can adopt the following two methods: the first method is to reflect the projected annual level according to the project; the second method divides the management cost into two parts: variable and fixed costs. The variability management expense allocation rate and estimated sales volume are measured.

Finance expenses budget selling expenses

The sales expense budget refers to the expense budget that must be paid in order to realize the sales budget. Based on the sales budget, it analyzes the relationship between sales revenue, sales profit, and sales expenses, and strives to achieve the most effective use of sales expenses. When arranging sales expenses, the cost-volume-profit analysis method should be used, and the payment of expenses should be able to obtain more benefits.

The sales expense budget can be divided into variable sales expense budget and fixed sales expense budget.