A budget is a detailed plan for the future that is usually expressed in formal quantitative terms. Budgets are used for two distinct purposes, planing and control. Planning involves developing goals and preparing various budgets to achieve those goals. Control involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.
Advantages of budgeting
Budgets communicate management's plans throughout the organization.
Budgets force managers to think about the plan for the future.
The budgeting provides a means of allocating resources to those parts of the organization where they can be used most effectively.
The budgeting process can uncover potential bottlenecks before they occur.
Budgets coordinate the activities of the entire organization by integrating the plans of it's various parts.
Budgets define goals and objectives that can serve as a benchmark for evaluating subsequent performance.
No comments:
Post a Comment