Budgeting? The term ‘budget’ is probably well understood by the layman. Budgeting is an important component of financial success; it makes it easier for people with incomes and expenses of all sizes to make. A manufacturing entity for example, might prepare sales production and administration budgets. The ‘master budget’ is defined as the overall financial plan for the period, which is made up of a budgeted profit and loss account, a budgeted balance sheet and a budgeted cash flow statement. Budgeting also is a key management tool for planning, monitoring and controlling the finances of a project or organization. It estimates the income and expenditures for a set period of time for your project or organization.
I agree to the statement ‘Budgeting is a key component in management short and long term planning’. Its role in the management of a business is best understood when it is related to the fundamentals of management. Planning is future-oriented. A plan specifies in some from what management wants to do. Management has certain variables that it can control such as financial resources, plant and equipment, products, production method, and human resources. Budgeting allocate funds to achieve desired outcomes. A budget may span any period of time. It maybe short-term plans which means one year or less, it’s usually the case, intermediate term is two to three years, or long term (three years or more). Short-term budgets provide greater detail and it is more specific. Intermediate budget examine the project the company currently is undertaking and start the programs necessary to achieve long-term objectives. Long-term plans are very broad and may be translated into short-term plans. The budgets period varies according to its objectives, use, and the dependability of the data used to prepare it. Beside that, it also is contingent on business risk, sales and operating stability, production methods and length of the processing cycle. This is definite between long...
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