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Budgeting

A budget is a monetary plan for an upcoming period prepared by a business organization. Budgeting allows management to set objectives, coordinate activities between departments, allocate resources, control spending, and motivate staff through goals and incentives.

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17 views

Budgeting

A budget is a monetary plan for an upcoming period prepared by a business organization. Budgeting allows management to set objectives, coordinate activities between departments, allocate resources, control spending, and motivate staff through goals and incentives.

Uploaded by

theskepticalone
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Budgeting

 Definition of a budget: a plan, expressed in monetary terms, prepared for a business


organisation for an upcoming future period.
 Purpose of budgeting:
o To help management set objectives for the business in the upcoming period as well
as identify the necessary activities to accomplish those objectives
o To allow management and staff to communicate ideas with each other such as the
feasibility of business objectives
o To help coordinate activities between the different functions of the business in order
to achieve the objectives
o To allocate the necessary and sufficient resources to the different functions of the
business in order to achieve the business objectives
o To control business resources by comparing actual consumption and performance of
the different departments to their budgeted consumption or expected performance
o To help motivate staff to work harder by giving them realistic goals and rewards as
incentives.
 Steps in the budgetary process
o Identify the company’s objectives
o Determine factors that may impact the company’s ability to achieve those objectives
o Prepare the following budgets in this order:
 Revenue/Sales Budget
 Production Budget
 Purchases Budget
 Inventory Budget
 Trade Receivables Budget
 Trade Payables Budget
 Capital Budget
 Cash Budget

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