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    Budgeting Notes

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    Vivek Kavta
    Budgeting involves creating financial plans that forecast expected income, expenses, and cash flows over a period of time. Budgets are used to set targets, communicate plans to employees, motivate staff to achieve goals, and monitor performance. While budgets help allocate resources, coordinate departments, and promote planning, they also require significant time and may involve conflict over limited funds. Organizations use different types of budgets, such as zero-based budgets which are created from scratch each period, and incremental budgets which make changes to the previous year's plan.

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    Budgeting Notes

    Uploaded by

    Vivek Kavta
    212 views3 pages
    Budgeting involves creating financial plans that forecast expected income, expenses, and cash flows over a period of time. Budgets are used to set targets, communicate plans to employees, motivate staff to achieve goals, and monitor performance. While budgets help allocate resources, coordinate departments, and promote planning, they also require significant time and may involve conflict over limited funds. Organizations use different types of budgets, such as zero-based budgets which are created from scratch each period, and incremental budgets which make changes to the previous year's plan.

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    This is all about budgeting and its basic concepts.

    Original Title

    BUDGETING NOTES

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    Budgeting involves creating financial plans that forecast expected income, expenses, and cash flows over a period of time. Budgets are used to set targets, communicate plans to employees, motivate staff to achieve goals, and monitor performance. While budgets help allocate resources, coordinate departments, and promote planning, they also require significant time and may involve conflict over limited funds. Organizations use different types of budgets, such as zero-based budgets which are created from scratch each period, and incremental budgets which make changes to the previous year's plan.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    212 views3 pages

    Budgeting Notes

    Uploaded by

    Vivek Kavta
    Budgeting involves creating financial plans that forecast expected income, expenses, and cash flows over a period of time. Budgets are used to set targets, communicate plans to employees, motivate staff to achieve goals, and monitor performance. While budgets help allocate resources, coordinate departments, and promote planning, they also require significant time and may involve conflict over limited funds. Organizations use different types of budgets, such as zero-based budgets which are created from scratch each period, and incremental budgets which make changes to the previous year's plan.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    BUDGETING

     Budgets are forward financial plans. They show financial targets over a given period of
    time for income, expenditure and cash flows within a business.
     The budgeting process is a cycle of ongoing review and monitoring.  
     A budget is a financial plan that sets out, using figures, an organization’s expected future
    results.
     A company's objectives budget is the overall financial plan showing expenditure of the
    available funds. It is driven by the aims and objectives of the organization as well as
    what the organization can actually accomplish.

    IMPORTANCE OF BUDGET
    By creating budgets, managers can:
     Set out a clear plan, involving target figures for defined periods of time
     Communicate their targets clearly
     Motivate employees to achieve these targets
     Control performance by monitoring actual outcomes against planned targets
     Meet the organization’s objectives.

    THE BENEFITS AND DRAWBACKS OF BUDGETING


     BENEFITS

     Provide a method of allocating and using resources within the organization


     Help to monitor and control operations
     Promote forward thinking
     Show employees an overall picture of the direction of the organization which can
    motivate staff
     Help to co-ordinate different departments and align them towards shared objectives
     Provide a framework for delegation.

     DRAWBACKS

     Staff time devoted to budgets carries a real opportunity cost. At Davis, 750 people
    are involved with budgeting.
     Errors and inaccuracies will always remain since it is impossible to predict the future. 
     Budgets involve and affect people, they may cause conflict. There may be difficult
    choices over where limited funds are spent. Some departments with tight budgets
    could feel constrained. This carries the risk of frustrating initiative and enterprise.
    PURPOSE (REASON) OF BUDGETING
     Cost Control
     Variance Analysis
     Proper allocation of:
    o Time
    o Resources
    o Energy

    POSITION
     INTERNAL FACTOR
     EXTERNAL FACTOR

    TYPES OF BUDGETING
     ZERO BASED BUDGETING
     Zero-based budgeting is done considering the base as zero i.e. it is done without
    considering the budget of the previous year.
     For every financial period, a fresh budget is prepared from the scratch.

     INCREMENTAL BUDGETING
     In case of incremental budgeting, current year’s budget is prepared by making
    changes in the budget of the previous year.
     In Incremental budgeting, the starting point for preparing budget is prior
    period’s budget. Taking this as base, current period’s budget is prepared.

    ADVANTAGES AND DISADVANTAGES OF ZERO BASED BUDGETING


    ADVANTAGES AND DISADVANTAGES OF INCREMENTAL BUDGETING

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