The Purposes of Budgeting Essay example
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Finance & Accounting
Pages 6 (1506 words)
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Budgeting helps in several ways:it helps control expenses and works as a tool to monitor planning processes;it also helps forecast future revenues for businesses;it documents and serves the purpose of a guide giving future directions to the businesses…

Introduction

Resources are scarce and the budgeting is used as a tool to deploy available resources judiciously for improving the organisational performance. The Purposes of Budgeting Budgeting helps in several ways: it helps control expenses and works as a tool to monitor planning processes; it also helps forecast future revenues for businesses; it documents and serves the purpose of a guide giving future directions to the businesses. With the help of budget, the management conveys its aspirations across different divisions of the organisation and it also serves as a vehicle to resolve conflicts between the groups within the organization. Thus, budgeting is helpful to the organisation in myriads of ways. Conventional Budgeting Process in the Global Context Conventional budgeting process employs the incremental approach. The incremental approach, while preparing this year’s budget, essentially takes into account last year’s budgetary numbers and depending upon the aspirations of the management, all numbers on different heads such as revenue, labour charges, utility expenses, overheads are revised suitably. For example, twenty percent increase in revenue generation will provide corresponding rise in raw material consumption, utilities and other necessary charges. ...
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