Advantages and Disadvantages of Traditional Budgeting

   

Added on  2020-12-10

11 Pages3135 Words489 Views
Business
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Table of ContentsINTRODUCTION...........................................................................................................................1PART 1 ...........................................................................................................................................1(I) Purposes of preparing a budget ..............................................................................................1(ii) Application of traditional budget approach for future cost management..............................3(iii) Traditional budget is appropriate to all.................................................................................3PART 2............................................................................................................................................4(iv) Explanation of rolling, zero based and activity based budget ..............................................4(v) The potential application of above mentioned budgets .........................................................5(c) Analysis budgeting methods ..................................................................................................6CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................8
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INTRODUCTIONThis report summarise about business finance denotes the funds & credit employed in thebusiness. As finance is the backbone of the business and without it operations can not be start.Funds are required to buy the raw material, assets, goods, to make payment to labour, employees,etc. In the financial activity budgets play a vital role and provide help to make estimation ofincome & expenses. Apart from this, report discuss about traditional budgets that is used by theorganisation Snappy Drinks. There are various budgets are also being discusses such as: rollingbudget and zero based budget. PART 1 (I) Purposes of preparing a budget Budget is an anticipation of expenditure & income and it prepare for the future purpose.All business organisations are required to made it so that business activities can be performed ineffective manner. As the management of Snappy Drinks is responsible to make appropriatebudget which fulfil the requirement of company. It prepare budget for the purpose of launchingnew drink product & to establish a new manufacturing plant. There are various purposes ofmaking a budget and these are as describe below: Decision making tool: As the budget provide help the company to make better decisionsso that business can grow and get success. The management of Snappy Drinks can get detailedinformation about each division so that higher authority will know the shortcomings and takeeffective steps for the improvement so that business of organisation will achieve its goals(Laitinen, 2013).Prepare action plan: Budget provide help the organisation to make action plan for thefuture. As management of Snappy Drinks can make future action plan that how much incomethey will generate from the selling of its products and how much expenses will occur and tominimise the expenses company can make proper action plan (Weetman, 2010).Provide help to monitor business performance: As budget provide help to monitor thebusiness performance and it is important to know it so that effective decisions can be taken forthe future improvement. With the help of budget Snappy Drinks can evaluate the performance ofits business which is related to the income & expenses during a specific financial year. If netrevenue is higher than budgeted than it shows the good performance and if it is below than the1
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