Importance of Budgeting in Organizations

BUDGETING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
REPORT..........................................................................................................................................1
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Budgets refers to the plan where company makes estimates for all the costs and
expenditures. Budgets are prepared by the organisations based on the estimates of each and every
activity carried out by the organisation. They makes the budgets so that all the activities are
carried out within the given budgets. This prevents the company to make over spendings and
having a control over its expenditures (Rubin, 2019). Present report will provide about the
budget, its importance, steps involved in budgeting process and limits of budgeting.
REPORT
Budget
Budgeting means the process where the management bf company creates a plan for
spending the funds. Spendings plans are known as budget by company. It helps the company to
determine whether the company will be available with adequate cash for carrying out its
operations and defined activities. Budgeting in simple terms refers to balancing the expenses
with the revenues.
Importance of budgeting
Budgeting is associated with having planning the activities and operation of business.
Budgeting helps company to decide in advance the direction in which company will be heading.
Company will be knowing whether it is having adequate resources or not for the activities.
Budget helps the company to have control over its cost and expenditures (Wildavsky, 2017).
Therefore a budget is important for every organisation carrying on business.
Sequence of Budgetary process
Budgeting can be performed in many ways and companies are more at advantage when
they adopt more than one budgeting process. Mainly two approaches are followed in the
budgeting process that are top -down budget and bottom up budget.
Top- Down Budget
In this budgetary process, primary inputs to be added in the budgets are decided by top
level management and executives of business. Companies provides guidelines for the preparation
of budgets. These executives provides the financial goals which are required to be maintained by
the budget. Guidelines are given by top management for budgets related to sales, compensation
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