Importance of Budgeting in Accounting and Management

This assignment discusses the significance of budgeting in accounting and management. It covers the importance of clear objectives, short-term budgets, communication, and realistic assumptions in achieving organizational goals.

ACCT11059 Accounting, Learning, and Online Communication ASS#2
ACCT11059 Accounting, Learning, and
Online Communication
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ACCT11059 Accounting, Learning, and Online Communication ASS#2
It is said about budget that “Budgeting has one rule : Do not go over budget”
Budget is an estimation being done for the expenses and income. The income and expenses
are being calculated so that and evaluate can be done for the saving. Each penny is being
calculated to bring to an outcome of expenditure and incomes. Budget is being prepared by
any person of the family, organization, small sellers, shopkeepers, country etc. To make the
estimation of the budget, various tools are being used so that the calculation becomes easy
and each activity can be counted.
According to the Peter Drucker, The management of objectives is only being obtained when
the objective of the organization are made perfectly. The objectives are made first which are
clear and understandable. Clear goals help in reaching to the objective timely with desired
results. He further says that there are 90% of the chances the objectives are not clear hence,
many issues are being faced in making the budget. It is the responsibility of the manages to
make plans and set objectives so that the organization can grow and profit can be earned. To
bring the plans into practical world, actions are being taken according to the pre-planned way.
The vision and mission of the organization must be clear and specified so that budget can be
estimated properly. Proper communication is important for the manager to make an
estimation of the budget from each of the department in the organization. To make the budget
correct the manager needs to make the communication better with each employee and each
department. To meet out the goals and objectives, the manager has to take all the members of
the organization and to communicate the plans and objectives with everyone.
In the words of Agha Hasan Abedi, the management is being is defined as work is being
completed with the help of people. But the reality, the management indicated to develop
people with the help of people. Short term targets are made for the short period of time. Short
term budgets are made for particular time period. Short term budgets are made for three, six
or maximum one year. Planning is made so that the short-term budget is being prepared. The
cash flow is being calculated so that estimation is being done of income and expenditure.
Cash flow provides the detailed information of the activities. Short term budgets are made so
that resources can use in proper manner and desired result can be obtained. The short term
budgets also help in analysing and evaluating the current situation of market and to make
plans accordingly.
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ACCT11059 Accounting, Learning, and Online Communication ASS#2
For example: Short term budgets leads to make long term budgets such as launching of the
new product or services in the market by the organization. The organization for this make
short term budgets so that the activities can be bifurcated and forecasting can be done. The
short term budgets are made to go on the right track and in the right direction. The
Organization has to work according to the short term budgets.
I thought that the short term budgets are made so that the mistakes can be corrected and the
long term objective can be obtained within time limit. The mistakes and the errors which are
being done in the short term budgets are being corrected so that timely work can be done and
resources can be allocated to the activities. Moreover, short term budget are made to fund the
activities and projects and to complete the targets. Each of the organization prepares short
term budgets according to their planning and product and services to be offered to the market.
George W. Bush says that the budget is the statically data to be presented in numbers.
Short term budgets are the budget prepared so that the future issue can be solved. Many a
times the issues arise in the future are being eliminated and long term planning can be made
successful. Moreover, this type of planning is being done so that the cash shortage can be
covered and opportunities can be grasped. Budgets are made so that the employees are
fulfilled with all the facilities and services can be offered to the customers. Communication is
also made strong with the help of short term budgets and planning. Sheets are prepared so
that the resources can be utilized and work can be done in proper sequence. The managers are
to manage each of the tasks so that decisions can be taken correct. The scope of the objectives
and goals are more and are to be obtained along with the guidelines and instruction. So
managers are to fulfil these boundaries and decisions are made to get the planned output.
Short term budgets also helps in motivating employees and taking out the outcome according
to the planned way. This also helps in co-ordinate, communicate and motivate employees.
Motivated employees results in increasing the production and increasing productivity of the
work. On completion of the targets, the marketing ranks are being displayed according to the
short-term budgets. With the short term budgets, along with the work, responsibilities are also
being allocated so that accountability can be allocated.
According to the Scott Adams, the budget is does not being prepared on the basis of
assumptions. This leads to decrease in the funding. The budgets are being prepared on the
basis of realistic assumptions and results are being obtained on that basis.
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ACCT11059 Accounting, Learning, and Online Communication ASS#2
For Example: In the case of sales, the production is being done on the basis of demand and
supply. The sales budget is prepared on the basis of forecast of sale of each product. The
short term budgets are being made in order to make the sale of the product and to increase
sales. The demand of the customers depends upon the supply and manufacturing of the
product and services. This also helps in the long run so that sale can be increased and budget
can be properly managed. With the help of master budget, sales budget and cash budget,
budgets are made and outcome is being allocated and being fulfilled.
I have made discussion over budgets and also share the views of famous personalities
regarding budget. After reading the chapter on Budget I thought that budgets must be an
important part for an organisation, size of the organisation doesn’t matter but budget is
helpful in handling uncertainties available in future. I enjoyed the reading of the chapter
because it not only summarise budget and their importance but it also introduced some
accounting terms. After reading the chapter I can say that a manager cannot be perfect in
management of things in the absence of budgets. Short term budgets improves the confidence
of management for strategic planning also.
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