Importance of Budgets Essay

2541 Words Aug 12th, 2011 11 Pages
1 INTRODUCTION A budget is a plan. Budgeting is generally formalized written documents. Budgeting is the process of developing a plan, implementing it and attempting to control outcomes so that they confirm to or exceed the result called for by the plan. Budgeting is an element of cost accounting, because mush of planning related to cost the organization expects to incur.
1.1 IMPORTANCE OF BUDGETS Budgeting is important process in organization. A budget process that works well could produce benefits as follow. * To pre-determine the capital expenditure of business. * To plan and control the income expenditure of organization. * To operate various divisions, units, department
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2.1.2.2 Goal determination stage. The second stage is specifying the goals.
The term goal represents targets, specific in quantitative term to be achieved in a specific period of time. The timing of introducing new products, purchase of new plant and machiner and expected rate of return are example of time and qualitative goals.
2.1.2.3 Strategy formulation stage. The next step involves laying down the strategies.
Strategies denote specific method or courses of action to achieve the goal, for instance, promotion of sales through price reduction or aggressive advertisement and so on.

2.1.2.4 Budget Responsibilities.

(http://www.bplan.com)
Type of Budgeting Methods There are two establish method for budgeting: top-down and bottom-up which is best for your project depends on your organization’s standard approach to decision making. Does management dictate most mandates? Or is the staff expected to produce ideas and decision that percolate up to management for final analysis? Your answer to this question will determine the most likely budgeting approach for the project.(G. Michael, 2007). Bottom-up Budgeting In bottom-up budgeting, staff members get together and attempt to hammer out a budget from the task-level detail. As a group, they can speak frankly one member might have a solution that’s superior to other. It’s also a good way to avoid missing a subtask. If any group member forgets

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