An estimation of the revenue and expenses over a specified future period
of time. A budget can be made for a person, family, group of people,
business, government, country, multinational organization or just about
anything else that makes and spends money. A budget is a microeconomic
concept that shows the tradeoff made when one good is exchanged for
another.
PURPOSES OF BUDGETING
"EMC3 PAD"
Evaluation
Responsibility accounting divides
the organisation into budget
centers which keeps each manager
responsible for the cost and
revenues of the particular budget
center .Thus through budgeting
there is a scope for evaluation
Motivation
The budgets act as a yardsticks for the
performance of the managers .They will be
motivated since they know what they have to
achieve to meet the overall org objectives
.The managers can be entitiled to
commissions and incentive if the budget
centers performance rise above the budget
Control
Actual results can be compared
with the budgeted figures and
corrective action can be taken
Communication
A budget is a communication channel
through which the senior level executives
interact with the junior staff for conveying
the org objectives to be achieved
Planning
Budgeting looks ahead
into the future and it drives
to planning
Authorization
the budget acts as a
formal method of
authorisation to manager
for ,hiring staff and pursuit
of plans contained within
the budget .
Delegation
junior staff can be called for
putting thier contributions to the
budget ,this enables the
management to make more
realistic budgets
Coordination
The budges coordinates the efforts
of all departments inside an org
to achieve common goals