ECONOMICS
BUDGETING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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They provide management with information about the company’s past performance.
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They help communicate goals and provide a basis for evaluation.
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They guarantee the company will be profitable if it meets its objectives.
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They enable the budget committee to earn their paycheck.
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Detailed explanation-1: -1. Option (a) is correct. Budgets are useful in the planning process because they help communicate goals and provide a basis for evaluation. Budgets are the plans of actions / activities to be done in future.…
Detailed explanation-2: -In most cases, it can be the single most important factor in determining how effective the company is at meeting its goals. For one thing, budgeting helps formulate the company’s activities, allowing it to better understand priorities, figure out how resources can be allocated, and which areas need to be reevaluated.
Detailed explanation-3: -Budgets can be used to evaluate the number of units produced or services rendered and the labor hours and materials it took for each task. The process involves allocating resources to various compartments within the budget, then going back after the work is complete and comparing budgeted resources with actual usage.
Detailed explanation-4: -Monitoring the budget is important to ensure that the financial, operational and capital plans that were developed and approved for implementation as part of the budget processes are being implemented. Budget monitoring is crucial for an organization to be able to enforce accountability related to spending.
Detailed explanation-5: -A business budget is a spending plan for your business based on your income and expenses. It identifies your available capital, estimates your spending, and helps you predict revenue. A budget can help you plan your business activities and can act as a yardstick for setting up financial goals.