Budgeting

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“Budgeting related Frequently Asked Questions by expert members with experience in Budgeting. These questions and answers will help you strengthen your technical skills, prepare for the new job test and quickly revise the concepts”



25 Budgeting Questions And Answers

21⟩ Described Budgeting?

Budgeting is a methodical control technique whereby budgets are prepared relating the responsibilities of budget holders. It is a continuous comparison of actual results with budgeted results, to ensure that the objectives of the company's policy are achieved; or to provide a basis for the change of those objectives. In simple terms, it is the analysis of the plans which the organisation has made; what was the result when those plans were implemented practically. After practical implementation of the budget if any variation is seen in the actual result to the budget result then the reasons for the variations are fount out and corrective actions are taken to correct variations.

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22⟩ What are the Budgetary Control characteristics?

Following are the characteristics of Budgetary control:

★ It deals with the establishment of the budgets.

★ A control technique where actual results are extracted from the organisation's operations and compared with the budget prepared.

★ Any differences or variations are computed and made the responsibility of key individual who can either take actions for maintain the favourable variations or revise the budgets.

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23⟩ What is Budget?

A budget is a financial document or an action plan which is prepared and used to project future income and expenses. It outlines an organisation's financial and operational goals. It can also include non- monetary information with the monetary information. They need to be made and approved in advance of the year in which they are to be used or implemented.

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24⟩ What are the advantages of Budgetary Control?

Advantages of Budgetary Control:

★ It is a powerful tool for the purpose of cost control and profit maximization.

★ It enables the management to maximize the use of available resources in a most profitable manner.

★ As a budgetary control is based on a budget which sets the plan of action in respect of various functional areas of operations. Thus, it acts as a means of declaration of the policies of the management.

★ It acts as means of communication.

★ It acts as a means of improving co-ordination by developing team spirit in the organisation.

★ It enables the management to take proper actions in regard to the adverse variations in the actual and budgeted results.

★ It enables the delegation of authority.

★ It is a powerful tool with the management for performance appraisal.

★ It also provides a basis for the establishment of the incentive systems

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25⟩ Define Finance Cash budget?

Finance Cash budget is the budget which is prepared under this functional area. It is an estimation of the expected cash receipts and cash payments during the budget period.

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