Discuss The Advantages And Disadvantages Of Budgeting

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Budget: An estimate of costs, revenues and resources over a specified period, reflecting a reading of future financial conditions and goals. Master Budget: A master budget is a set of composite of sales, production costs, purchases, incomes, etc. It is playing a role in any organization and it also includes pro forma financial statements. A budget is a plan of future financial transactions. A master budget serves as planning and control tool to the management since they can plan the business activities during the period on the basis of master budget. At the end of each period, actual results can be compared with the master budget and necessary control actions can be taken. A master budget is an overall financial and operating plan for a forthcoming calendar or fiscal year. It is usually prepared annually or quarterly. The master budget is really a number of sub budgets tied together to summarize the planned activities of the business. The format of the master budget depends on the size and nature of the business. Advantages of Budgeting Types of Budgets: Operational Budgets:…show more content…
This “budget cycle” can be broken down into four major events or stages: • Formulation: When the executive branch puts together the budget plan • Approval: When the legislature debates, alters (if it has the power to do so), and approves the budget plan • Execution (implementation, monitoring, and control): When the government implements the policies in the budget • Oversight (auditing and legislative assessment): When the national audit institution and the legislature account for and assess the expenditures made under the

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