Question

Explain the main functions of budgeting with examples from your organization.

(500 WORDS)

Answer 1

Following are the main functions of the budgeting

1.Control : This is one of the most important functions of the budgeting to grow the organisation.It helps control the cost of the of the organisation,by estimation on continuous monitoring with the budgeted estimates.It also helps for coordination which means that different parts of the business work in congruence.It helps to expose the weakness so that plans can be made to cover for it.

2.Analysis or evaluation: Means to judge some thing with a standard.The budget represents that the target performance which will then be compared with actual performance.This will lead to corrective action to be taken.For this evaluation purpose various non financial factors that effects on investment appraisal need to be considered and also other business factors equally need to be considered.

3 Authorization : Through this we can fix the managers are accountable for their works.Helps to minimize the misappropriation and embezzlement. It would help to prevent fraud. for example if managers authorizes to spend $1000 but if he or she spends more than that he or she will be in trouble.

4.Planning : It depends on forecasts that has been made in the past to take decision about the future.some agencies use forecasts form estimated population to plan the number of hospitals to be put in the that specified area and medical equipment to be put.The estimated data can be generated to use to make plans. Business organisations also use forecast to make plans on raw materials and make plans to ensure that they are provided as and when they are due.

5. Estimating or forecasting :It is complex exercise that requires to consider many variables because of action of competitors ,government actions,relationship between price and demands. This means an attemt to understand the what future holds. It may not be perfect but it is better to have forecast .There are many statistical tools developed to help accountants and financial managers make better forecast.