What is a budget? Why should budgets be compared to actual performance? (100–150 words)

Expert Solution

Budget : Firstly Budget is an expectation of events going to be occurred in future. Mainly we use the word of budget in two points

1. Financial perspective

2. Operational Perspective

Financial Perspective : It is mainly concerned about the estimation Financial transactions going to be occurred in the future.. like Not only corporates prepare there budget even government will announces the budget …. this is used from lower level person to high level parties like government …. They considered the how much expenses will be incurred and whether the concerned revenue is enough or any finance to be taken ….etc

Operational budget mainly deals with how much production is targeted to achieve and how many raw materials will be required .. like wise....

They are compared to actuals later on ...

Because they will find the progress of their results i.e whether achieved the budget...

Due to budget they know there target and try's to not deviate from such … like wise financial...suppose in one month there is high expenses they later on implement the cost reduction strategy's to maintain budgeted expenses...

Workers effenciency / operational efficiency can be reviewed and can be improved..

jeff jeffy answered 2 weeks ago

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