Question

7. Describe the benefits of budgeting.

8. What is a continuous budget? A rolling budget? When are budgets normally prepared and over what time period?

9. Is a top-down or bottom up budgeting process recommended?

Answer 1

7 . benefits of budgeting - :

1. enables mgmt to conduct operations in a efficient manner.

2. cost control instrument

3. yardstick for performance evaluation

4. helps in variance analysis by provideing budgeted data

5. finally it helps in policy formulation.

8. Continuous budget - process of preparing budgets for future periods, revising them during current periods, and adjusting them at the end of the period.

Rolling budget - it is a continuous budget that is updated at regular intervals when the old budget period expires therefore it is an extension of existing period budget.

The most common budget periods are annual and monthly.normally the company prepares the budget for the year befor the start of financial year.

9. top down budgeting process - in this process budget is prepared by top level management and according to this budget is allocated to different departments . it is prepared without consulting manger of differnet departments

bottum up approach - in this approach various depatment manager give their budgetary requirements to top level managemnt and according to which top level managemnet formulates a rationale budget for the whole organisation

with the help of botttom up  approach are ownership of the budget increases, more information since employees familiar with each department are creating the budget, and increased understanding, communication and commitment on behalf of managers because they are directly involved in the process.