Question

7) Duration of budget is called as [Provide detail explanation and type your answer and do not copy the answer from chegg study ]

Answer 1

In the general sense, the budget is described as a precise statement, representing a financial estimate of income and expenditure of the government for a certain period. In cost accounting, budget means a quantitative statement, prepared before a particular period to serve as an estimate of future receipts and disbursements.Long-term Budget: The budget designed by the management for a long-term, i.e. three to ten years is called as long-term budget. Short-term Budget: As the name suggests, the budget which is prepared for a period ranging from 1 to 2 years, is called short-term budget.Short-range budgets may cover periods of three, six or twelve months depending upon the nature of the business. Most manufacturing firms use one year as the planning period. Wholesale and retail firms usually employ a six-month budget which is related to their selling seasons.

A long-range budget or planning is defined as a systematic and formalised process for purpose­fully directing and controlling future operations toward a desired objective for periods extending beyond one year. Long-range budgets or plans are neither described in precise terms, nor are they expected to be completely coordinated future budgets. They cover specific areas, such as future sales, future production, long-term capital expenditures, extensive research and development programmes, financial requirements, profit forecast.They evaluate the future implications associated with present decisions and help management in making present decisions and select the most profitable alternative. Long-range budgeting does not eliminate risk altogether: it only reduces the risk to a level which does not hamper the production and achievement of company objectives.