Question

In: Accounting

PLEASE PROVIDE A DETAILED RESPONSE. Discuss what motivates a small business to adopt a budgeting system....

PLEASE PROVIDE A DETAILED RESPONSE.

Discuss what motivates a small business to adopt a budgeting system. In doing so, consider the attributes of traditional and flexible budgeting. Is flexibility more or less important to small business budgeting system? What are some of the informational systems and organizational challenges in initiating and implementing a budget?

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Expert Solution

A :- discuss what motivates a small business to adopt a budgeting system .

Answer :- budgeting system is the most powerful financial tools available to any small business owner.small business adopt budgeting system because budget is a plan that helps you prioritize your spending.with a budget ,you can move focus your money on the things that are most important to you. budgeting system is a forecast of income and expenditure. A tool for decision making. A means to business monitor performance. Budget contains economic goals, boundaries and limits or expenditure of the organizations.by creating a budget you will be able to hold the company accountable for its expenditures, reduce costs,and prepare for a worst case scenario.

B :-Attributed of traditional and flexible budgeting .

Answer :- TRADITIONAL BUDGET :- a traditional budget indicates the amount of money you allot during a set time period for specific financial obligations such as rent , entertainment,or insurance.the budget is design to help you spend your income according to your plan. Traditional budgeting is a method of preparation of the budget in which last year's budget is taken as the base.traditional budgeting is the process of projecting your business's revenue and expenses for the upcoming year based on your previous budget.

FLEXIBLE BUDGETING :- a flexible budget also called a variable budget,is financial plan of estimated and expenses based on the current actual amount of output. A flexible budget gives different budgeted costs for different levels of activity..the flexible budget is more sophisticated and useful than a static budget, which remains at one amount regardless of the volume of the activity.

C :- Is flexibility More or less important to small business budgeting system

Answer :- Flexible budget is more important to small business budgeting system . This can be document that set strict spending limits for your small business or a template that changes or grows with your company as you get a better handle on your income and expenses .a flexible budget allows you to cut or increase spending ,depending marketplace and business conditions.


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