Question

How the budgeting process works, and its relationship to the financial statements, and working capital.

Answer 1

The process of budgeting is a determination of expenditure and revenues of a company in advance and it will be trying to plan them accordingly so that company will be able to have a higher profits in its hands and it will be able to perform according to the industry standards.

Budgeing is a forward looking approach in which the company will be continuously designing the overall expenditure and income by estimating it to a large extent and budgeting will be helping the company in order to to prepare its financial statement in an optimum manner because when there will be a better forecasting of its expenditure and income then it will help the company in order to maintain a uniformity as the company will be able to grow by the desired rate and it will help the company in order to maintain the level of profitability because there will be low level of variation from actual estimation to the standard figures are very important for the company for growth and expansion and it will be reflected in the balance sheet as the budgeting will help the company to improve the balance sheet and it will also help the company in order to match with the balance sheet figures

Working capital will be reflecting the short-term needs of the company and budgeting will be proactively determining the liquidity in the hands of the company so it will always trying to determine the working capital of the company in advance and it will try to maintain an optimum level of Liquidity.