Question

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Explain Budgetary Planning

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Answer 1

Imagine you are planning a trip with your friends. Practical real life kind not the superficial movie kind. Let us consider 2 alternate situations. 1. You and your friends go without a plan 2. You and your friends go with a PROPER plan In the first scenario, surviving would be very difficult. You would be worried since things may be out of your hands. You may not even find a proper place to stay without any advance planning. In the second scenario, you'd actually enjoy the trip and make some great memories along with gaining rich experience. Apply this scenario on a company now. A company is in trading of healthcare equipments. It has just started its business in a new country. In order to do this, in order to have a long term survival A REALISTIC PLAN is necessary. This plan is known as BUDGETARY PLANNING. It is the process of CONSTRUCTING a budget and then using the same in order to achieve the desired results. If we set some targets before hand, we can prevent failing. Falling short of targets can be avoided if budgetary planning is appropriate. Not just this, after execution, proper comparisons are also made. Comparisons in the form of budgets vs actuals is made. Reasons are found out for major variances. Investigations are made for largest negative variances.