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In: Accounting

Compare forecasting to budgeting?

Compare forecasting to budgeting?

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Expert Solution

Comparison between Budgeting and Forecasting
Budgeting Forecasting
Budget can be defined as a financial or business plan that is prepared for the forthcoming period. Forecast can be defined as the estimation of the future trends or outcomes based on historical data
It explains the set targets of the business that management wishes to achieve during a particular period It is the prediction of what the company may achieve during a particular period on the basics of present and past business conditions.
This is a static statement i.e. it remains the same for a particular period. This is more flexible and changes according to the changes in the business environment.
It acts as a guidance for the company regarding the direction it should go in order to achieve its objective and to achieve operational efficiency. It acts as a tool that helps the management to be proactive rather than reactive, and acts as inputs for preparing future budgets. Forecasting also help the origination to set its long term plans.

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