Question

Explain the phases of budget cycle?

Answer 1

Four phases of budget are preparation,approval, execution, and evaluation.

Preparation- First phase of budget is to create it. A budget must include anticipated revenue and estimate of expenses that a business need to incur to meet the revenue targets.Once the budget is ready it needs to approved by the department head and top management.

Approval- Once the budget is ready it needs to be approved by the department head and top management.Before approval department heads have to review and it may move back for edit and corrections until all parties approve the document.

Execution- once you get approval for the budget,next step is to start executing it. Execution of budget is usually start with beginning of the accounting period and business operations are performed following this budget.

Evaluation-Budget should regularly evaluate and monitored by the company or individual. It helps in making timely change to the budget based on internal and external forces. These changes could be revising revenue targets, adjusting cost and expenses with newly available information.