Question

1. What is a budget, what is the goal of a budget, and what are the three functions of budgeting, including their chief criticisms?

2. What are the major challenges in preparing a budget for a large organization? Please offer an example from research or from your place of work.

3. Describe the major steps required to create a budget, who is responsible, and when they should be completed? Also, discuss the three rules for winning the budget game.

Answer 1

1. Budget is an estimation of revenue and expenses over a specified future period of time. Goal of the Budget is try to achieve the specified target in the allocated resources. Functions of the Budget are :

a). Improve Planning,

b). Improve co-ordination,

c). Provide a Basis of Control and Performance Evaluation.

Budget criticisms is Budgets are primarily concerned with the allocation of cash to specific activities. and the expected outcome of business transactions - they do not deal with more subjective issues, such as the quality of products or services provided to customers.

2. Major Challenges are :

a). There will be Inadequate Information due different spending ways of various departments in the organization.

b). Budget preparation will take so much time.

c). Prepare a Budget annually. It will not helpful for future periods unless pay close attention to how accurate your forecasting are. Otherwise, simply wasting valuable time.

In the Manufacturing industry, many departments involves like, Stores, Admin, Production, Selling &Distribution, Research & Development Etc. while preparing a Budget need to consider Different departments way of operations and allocate the budget in such way. It's not an easy task.

3. While preparing the Budget, need to the below steps:

a. Calculate the all the Expenses incur in the month.

b. Determine the all monthly Revenue/Incomes.

c. Budget should be realistic.

Finance Manager is responsible for prepare the Budget and budget preparation should be complete before start of next financial year and approved by all other head of the departments.

Three rules of budget game are 1. Should consider company and department goals. 2.Keep it simple 3. Stick to the Budget.