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Cost Accounting
Define the term ''budget'
Budget refers to the financial projections of a business that indicates its current position
and bringing to light the future anticipated financial position. The budget is set to determine
the cost of developing, marketing a new product (Andersson et al., 760). It is usually
pronounced for a set period of time and must indicate the expected expenditures, the funds
available for the projects such as business expansion and the projected source of capital.
How are Budgets used in Planning and to Control?
Budget control entails the comparison between budget and actual performance. The
discrepancies identified are assigned expertise to apply control, measures or revise the initial
budget. The budgetary control aids in the planning process of the business activities, decision
making, monitoring results, and motivating the human resource to maintain their focus in
achieving the company’s goals and objectives. A well-structured budget shifts the focus of
the management from the current state of the business to its future state thus intensifying the
need for proper planning of the course of actions. Budgeting ensures that proper planning and
effective allocation of the scarce resources is met thus giving all the departments a
freewheeling power in their activities. Under planning issues, budget acts as the glue that fits
together the different departments of a company or business.
What are the Differences between a Master Budget, a Financial Budget and an
Operating Budget?
