The following are some of the most significant advantages of budgeting. Budgeting compels management to plan for the future, the budgeting forces management to look ahead and become more-effective and efficient in administering business operations. It instills into managers the habit of evaluating carefully their problems and related variables before making any decisions. Budgeting helps to coordinate, integrate, and balance the efforts of various departments in the light of the overall objectives of the enterprise. This results in goal congruency and harmony among the ...

Like other control methods, budgets have the potential to help management reach their goal. How useful budgets are, in practice depends on how they are conceived and implemented. It is also important that the, process is clear and acceptable to the people whose activities it controls. Potentially Functional Aspects of Budgets, Some of the potentially functional  aspects of budgets as follows : Motivation. Budgets can have a positive impact on motivation and morale. Most individuals in an organization desire to achieve things and recognition by groups to which they belong. Budgets can ...

According to this basis of classification, budgets correspond and are co-terminus, with a particular function and are integrated with the master budget of the business. These are called functional budgets whose number depends, on the size and nature of the business. The usual functional budgets of a business are : Sales Budget. This is a forecast of total sales, classified according to groups of products, salesmen and geographical locations. Selling and Distribution Cost Budget. This is a forecast based on sales, productive capacity and requirements of inventories, etc. Introduction ...

According to the flexibility factor, budgets are classified into: Fixed Budget This is budget in which targets are rigidly fixed. Such budgets are usually prepared from one to three months in advance of the fiscal year to which they are applicable. Thus, twelve months or more may elapse before figures forecast for the budget are used to measure actual performance. Many things may happen during this intervening period and they may make the figures go widely out of line with the actual figures. Though it is true that a fixed, or static budget as it is sometimes called, can be revised whenever ...

Sales Budget is a forecast of total sales expressed and incorporated in quantities and/or money. A sales budget may be prepared by expressing turnover under any one or combination of the following: Product or product group; Territories, areas and countries; Types of customers, e.g., National, Government, export, home, wholesale or retail; Salesmen, agents or representatives, and Period, such as quarter's months, weeks, etc. A sales budget may be prepared with the help of any one or more of the following method: Analysis of past sales with-adjustment for current ...

In those industries where the pattern of demand is stable, a fixed budget may be adequate, especially where the budget period is comparatively short. In such it is possible to forecast sales with a considerable degree of accurate are many undertakings where stable conditions are absent. In such fluctuations in output might lead to violent deviations from the budget. In such concerns it is usual to adopt the flexible budgetary technique. A flexible budget is a budget, which is designed to change in accordance with the levels of activity actually attained. If flexible budgeting is adopted, a ...