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Budget- Meaning and Concepts
Budget
is a quantitative tool of presentation of business plans and policies to be
pursued in the future period of time. Budgeting is a part of management process
which includes preparation of budget, buget control all those activities that
are related with budget.
According to
Harry L. Wylie:
“Budgets are formal programmes of future operations and expected results.
Budgets result from forward thinking and planning”.
According
to I.C.M.A.London: “A Budget is a financial statement prepared prior to a
predetermined period of time of the policy to be persued during that period for
the purpose of attaining a given objective”
Preparation of a
Budget
1. Formation of a policy: First, an
organization formats a policy to make a budget.
2. Preparation of Forcast: It is a
quantitative term. Company forcast the future demand, trends and fashion.
3. Evaluate the different
alternatives: Company evaluates all the alternative. After that select the best
alternative
4. Prepare a budget: After following
all the steps, company finally prepare budget.
Essentials of an
effective Budgeting
1. Sound forcasting
2. A proper plan
3. Efficient organization with
definite plan of responsibility
4. Formation of budget committee
5. Clearly define business policies
6. Availability of statistical policies
7. Support of top management
8. Good reporting system
9. Motivational approach
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