Use of Financial Accounting in Organisations

Use of Financial Accounting in Organisations

         Use and Importance of Budgeting in Business

Budgeting is the process of quantifying the plans of an entity in order to achieve its objectives within a certain specified period.  Budget is normally used for performance evaluation, cost control and future decision making. (Shields & Young, 1993).  A business uses such a budget to evaluate the amount of money that is flowing into the business in a given period, and consider the best way to spend it among different categories of commitments. Incidentally, an entity normally designates a suitable amount of funds to capital expenditure, recurrent expenditure and other categories. By keeping track of where and how money is spent, a business is less likely to overspend; and hence meeting the intended financial objectives. (Hopwood,  2008).

Budgetary Planning and Control may is a short short-term monitoring and quantification of long-term strategic plans of the business.  Strategic planning is the process of preparing strategic plans which identifies the objectives of the organisations. Long-term corporate plan is implemented by help of budgeting. Budgets may be prepared for functions, financial departments or resource items. Incidentally, some organisations refer to budgeting as a means of harmonizing the combined intelligence of the entire business into a plan of action.

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