Sunday, February 3, 2008

Purpose of Budgets

Why is it essential that managers design budgets?


1. Budgets provide a method of communicating management’s plans throughout the organization to others.

2. Budgets force managers to plan for the future.

3. The budgeting process allocates resources to parts of the organization where they can be used most effectively.

4. The budgeting process can uncover potential problems before they occur.

5. Budgeting ensures that everyone in the organization is working in the same direction towards the same goals.

6. Budgets define goals and objectives that can serve as benchmarks for evaluating performance in future periods.


Additional Accounting Examples and Links:

Level of Sales Budgets

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