Saturday, July 3, 2010

What is Accounting Forecasting?

Forecasting is the accounting prediction of a value of a variable at some specified time in the future. Tt can be based on past values or expert judgment. Forecasting is essential is creating budgets that are reasonable and likely to be met or exceeded.

There are several types of Forecasts can include long, medium, or short-term forecasts. Specifically, they include:

  • Sales forecasts are necessary to prepare a sales budget
  • Capital expenditures forecasts are required to plan for funding for future years. 
  • Forecasts are developed to aid management in meeting goals and objectives.  
  • Product demand forecasts are used to prepare sales forecasts and detrmine the introduction of new products. These forecasts can also be used to determine if an old project should be dropped because its sales are lacking seriously. 

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