Notesale: Turn your study into money

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BUDGETING, ADVANTAGES AND LIMITATIONS
A budget is an instrument of management used as an aid in planning, programming, and
control of business activity
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The budget represents the financial
requirement of different sections of a business during a period, to achieve an estimated profit
based upon a given volume of sales
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Budgeting is the art of budget making
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Good
budgeting shows the manager what he may expect in sales over the next few months
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Requirements for an Effective Budgeting
❖ There should be a recognized organization for budgeting, with all lines of authority
and responsibility definitely allocated and defined
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What is Budgetary Control
Budgetary control makes use of budget for planning and controlling all aspects of producing
and selling products or services
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When the

budgetary control is applied to a business as a whole or different section within the business,
it compares actual performance and the predicted performance and thus enables all levels of
management and supervision to know how their sections are moving towards the
achievements of budgeted targets
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Advantages of Budgeting
1
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There is a
formal recognition of the targets which the business hope to achieve
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Budgeting makes for better understanding, coordination, and harmony of action in a
business enterprise because all departments take part in the process
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The targets, goals, and policies are clearly defined
4
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5
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Total capital required and price of an item can be estimated in advance
Disadvantages
1
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e
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2
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