1. Pam Kelly says she has no faith in budgets. Her company, Kelly Manufacturing Corporation, spent thousands of dollars to install a sophisticated budget system. One year later the company’s expenses are still out of control. She believes budgets simply do not work. How would you respond to Ms. Kelly’s beliefs?
Explain the importance of budgets to Person P that makes the employees responsible to control costs.
Explanation of Solution
Budget: Budget is a formal statement of a company’s future plans expressed in monetary terms that are established by the management to fulfill the financial objectives.
Importance of budgets in controlling costs: Budgets are prepared by people to plan the revenue and expenses. But if the budgeting system is not followed by people, the preparation of budgets is a mere paper work. Person P should train the employees to use the budgeting system and make them responsible for the costs under their control.
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Survey Of Accounting
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- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning