Chapter 22, Problem 1DQ

To determine

Introduction:

Budgeting in an organization provides a road map to the managers for achieving the goals of the organization. Budgeting helps the company control the finances and expenses, helps in forecasting and comparing with actuals to control variances and grow constantly.

Requirement 1:

To State:

The ways in which budgeting helps manager plan and control the business

Answer to Problem 1DQ

Solution:

There are multiple ways in which the budgeting helps the managers plan and control the business which includes controlling the income and expenditure, guiding the manager in taking critical decision and helping them in controlling and allocating the resources of the company.

Explanation of Solution

1. Budgeting helps control income and expenditure for the organization. The managers have a yardstick in form of budgets to compare and control the income and expenditure. The managers can gauge the actual income and expenditure and compare it with the budgets to identify and analyze the variances and take corrective action for future course of actions.
2. Budget guides the managers in taking important decisions in relation to finances, sales, production and all other expenses. The budget helps the managers plan the activities in relation to the available budget to maintain the bottom line of the organization.
3. Budgeting helps the manager control the available resources and allocate them effectively for optimal utilization.

Conclusion

Budget is an excellent tool for the manager in controlling the expenses, income and resources within the organization and all levels of management must be involved in the budgeting to ensure optimal participation and adherence to budgets