Budgeting

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Budgeting

Introduction

Budgeting is basically a plan for identifying and controlling future income and expenses. Budgets can be made on daily monthly or yearly basis, and it only depends upon how much cost or income is needed to be dealt in the future. Budgets are of different types also, namely fixed budgets, variable budgets, zero based budgets and operating budgets and so on. All of these budgets have their own benefits, and each of these budgets also come with their own disadvantages. However, the main highlight of these papers will be the operating budget and how it disciplines and organization management. The elements of these budgets will also be discussed with some discussion of budgeted variance also (www.investopedia.com).

Discussion

Operating Budget

An operating budget is a budget which deals in all the estimated incomes and expenses of the next period (usually one period). Unlike other budgets, it deals with the day to day expenses and costs of operations and is the one of the best means through which day to day expenses are controlled and guided accordingly. However, operating budget is a short term budget so, long term capital lay are excluded from the basic calculations (www.dynamicbusinessplan.com).

Budgets and Management Discipline

Budgeting is one of the best means through which management and its duties and operations can be managed and disciplined as per required. Through budgeting management and other personnel are aware of what to achieve and sometimes how to achieve it. It helps in better understanding of the required minimum cost for the period and how to achieve this target.

Through the operating budget, management is prepared to control their daily costs and expenses, and try their best to control is decompose of any abnormal costs for the period. Through these budgets, managements and other personnel's bonus are tagged and this aids in discipline manager so that they will work their best to achieve this budget and their bonuses accordingly.

Operating budgets also enables managers to plan for the best in order to increase the required income or at least achieve the one that's in the budget. Other benefits of budgeting are that, management will thrive to achieve its objects and goals in a timely basis, in other words, during the time budgets are set for. Budgets also contribute in communicating the required performance and goals throughout the organization. 

Elements of Budgets and their Construction

The most basic elements required in order to produce a productive ...