BUDGETING

Economic and Social Significance of Budgeting



Economic and Social Significance of Budgeting

Introduction

The study is related to the budget which is an important and essential element for the organizational activities. Budget is called the advance estimate of budget revenues and expenditures of an economic activity (personal, family, business, company, an office, a government) for a period, usually annually. It is a plan of action to meet a target, expressed in financial terms and values ??that must be met by a certain time and under certain conditions laid down; this concept is applied to each responsibility center organization. The budget is the annual development tool companies or institutions whose plans and programs are formulated within a year. In addition to this, in the budgeting process, the different types of budgets are the operating budget, the program budget, the cash flow budget and the capital budget.

Discussion

Budgeting enables companies, the governments, private organizations or families set priorities and evaluate the achievement of its objectives. To achieve these ends, it may be necessary to incur deficits (which expenses exceed income) or, conversely, it may be possible to save, in which case the budget will present a surplus (revenues exceed expenses). In the area of trade, budget is also a document or report that details the service will cost if done (Bo-Golan & Jan 2000, pp. 519-539). Whoever does the budget should be adhered to him, and you cannot change if the customer accepts the service. The budget may be charged or not, should not be accepted. The budget can be considered a classic part of the management cycle consisting of planning, action and control (or, more specifically, as part of a total management system.

Economic Significance

The activities of organizations that use the system of planning and budgeting, is characterized by higher levels of cost-effectiveness compared with other organizations. Such organizations have the advantage in the entire economic performance due to the relatively high average of individual indicators of labor productivity, product profitability, return on assets and turnover of working capital. Furthermore, such organizations plan their activities on the basis of two groups, using the technical and economic planning and budgeting (Brewster, Sparrow & Vernon 2007, pp. 323-341). Financial and economic performance of organizations suffers that do not use planning.

For all the financial and economic indicators of production efficiency is higher in those organizations that use in their planning activities, especially budgeting. This is especially noticeable on the profitability of products. Organizations, which use budgeting, have a positive financial result. In addition, budgeting allows organizations to have increased business activity (turnover of working capital) in the formulation of the budgeting system in organizations. This is due to the fact that budgeting allows calculating the optimal batch size of raw materials or goods, which leads to lower costs for storage and delivery of goods, reduction of residues in storage and, consequently, increase inventory turns.

The increase in capital productivity in the implementation of the planning system due to the fact that carefully developed product range, in some organizations, the ...