Budget 1. Describe the budget process apply appropriate budgeting Essay

Budget 1. Describe the budget process apply appropriate budgeting techniques and explain its significance in the business environment - Essay Example In any organization, budgets are a representation of the future revenues and costs. The main characteristic of budgets is that they are prepared in advance and are derived from long term strategy of a company. The budgets relate to the goals and objectives of the organization and express in quantitative form, the monetary and physical units of activities. The main activities in companies include control and planning, and budgets are the centre of these activities. Budgets are crucial control systems that show estimates of expenses and revenues of a company over a certain period of time. Budgets are usually compiled and evaluated after certain periods. There can be a surplus budget when the company anticipates to get a profit, it can be balanced when the company expects the expenses to equal the revenues, or it can be deficit budgets when the expenses are expected to exceed the revenues. Budgets are usually prepared in companies based on their goals. The process of planning budgets involves preparing detailed, short-term plans for the organizations. Budgets are prepared by starting with an overall budget for the whole organization, which can then be broken down into smaller budget based on departments. The planning process involves consultations with the whole organization in order for the objectives of the company are achieved. The process of developing a master budget starts by preparing the sales budget. This is because the sales budget acts as the limiting factor in this company. This budget also affects other components of the master budget directly or indirectly. This budget shows the sales expected over a period of time. It is simply a product of the expected units of sales and the expected price per unit. This budget needs to be prepared carefully because other components of the master plan rely on it; otherwise the master budget will be ineffective for control and planning purposes. Once the sales budget has been done,