Question

Define budget as a type of plan. Why is budget also a control device? Why is it regarded as fundamental planning instrument?

Answer 1

Answer:

Budgeting has come to be accepted as an efficient method of short-term and long-term planning and control. It is employed, no doubt, in large businesses, but even the small businesses are using it at least in some informal manner. Through the budgets, a business wants to know clearly as to what it proposes to do during an accounting period. The technique of budgeting is an important application of Management Accounting. One of the greatest aid to good management that has ever been devised is the use of budgets and budgetary control to guide an organization to efficient

Answer 2

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It is a fundamental planning instrument in many organisations. Let us take an example of Cash Budget. ... It is a device to help the management to plan and control the use of cash. It is a statement showing the estimated cash inflows and cash outflows over a given period.

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