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Budgets - Coggle Diagram
Budgets
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Cash Budgets
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Cash Receipts (e.g. cash sales, collections, other) LESS
Cash Payments (e.g. purchases, settlement, labour, OH's dividends, equipment)
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Characteristics
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- It aims to achieve a predetermined goal or objective
- It is expressed in quantifiable terms
Objectives:
- Budgets facilitate the achievement of an organisation's strategic and tactical objectives.
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- Budgets promote the co-ordination of activities.
- Budgets promote communication in the organisation.
- Budgets promote a framework for control and responsibility accounting.
- Budgets serve as a framework for authorisation of decisions within the organisation.
- Budgets provide a basis for performance evaluation.
- Budgets provide motivation for employees to improve their performance.
Strategic, tactical and operational budgets:
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Operational budgets
are prepared for a single financial period, usually a year or less.
Strategic budgets
will usually be for a long period, perhaps between 3 and 15 years.
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