Question

What should a budget accomplish? Does the goal change when considered for the total company, an individual department or for outside investors?

Answer 1

Budget defination
The term budget may be defined as a "plan" to how to accomplish goals for a period of time for the organisation.It may be related to planned sales volume, revenues, resources, quantities, cost and expenses, cash flow etc.
There are a number of budgets such as cost budget

• financial budget
• fixed budget
• flexible budget
• short- long term budgets.

The budget should be a mix of variety of things to be an ideal budget it must accomplish things such as

1. It should involve or consist of managements operating plans.
2. Budget must have formalized management plan in quantitative terms.
3. Budget should force all the levels of the management to think ahead, anticipate results.
4. Budget Shall be accompany motivation for individuals to strive them to achieve stated goals.

The goal of budget changes when they are prepared for a total company and individual or for the outside investors.

1. For total company

Company uses budget as a whole for actual comparison to evaluate individual department performances.

Company are involved in budgeting procedure to plan for future profitability as earning a reasonable return on resources used in company's primary objective.

They are involved in budgets to draw coordination among managerial staff and departments.

2.For each department

The budget prepared for each department are different from that of total company as they are focused more on expertise and efficiency in their own department.

So their budgets are not based on profit motive rather they focus on per unit costing budgets, overhead budgets, work hour budgets etc.

3. For investors
The investors budget are all together totally different from the budgets of organisation or from each department.

They seek for maximum returns and safety of return for their money invested in the organisation. They are least concerned for the management coordination or expertise or efficiency within the organisation.