Question

Why is it important to project the first year on a monthly basis and the subsequent yearly budgets, on a quarterly basis? provide reference

Answer 1

This is important because in the first year, the budgetary trends are unknwown. Therefore, during the first year, it is important to prepare budgets in the monthly basis to avoid possible budget errors.

When budgets are prepared, all of the variances must factored in. However, these variances may not be consistent in the first year. To ensure that these budgetary issues or errors are managed well, then monthly budgetary basis will be appropriate.

But in the subsequent years, the variances will already be clear and known. In that case, the budgets can be prepared on quarterly basis. Budgets need clear and accurate. This will only be possible if all of the factors of production variables must be factored in.

Explanation:

A budgetary processes is important in offering a company appropriate financial blue print. If companies fail to budget, then there is likely to misuse its resources. In that case, the budgetary planning and preparation is a factor of concern.

Budgets need to be prepared well and with accurate figures. To achieve this, you will need to know all of production variances. In the first year, you need to use monthly basis to limit any possible errors during the budgetary process.

In the subsequent years, an organization will already have the budgetary inputs that helps in preparation its budgets. This will be easier for organization to prepare accurate budgets. Therefore, it important to project the first year on a monthly basis and the subsequent yearly budgets, on a quarterly basis.