Question

Discuss the similarities and differences between static and flexible Budgeting and Capital budgeting. · Why is budgeting important to an organization?

Answer 1

Answer-

Meaning of Budgeting- Budgeting refers to the financial planning in advance for the future. It give compnay a plan for how much money is for expense and how much money will come as revenue.

Similarities between Static, flexible and capital budgeting:-

• All the budgeting methods gives a plan for the future.
• It gives order or commands for the financial arrangements as how much to earn or spend.

Difference Between Static,flexible and capital budgeting:-

• Static budget is a kind of fixed buget, and flexible budget is flexible which changes due to change in volume and activities on the other hand Capital budgeting is a budgeting process which evaluates the investment worth whether it is right or not to invest in the particular investment.
• Static budget doesn't suits or helpful in every condition but flexible budget is the budget which goes with every condition as flexible budget changes according to the situation and activities, that's why flexible budgeting is more helpful. On the other hand Capital budgeting is also for evaluating the effectiveness and worthiness of long term investment.
• As we know, business activities are changes day by day, so flexible budgeting gives more management control as comapre to Static budget and Capital budgeting.

Importance of budgeting to an organisation:-

Budgeting is very important for an organisation as it gives the financial arrangements for the company, it gave information about how much, where to spend or invest. On the basis of budgeting whole company works and that's how whole company runs.