PART 1 LESSON 1FORECASTING TECHNIQUES
A budget is a quantitative expression of a proposed
future plan of action
. Itrelates to a particular set
. It acts as a blueprint for the organization to followin the budget time period. Budgets quantify management’s targets regarding future income,cash flows, financial position. Budgets are projected financial statements. Budgets includea budgeted income statement, budgeted cash flow statement, and budgeted balance sheet.Forecasts act as starting point of all the budgetary process. Forecasts help in preparingrevenue budgets. Budgets are also useful as guideposts. Organizations actual performanceis compared with budgets to determine whether organization is lagging or exceedingexpectations
Budget is a formal quantification of Management plans and has the followingfeatures:
1.An organization has goals. Plans are formulated to reach the goals.2. Plans specify the resources to be allocated and expected results3.A Budget is a detailed written expression of an entity’s expectations with respect toacquisition and use of resources for a specified period of time4.A budget is a management tool.
It is a quantitative statement of an organizationsplan of action for a specified period.
5.A budget is a quantitative expression, for a time period of a proposal of future planof action (Horngren).6.Budget can cover both financial and non financial aspects of plans and acts as blueprint for the organization to follow in the specified time period.7.Budgets quantify management’s expectations regarding future income, cash flows,and financial position.8.Budgets prepare financial statements for future periods covering budgeted incomestatement, a budgeted cash flow statement and a budgeted balance sheet.9.Budgets are not only means of communicating management plans to theorganization but also provide a basis for evaluating segment and organization performance by providing yardsticks against which actual performance could becompared.RukshiCA2