Explain advantages of budgets.

Advantages of Budgets:

(i) Actions plans and policy taken are all reflected into the budgetary control system. Now here is a formal recognition of the targets that the business hopes to achieve.

(ii) Not only departmental programmes are made, over expenditures into departments are also controlled and curtailed.

(iii) Budgeting makes for better harmony, coordination and understanding of action in a business enterprise, since all departments take part in budget preparation.

(iv) The targets, policies and goals of a business enterprise are clearly explained.

(v) Deviations from predetermined plans are brought to notice by variance analysis and corrective action is stimulated through reports, personal and statements contacts.

(vi) This provides management with a guide of daily activities; therefore helps determining performance and efficiency of each department, thus leading to improvement.

(vii) This informs management the progress made towards attaining the predetermined objectives.

(viii) This facilitates financial control.

(ix) Total capital needed and price of an item (product) can be calculated in advance.

(x) Budgetary control builds morale while operated in a truly managerial spirit that should not acquire merely a clerical outlook or approach.