ESSENTIALS OF BUDGET

ESSENTIALS OF BUDGET

Essential elements of a budget are as follows:

1. Organisational structure must be clearly defined and responsibility should be assigned to identifiable units within the organisation.

2. Setting of clear objectives and reasonable targets. Objectives should be in consonance with the long term plan of the organisation.

3. Objectives and degree of responsibility should be clearly stated and communicated to the management or person responsible for.

4. Budgets are prepared for the future periods based on expected course of actions.

5. Budgets are updated for the events that were not kept into the mind while establishing budgets. Hence, budgets should flexible enough for mid- term revision.

6. The entire organisation must be committed to budgeting.

7. Budgets should be quantifiable and master budget should be broken down into various functional budgets.

8. Budgets should be monitored periodically. Variances from the set yardsticks (standards) should be analysed and responsibility should be fixed.

9. Budgetary performance needs to be linked effectively to the reward system.