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3.3 Objectives of Budgeting

It is a well known fact that a planned activity has better chances of success than an unplanned one. The budgeting is a forward planning and effective control tool. Thus, the objectives of the budgeting are:

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a) To control the cost and increase revenue and thereby maximise profit, so as to know profit at different level of production and best production level.

b) To run production activities in efficient manner by lay behind the chances of interruption in production process due to lack of material, labour etc.

c) To bring about coordination between different functions of an enterprise, which is essential for the success of any enterprise?

d) To incorporate measures of calculation of deviations from budgeted results and analysis of the same, whereby responsibility can be fixed and controlling measures/action can be taken.

e) To ensure that actions taken are in accordance with the targets and if required, to take suitable corrective action.

f) To predict short-term and long-term financial positions for better financial position and management of working capital in better manner.

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