For effective control on variations bussiness activity planning needs various information for decision making and execution of various activities. Every business needs resources which are always limited. Thus, out of limited resources, maximum use is recommended. For, these budgets are needed. The preparation and use of budget different business activities are controlled.
Budgets are financial statements prepared for definite future period on the basis of planned forecast figures. The budgets are prepared to make sure the availability of resources at a future date. The budgeted activities are compared with the actual results and variations are put for correction.
These are formal programmes, for the future and are expected results. Budgets are forward thinking and planning. In this chapter, an effort våll be made to explain the practical utility of various budgets.