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In economic world, budget plays an essential role to company’s growth and survival. Budgeting is the process of preparing financial statements for a business for a certain period of time. In every organization, budget is prepared by the financial department while considering the internal and external factors of the organization. By the help of budget, the chance of making profits increases in an organization. Students looking for various topics related to Preparation types of budgets can refer Preparation Types Of Budgets Assignment Help where all the approaches of budgeting is explained.
Different Approaches Of Preparation Of Budgets
The different types of approaches of preparation of budgets explained in Preparation Types of Budgets Assignment Help are
Top- Down Approach of Budgeting
In this type of budgeting approach, budget is prepared by the top management according to the objective of the organisation. Then this budget is passed on to the managers for further implementation. Managers provide suggestions for budgets but consideration of these suggestions solely depends upon the management. The initial step in top- down approach is estimation of costs at higher levels. Budget is divided into first level tasks and below level tasks. The disadvantage of top- down approach is that the Budget may not be accurate as the top management may not have close information about the organization. Advantages of top- down approach given in Preparation Types of Budgets Assignment Help are
• Inter departmental issues will not take place and hence the preparation of budget will be fast.
• Budget will be prepared by the experts and management.
• There will be overall corporate functional approach as budget is prepared by the management. This will eliminate the divisional approach.
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Bottom- up Approach of Budgeting
In this type of budgeting approach, department wise budget is prepared by the managers according to the experiment and past experiences. Then this budget is presented to the top management for suggestions and approval. The initial step in bottom- up approach is identification of different tasks and operations performed by the organisation. The finance department is responsible for the consolidation of funding and HR department is responsible for the consolidation of the resources requirement of the entire organization. The disadvantage of bottom- up approach is that budget preparation process will be slow and there may be inter- departmental dispute. Advantages of bottom- up approach given in Preparation Types of Budgets Assignment Help are
• It motivates the managers as the preparation of budget is in their hands.
• It will increase the commitment of the managers towards the organization to fulfil the target set by them.
• It leads to accurate budget as individual budget is prepared for individual department.
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