1SE - Horngren'S Financial And Managerial Accounting

Question

Budgeting benefits List the three key benefits companies get from preparing a budget.

Step-by-Step Solution

Answer

The key benefits companies get from preparing a budget is planning, coordination and communication, and benchmarking.

Step 1: Budgeting benefits

Budgeting helps managers to plan, improve coordination and communication, and set benchmarks for evaluating actual performance.

Step 2: Three key benefits companies get from preparing a budget

1. Planning: - Managers plan for the company’s future using budgeting. The better they plan the higher are the chances to achieve targets. 
2. Coordination and communication: - The managers of different levels and functions work together to make a comprehensive plan for the business.
3. Benchmarking: - Managers together set benchmarks for the employees and compare them with actual output