Q2RQ - Horngren'S Financial And Managerial Accounting

Question

Question: One benefit of budgeting is coordination and communication. Explain what this means.

Step-by-Step Solution

Answer

Answer

 

The budget encourages managers to communicate to ensure that the company can achieve its goals.

Step 1: Meaning of Budgeting

Budget or budgeting can be defined as it is a plan established by a company for a specified period of time in the future. It helps the entity to focus on the set goals. It guides the entity for performing better.

Planning, coordination and communication, and benchmarking are the main benefits of budgeting.

Step 2: Co-ordination and communication as a benefit of budgeting

Budgeting requires input from all managers from different departments and areas, and these managers work together to make a single, unified, comprehensive plan for the business. Budgeting helps managers communicate with each other by giving suggestions and viewpoints regarding budgeting decisions.