The main objective of a firm is to make an excess of revenue over expenses to maximize profit. But it is not a matter of a dream or chance. There is no magic formula for boosting the figure of profit overnight. Budgeting can increase the chances of making profits within the given environment.
The main objectives of budgets are as follows:
* To provide a realistic estimate of income and expenses for a period and of the financial position at the close of the period.
* To provide a coordinated plan of action which is design to achieve the estimates reflected in the budget.
* To provide a comparison of actual results with those budgeted and an analysis and interpretation of deviations by areas of responsibility to indicate courses of corrective actions and to lead to improvement in future plans.
* To provide a guide for management decisions in adjusting plans and objectives if there is an uncontrollable change in conditions.
* To provide a ready basis for making forecasts during the budget period to guide management in making day to day decisions.
