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Budgeting AO2

AO2 You need to be able to: Demonstrate application and analysis of knowledge and understanding Command Terms: These terms require students to use their knowledge and skills to break down ideas into simpler parts and to see how the parts relate: Analyse, Apply, Comment, Demonstrate, Distinguish, Explain, Interpret, Suggest

A budget

A budget is an agreed plan setting out an organisation's expected future income and expenditure over a defined period usually one year.

A budget is a forward financial plan. It provides a prediction of expected flows of money in and out of the firm in the immediate future. A budget is a yardstick by which a manager's success or failure can be measures and potentially rewarded. Normally, a budget will be prepared in advance of a period of time, usually a year but it could be on a monthly or quarterly basis.

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Budgets are drawn up for a number of reasons within a firm. Often the process of producing a budget will take a significant amount of time. Producing budgets on a regular basis for a large part of the activities of the business will help in many ways.