Budgets allow a business to create a financial roadmap by setting goals and working to achieve those goals. A budget is an instrument of management used as an aid in the planning, programming and control of business activity. In other words, a budget is a document that management makes to estimate the revenues and expenses for an upcoming period based on their goals for the business. It is based upon past statistical data and it predicts the estimated labour, sales, production and other management requirements for future. Some of the advantages of budgets are it translates strategic plans into action, it improves resource allocation, it provides tools for corrective action through reallocations. The major problem occurs when budgets are applied mechanically and rigidly. It can cause perceptions of unfairness and can create competition for resources. More advantages and limitations of budgets are detailed in the presentation.

Abhijith S

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