Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 7

Many accountants believe that the most important benefit of the master budgeting process is the end result: a set of pro forma financial statements. What is the rationale for this view?

Step 1 of 2

A budget is a financial strategy for a specific forthcoming period of time. A budget is prepared and swotted on an intervallic basis. The budget acts as a guide for managers. Managers make decisions based on the budget. The budget acts as a basis for performance evaluation. The attainment of the company’s strategic vision depends on the performance assessment. A budget is a motivational device.