Mrs.Geetha Dasaraty is a commerce graduate with a Masters in Business Administration specialising in finance. Her stint with a Coimbatore based company and later with a consulting firm in Chennai has provided her with a decade of experience in project finance and appraisals, accounting and tax laws. She is a freelance writer and money matters are her forte. She is currently pursuing her final course in Company Secretaryship and is doing a course on Vaishnavism. She has a passion for literature and Carnatic music. She is also a violinist.

• A budget states the objectives of the business and determines the goals for each unit of the business.
• It enables responsibility accounting by fixing responsibilities for each executive and other personnel in each department.
• It enables comparison of the budgeted targets with the actual performance, thereby enabling corrective action to be taken.
• A properly drawn out budget enables the optimum use of resources,
• A budget provides the direction for the period to which it relates and enables the management to take of the situation.
• It helps to control expenditure in a business enterprise.

• The goals of the business establishments are translated into smaller capsules for various operating units. Targets to be achieved for each area like sales, production etc are stated for a period of time, generally, a year.
• The resources or materials, like funds, raw materials, labour etc. that are required for achieving these goals are determined.
• The resources are allocated for each unit of activity separately.
• A system is established to monitor the budgets and see that there are not many deviations.

• State your objectives: For any budget to be successful the main point to be considered is the purpose of the budget. The objectives should be clearly stated and the areas to be covered by the budget should be clearly spelt out.
• Identify the prime factor: Generally, in any manufacturing concern there will be a certain factor, which determines the production capacity. This limiting factor should be identified and taken into account while preparing budgets.
• Determine the budget period: A budget period is the period for which the budget is prepared. Generally, a budget is prepared for a year and can be broken down into monthly or quarterly periods depending on the business.
• Past standards: Budgets are usually prepared on the basis of past records and achievements. Past statistics form the basis of budgets. But, a budget should be progressive and should aim at better results for the future. In the case of production, budgets should set goals that exceed the previous years.