The forecast is an estimation of future business trends and outcomes based on historical data. A financial plan expressed regarding money, prepared by the management in advance for the forthcoming period, is called a budget.The significant differences between budget and forecast are mentioned below: Key Differences Between Budget and Forecast It can be done by adopting qualitative or quantitative or the combination of the two methods.
It also assists in budgeting and planning process. Business forecasts predict the forthcoming financial inflows and their sources by evaluating current and previous data and trend analysis.įorecasting helps the business in taking immediate actions by examining and analyzing the data provided. The management does it in the light of past experiences and knowledge. The projection of business activities for future accounting period on the basis of historical data is known as forecast. On the basis of time: Long term, short term, and current budget.On the basis of function: Sales budget, production budget, purchase budget, cash budget, etc.On the basis of capacity: Fixed Budget and flexible budget.actual outcome is compared with the budgeted outcome, and if there is any deviation, then necessary actions are taken to prevent unplanned expenditures.īudgets can be classified on various basis i.e. A budget helps in the control process, i.e. After the preparation of budgets, they are used to direct and coordinate business activities to achieve the objectives. It is prepared by the management of the enterprise keeping in view the past experiences. In other words, budget indicates the business plans and therefore planning should be done before budgets are prepared.
The budgets are prepared for the forthcoming period, considering various objectives of the business organization such as vision, mission, goals, objectives, and strategies.
It is an ongoing process as it needs to be revised, adjusted, updated and monitored at regular intervals when there is a change in the prevailing conditions. It is a written document which is expressed in monetary terms and represents all economic activities of a business organization. It is the prediction of upcoming events or trends in business, on the basis of present business conditions.Ī budget is defined as a detailed financial plan for a particular accounting year. It is the financial expression of a business plan or target. Content: Budget Vs ForecastĪ budget is a financial plan expressed in quantitative terms, prepared by the management in advance for forthcoming period.įorecast means estimation of future trends and outcomes, based on the past and present data. But there exist a fine line of differences between budget and forecast, which we’ve discussed in the given article. The two terms budget and forecast, ae commonly misconstrued with each other. Forecast can be understood as the evaluation and interpretation of the conditions that are likely to occur in future, with respect to the operations of the enterprise.
0 kommentar(er)
