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A budget is defined as a long term plan which helps the business to estimate the level of expenses and the level of profit that the business will earn in the future years (Epstein, 2012). The organizations generally formulate different monetary plans and policies and make the expenses and the profits accordingly less or more to facilitate a new budget. The plan in the budget helps the company to make sales and demand forecast. According to Marsh (2012) importance of budget is as follows:
• To help the management to perform, review and control.
• To ensure that the business is moving according to the plan by comparing the actual results with the budgeted results.
• To take appropriate actions when disparity is noticed between the actual plan and the budgeted expenses.
When all these importance are kept in mind and actually a projected budget is prepared to achieve the target of the company, then it can be said that the estimated budget is accurate, achievable, fair and understandable (Manchester, 2012).
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