DB1 Essay Example | Topics and Well Written Essays - 250 words

DB1 - examine ExampleForecasting is the practice of predicting the sources of expected revenues while figureing details the use of the expected revenues (Dlabay & Burrow, 2007). Forecasting information is mainly used in preparing the budgets. Budgeting allows the organization to control the cash flow of the organization (Shim, Siegel & Shim, 2012). In summary, budgeting entails preparing a financial plan while forecasting involves predicting the future revenues and expenditure. Budgeting is mainly done for a financial yr unless forecasting that can take longer periods (Crosson & Needles, 2011).There are certain differences between operating budgets and cash budget. Operating budget is mainly prepared for each income statement components such as the production budget, gross sales budget (Crosson & Needles, 2011). Operating budgets mainly provide a blueprint on how the business pass on deliver its operations in a certain period of time like the expected production level, the sa les volumes (Dlabay & Burrow, 2007). On the other hand, cash budgets are prepared after the preparation of operating budgets. The cash budget contains the receipts, disbursements, the cash deficit or surplus (Burton & Thakur, 1998).Zero based budgeting approach requires each cost broker to be justified. The budget allowance is usually zero. Each budget is prepared from zero based alternatively of the previous years budget as the base (Crosson & Needles, 2011). Each manager must excuse the need for spending through detailed proposals of costs, purpose, alternative courses of action and measures of budget performance. Zero based budgeting will improve efficiency through detecting inflated budgets and recognizing obsolete operations (Crosson & Needles, 2011). The budgeting approach leads to greater incentives for responsible decision making and increases communication and coordination in the organization (Burton & Thakur, 1998).Forecasting is predicting the future events,