Question

Describe the benefits of preparing an operating budget to an organization.*

Answer 1

An operating budget enables financial control, goal setting, and resource allocation in an organization.

Step-by-step explanation:

An operating budget is a financial plan that outlines an organization's projected income and expenses for a specific time period, usually a year. There are several benefits to preparing an operating budget for an organization:

1. Financial Control: An operating budget helps an organization to monitor and control its finances. It provides a framework for tracking income and expenses, allowing for better financial decision-making. By comparing actual results to the budget, management can identify any deviations and take corrective actions.
2. Goal Setting and Planning: The budgeting process involves setting financial goals and objectives for the organization. It helps to align the activities and resources of the organization towards achieving these goals. By planning and allocating resources effectively, an organization can work towards its strategic objectives.
3. Resource Allocation: An operating budget helps in allocating resources efficiently. It provides a clear picture of the resources available and helps to prioritize spending in line with the organization's priorities. It ensures that resources are allocated to areas that generate the highest return on investment and supports strategic initiatives.

Overall, preparing an operating budget is essential for financial control, goal setting, and resource allocation in an organization.