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PLAN

The first ingredient of a budget is its plan. The term plan with reference to budgeting has a specific connotation. It includes two aspects which have a bearing on the operation, of an enterprise. One set of factors which determine a firm’s future operations are wholly external and beyond its control. Included in this category of factors are general business conditions. government policy and size and composition of population. The second set of factors affecting future are within the firm, control and discretion, that is, they are internal. The promotional programmes and manufacturing processes are illustration of these factors. Budgeting, as a plan, covers both these aspects. In other words, budgeting not only suggests what should happen but should also make things happen. In brief, a budget (plan) is an expression partly of what the management expects to happen and partly of what the management intends to happen.

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