ACCA Applied Knowledge · Management Accounting · Nature and purpose of budgeting
Which statement about the planning role of a budget is correct?
A budget forces management to look ahead, consider the resources required and plan actions to achieve objectives. It is prepared before the period and supports, rather than replaces, the long-term strategic plan.
- AA budget forces management to consider future resources and the actions needed to achieve objectivesCorrect
- BA budget is prepared after the year ends to explain results
- CA budget replaces the need for a long-term strategic plan
- DA budget is a record of past transactions used to prepare the financial statements
Explanation
Budgeting is a short-term plan that turns strategic objectives into quantified targets, requiring managers to consider resources and actions in advance. It is prepared before the period, does not replace the strategy, and is not a historical record.
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