The first and most critical step of this paper is to understand what a budget actually is and what it entails for an organization. The budget is a written documented statement of the plans of a company set forth by the management which demarcated in monetary terms is known as a budget statement. This report is basically indicative of the future performance of the company following the perceptions of the managers. The process of budgeting in the eyes of many is basically the lawful marriage of the accounting and the managerial entities that exist inside a business. However, according to most of the renowned personalities in this field, the process of budgeting is more the prerogative of the managerial function of the business rather than the financial function which is backed by the rationale that the formulation of this plan is in an attempt to better aid and abet the managers of the firm in the proper and utility-maximizing mechanism of management of the firm (Churchill, 1991). Systems for decision making, determining the objectives for the company, and earmarking the main concerns of the organization all come under the jurisdiction of the formulated budget. Now, the budget is not merely a managerial instrument but rather has accounting implications, as well as the future goals of the company, are interpreted into financial goals that have to be met. Therefore, it would not be wrong in considering that a budget is perhaps the most effectual mode of business management that is present in the contemporary business landscape (Demski, 1994).

The level of revenue that will be appropriated for the business activities of the business will be determined by the budget and this allocated amount will determine the level of outlays that the business can ascertain and the&nbsp.final closing balance present to the operators of the business at the end of the period of activity for which the budget was ascertained.