Which of the following is not a part of budgeting?
A. planning
B. finding bottlenecks
C. providing performance evaluations
D. preventing net operating losses
Introduction:
Planning and controlling are very important aspects of the management of a company. Budgeting is nothing but a way to reach the company’s goals by planning and controlling the activities related to revenues, expenses and other financing options wherein they show which areas are profitable, unprofitable or are not good for the anticipated goals. Communication, planning, evaluation and controlling are advantages of budgeting that are useful for the company.
To choose:
The correct answer from the given options that is not a part of budgeting
Answer to Problem 1MC
The correct answer is option D. Preventing net operating losses is not a part of budgeting.
Explanation of Solution
Explanation for correct answer:
Preventing net operating loss is not a part of budgeting as the budget is prepared towards finding realizable goals. Budgets are prepared to know both profitable as well as unprofitable areas hence preventing losses would not help in proper forecasting.
Explanation for incorrect answers:
Planning, finding and solving bottlenecks, providing performance evaluations are all parts of budgeting. Bottlenecks are predicted by the budget and management strives towards solving the issues to meet the sales goals.Planning is an integral part of budgeting as it is necessary to evaluate the performances of both long term as well short term financial goals. It helps in knowing the position of the company in the market. It also helps the manager in understanding the performances of each department and managing the departments. It helps in allocating resources in a planned manner so that there is no wastage and they are used to meet the sales and manufacturing goals. The departments compare forecasted budgets with the actual ones.
Conclusion:
Hence, preventing net operating losses is not a part of budgeting because when budget is compared with the actual results, it must give appropriate goals.
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