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Budgeting
- is financial translation/expression of the Company's operational and strategic objective and plans
- It's being done annually, in sometimes it's prepared for longer period in case of capital budgeting.
- It starts withs sales and end with cash budget.
- Budget is used as planning and controlling tool. (Act. vs Bud.)
Forecasting
- you are building an anticipation based on assumptions to reach an estimation for a future event based on certain assumptions.
- Unlike budget, forecasting does not necessarily end with budgeted Balance sheet, income statement, cash flows. It could be a forecast for certain type of expenses or revenues.
The forecast is a technique used to predict the future and it is used in preparing budget. So budget is prepared based on forecasts.
