Business Finance
can i please get some help

Question Description

What is the difference between forecasting and budgeting? Provide examples.

Final Answer

Hi Keisha,

Let me help you....budgeting is a projection or plan of a business's success. It is very detailed and contains documentation on every related financial document. A budget is usually planned at the beginning of a fiscal year and isn't changed very often. An example of a budget is a private school budget. This would include items such as building rent and maintenance, utilities, employee wages, ordering of school supplies for each classroom, reservation of specific textbooks to be re-sold to the applicable students, and of course, the tuition costs for student attendance.

The forecast is an estimate of the success to be achieved. This involves taking the largest revenues and expenses and making estimates based off of those items. Consequently, a forecast is not as detailed as a budget and can be changed/updated periodically throughout the year. Let's look at the school again. The people in charge of delivering a forecast can look at the private school's major revenues (most likely tuition) and expenses (probably rent and employee wages). Let's say revenue is $100,000 a year and rent plus wages combined is $70,000 a year. Well based off this, the school is estimated to come out with $30,000 (this neglects any unforeseen repairs, employee termination, etc.)

Did this help? If so could you choose my answer as the best answer please? Thanks Keisha and I like your avatar by the way. "Thank you Jesus!"

Bitaseme M (351)
Cornell University

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