Assertion: Modern formal budgets not only limit expenditures; they also predict income, profits, and returns on investment a year ahead.
Reasoning: Unless the budgetary process is managed with extreme skill and care, the very virtues of budgeting can turn into negative.
Reasoning: Unless the budgetary process is managed with extreme skill and care, the very virtues of budgeting can turn into negative.
Answer & explanation
Correct answer: option 2
In the broadest sense, a budget is an allocation of money for some purpose. Modern formal budgets not only limit expenditures; they also predict income, profits, and returns on investment a year ahead. They have evolved into tools of control and are also used as a means of determining such rewards as profit-sharing and bonuses. Unless the budgetary process is managed with extreme skill and care, the very virtues of budgeting can turn into negative.