Budgeting is a planning tool by setting up projected income and expenditure for the incoming year to forecast which the profit/loss is going to be.  Some adjustments may need to be made to increase the profit or to diminish the loss.  On a monthly basis a comparison of actual operations to budgeted operations is carried out to discover how the firm is performing and variance analysis is carried out.  Any significant variances will be discussed to find out what the reason was for their existance.

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