Which of the following is NOT a purpose of budgets?

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Multiple Choice

Which of the following is NOT a purpose of budgets?

Explanation:
Budgets are planning and control tools. They set expected levels of revenue and costs for a period, allocate resources to activities, and provide a benchmark to measure actual performance. This supports planning costs, guiding spending decisions, and comparing what actually happens with the targets to spot variances and take corrective action. They cannot guarantee profits, though. Profit depends on real-world outcomes such as actual sales volumes, price changes, and unexpected costs or events, all of which can differ from the budgeted assumptions. So, while budgets aim to support profitability, they do not guarantee it.

Budgets are planning and control tools. They set expected levels of revenue and costs for a period, allocate resources to activities, and provide a benchmark to measure actual performance. This supports planning costs, guiding spending decisions, and comparing what actually happens with the targets to spot variances and take corrective action. They cannot guarantee profits, though. Profit depends on real-world outcomes such as actual sales volumes, price changes, and unexpected costs or events, all of which can differ from the budgeted assumptions. So, while budgets aim to support profitability, they do not guarantee it.

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