Explain the following statement: A budget has both a planning function and a control function. - NSC Agricultural Management Practices - Question 4 - 2022 - Paper 1

A budget serves two primary roles in financial management:

1. Planning Function: The planning aspect of a budget involves forecasting the expected income and expenses of a farm. This allows farmers to set financial goals and make informed decisions about resource allocation and operational activities that align with their objectives. By anticipating future financial scenarios, a farmer can prepare for both expected and unexpected events, ensuring a smoother operational flow.

2. Control Function: The control function relates to the monitoring aspect of the budget. Once a budget is established, actual income and expenditures are tracked against the budgeted figures. This comparison helps identify any deviations from the planned budget, enabling corrective actions to be taken. It ensures accountability and encourages adherence to set financial targets, ultimately leading to better financial discipline and resource management.