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First, the budget should be derived to support the strategy and business plans of the organization. If everyone meets budget on every account then the plans will be successful and all goals will be met. Thus properly prepared and coordinated budgets provide an important coordinating tool for any organization.

Second, budget versus actual reporting provides early indications if actual operations are not going as planned. This provides an opportunity for management to get things back on track or coordinate changes to the plan.

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Q: How are budget used in controlling operations?
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