Answer to Question #213713 in Microeconomics for Y. McGee

Question

"The narrative comes before the numbers." Explain what this statement means with respect to budgeting. (2) Explain why it is important that the budget "narrative" be drafted first

Answer 1

Solution:

1.). This statement with respect to budgeting means that before numbers and projections in the form of figures are produced in a budget, a description of the budget and what it entails must be forecasted and the qualitative aspect of the forecast must be considered. Every aspect of the budget must be captured first before the actual budget is drawn.

 

2.). It is important to first draft the budget narrative in order to capture the most critical items that will be covered by the budget and their costs. Therefore, it will be much easier to explain and justify the estimated costs of the selected items in the budget and ensure accurate budget forecasts.