Difference Between Costing and Budgeting


Any enterprise needs to use thorough patterns to assess its costs and maintain its expenditures under supervision. Costing and budgeting are both utilized by enterprises for this exact objective. Costing and budgeting are distinct from one another since costing has to do with maintaining a trail of the expenses expected to encounter in the future. In contrast, budgeting is described as planning the expenses to be met and sharing the needed money based on pre-arranged agenda. Costing and budgeting must be differentiated, and this article elucidates the differences.

What is Costing?

Costing is the procedure whereby a company tries to calculate the expenses entangled in the manufacturing of one division of output. Costing needs the utilization of recorded information that is interesting to the previous expenses encountered by the business, and this data is utilized to indicate the future cost system of the company. Contemplating an instance for costing in the textile business, costing will have to do with calculating the price of materials, designs, and things used for the clothes, including labor expenses, factory manufacturing expenses per unit, and handling expenses of inventory stocks. Costing is vital for an enterprise since it permits the company to assess its present expense status, assess the expenses to be encountered in the future and prepare plans for decreasing those expense levels.

What is Budgeting?

Budgeting involves business, creating a plan concerning the expenses for every business action or unit in the firm, and ensuring that payments are created from the plan’s finances. Budgeting permits a company to maintain its expenses perfectly to the arranged levels and leads to reduced overspending. Budgeting also assists a firm in making sure that money is well-spent on under-functioning fields and in sharing funds to areas with greater possibility for expansion and growth. Therefore, a budget must be planned integrating adjustability since it is essential to possess an adjustable budget that can be adaptable based on any quick functioning alterations in the future. Budgeting is a necessary area of regulating a firm’s economy. It will assist a company in being ready for unplanned occurrences, preventing a monetary problem, and creating better income from money used. It will be an essential field of planning procedures.

Difference Between Costing and Budgeting

  • Costing and budgeting are critical for a company to regulate its economy and assist it in lessening its threats of creating unrecoverable casualties.
  • Costing and budgeting execute completely varied positions. Costing calculates the future expenses encountered for one division of output, and budgeting ensures that costs faced are pre-arranged.
  • Budgeting has to do with making plans for the future, while cost has to do with assessing previous data.
  • Both costing and budgeting must be executed hand in hand to ensure that a company can calculate its future expenses and share money with the right intentions.