Budget
MANAGEMENT ACCOUNTING 2
BAAB 2073
REPORT
SECTION 2
.
Lecturer : MR. ISZMI ISHAK
The basic framework of budgeting
E-Book
Basic definations
i. A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.
1. The act of preparing a budget is called budgeting.
2. The use of budgets to control an organization’s activities is known as budgetary control.
Difference between planning and control
i. Planning involves developing objectives and preparing various budgets to achieve those objectives. ii. Control involves the steps taken by management to increase the likelihood that the objectives set down at the planning stage are attained and that all parts of the organization are working together toward that goal. iii. To be effective, a good budgeting system must provide for both planning and control. Good planning without effective control is time wasted.
Advantages of budgeting
i. Budgets communicate management’s plans throughout the organization. ii. Budgets force managers to think about and plan for the future. iii. The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively. iv. The budgeting process can uncover potential bottlenecks before they occur.
v. Budgets coordinate the activities of the entire organization by integrating the plans of its various parts. vi. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.
The bottom-up/self-imposed budget
1. A self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels. It is a particularly useful approach if the budget will be used to evaluate managerial performance.
2. The advantages of self-imposed budgets include:
a. Individuals at all levels of the
BAAB 2073
REPORT
SECTION 2
.
Lecturer : MR. ISZMI ISHAK
The basic framework of budgeting
E-Book
Basic definations
i. A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.
1. The act of preparing a budget is called budgeting.
2. The use of budgets to control an organization’s activities is known as budgetary control.
Difference between planning and control
i. Planning involves developing objectives and preparing various budgets to achieve those objectives. ii. Control involves the steps taken by management to increase the likelihood that the objectives set down at the planning stage are attained and that all parts of the organization are working together toward that goal. iii. To be effective, a good budgeting system must provide for both planning and control. Good planning without effective control is time wasted.
Advantages of budgeting
i. Budgets communicate management’s plans throughout the organization. ii. Budgets force managers to think about and plan for the future. iii. The budgeting process provides a means of allocating resources to those parts of the organization where they can be used most effectively. iv. The budgeting process can uncover potential bottlenecks before they occur.
v. Budgets coordinate the activities of the entire organization by integrating the plans of its various parts. vi. Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.
The bottom-up/self-imposed budget
1. A self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels. It is a particularly useful approach if the budget will be used to evaluate managerial performance.
2. The advantages of self-imposed budgets include:
a. Individuals at all levels of the