FUNCTIONAL AND ACTIVITY BASED BUDGETING
FUNCTIONAL AND ACTIVITY-BASED BUDGETING
Budget
a financial plan of the resources needed to carry out tasks and meet financial goals.
A quantitative expression of the goals the organization wishes to achieve and the cost of attaining these goals.
Budgeting
the act of preparing a budget.
Budgetary control the use of budgets to control a firm’s activities.
Master budget (planning budget/ budget plan) a summary of all phases of a company’s plans and goals for the future.
Indicates the sales levels, production and cost levels, income and cash flows that are anticipated for the coming year.
Represents a comprehensive expression of management’s plans for the future and how these plans are to be accomplished.
DIFFERENCE BETWEEN PLANNING AND CONTROL
Planning involves developing objectives and preparing various budgets to achieve these objectives.
Control involves the steps taken by management to ensure that the objectives set down at the planning stage are attained and to ensure that all parts of the organization function in a manner consistent with organizational policies.
Good planning without effective control is time wasted.
Unless plans are presented or known in advance, there are no objectives toward which control can be directed. THE PURPOSES OF THE BUDGET
The benefits that may be realized from a budgeting program are
1. Defining broad objectives and goals and formulating strategies to achieve such objectives;
Each time a budget is prepared, there is a period of critical self-appraisal during which policies and procedures come up for review.
When planning is done well in advance, many problems are anticipated long before they arise, and solutions can be sought through deliverative study. Planning ideally should occur at three levels, namely
a. Strategic planning – focuses on long-range horizon and is performed by the highest level of management
b. Programming or intermediate-range planning – involves identification of broad programs in the functional areas such
Budget
a financial plan of the resources needed to carry out tasks and meet financial goals.
A quantitative expression of the goals the organization wishes to achieve and the cost of attaining these goals.
Budgeting
the act of preparing a budget.
Budgetary control the use of budgets to control a firm’s activities.
Master budget (planning budget/ budget plan) a summary of all phases of a company’s plans and goals for the future.
Indicates the sales levels, production and cost levels, income and cash flows that are anticipated for the coming year.
Represents a comprehensive expression of management’s plans for the future and how these plans are to be accomplished.
DIFFERENCE BETWEEN PLANNING AND CONTROL
Planning involves developing objectives and preparing various budgets to achieve these objectives.
Control involves the steps taken by management to ensure that the objectives set down at the planning stage are attained and to ensure that all parts of the organization function in a manner consistent with organizational policies.
Good planning without effective control is time wasted.
Unless plans are presented or known in advance, there are no objectives toward which control can be directed. THE PURPOSES OF THE BUDGET
The benefits that may be realized from a budgeting program are
1. Defining broad objectives and goals and formulating strategies to achieve such objectives;
Each time a budget is prepared, there is a period of critical self-appraisal during which policies and procedures come up for review.
When planning is done well in advance, many problems are anticipated long before they arise, and solutions can be sought through deliverative study. Planning ideally should occur at three levels, namely
a. Strategic planning – focuses on long-range horizon and is performed by the highest level of management
b. Programming or intermediate-range planning – involves identification of broad programs in the functional areas such