Budget and Budgetary Control Practices
CHAPTER I
1.1 INTRODUCTION
Budget and budgetary control practices are undeniably indispensable as organizations routinely go about their business activities and operations. These organizations are constantly on the alert on how actual levels of performance agree with planned or budgeted performance. A budget expresses a plan in monetary terms. It is prepared and approved prior to a particular budgeted period and explicitly may show the income, expenditure and the capital to be employed by organizations in achieving their goals and objectives.
Budgeting control practices are then devices that organizations use to regulate their budgets. The controls are mostly comprehensive systems of budgets that aid management in carrying out its functions like planning, organizing, directing and controlling.
The budgetary system takes a critical look at how organizations are divided on functional basis and into different sections known as ‘budget centres.’ It proceeds to prepare separate budgets for each budget centre, consolidates all the functional budgets to present the overall organizational budget, compares actual performance against budgeted performance and finally reports variances if there are any. Budgets can be prepared for and used by anyone and anything. That is, we can prepare and use personal budgets and organizations, ministries and non-profit making organizations can all use them. Budgets have to be prepared in advance; and for this reason, they are often referred to in terms of their being part of a feed-forward system. Feedback is a term frequently heard both in accounting and ordinary use. Feed-forward, on the other hand tends to be less frequently heard, yet this word incorporates the most important aspect of budgeting- looking at situations in advance, thinking about the impact and implications of things in advance, and attempting to take control of situations in advance. Budgets are simply exercises in calculation unless they are used. When we use a budget,
1.1 INTRODUCTION
Budget and budgetary control practices are undeniably indispensable as organizations routinely go about their business activities and operations. These organizations are constantly on the alert on how actual levels of performance agree with planned or budgeted performance. A budget expresses a plan in monetary terms. It is prepared and approved prior to a particular budgeted period and explicitly may show the income, expenditure and the capital to be employed by organizations in achieving their goals and objectives.
Budgeting control practices are then devices that organizations use to regulate their budgets. The controls are mostly comprehensive systems of budgets that aid management in carrying out its functions like planning, organizing, directing and controlling.
The budgetary system takes a critical look at how organizations are divided on functional basis and into different sections known as ‘budget centres.’ It proceeds to prepare separate budgets for each budget centre, consolidates all the functional budgets to present the overall organizational budget, compares actual performance against budgeted performance and finally reports variances if there are any. Budgets can be prepared for and used by anyone and anything. That is, we can prepare and use personal budgets and organizations, ministries and non-profit making organizations can all use them. Budgets have to be prepared in advance; and for this reason, they are often referred to in terms of their being part of a feed-forward system. Feedback is a term frequently heard both in accounting and ordinary use. Feed-forward, on the other hand tends to be less frequently heard, yet this word incorporates the most important aspect of budgeting- looking at situations in advance, thinking about the impact and implications of things in advance, and attempting to take control of situations in advance. Budgets are simply exercises in calculation unless they are used. When we use a budget,
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