BUDGETARY CONTROL DEFINITION BUDGET: A budget is a monetary and/or quantitative expression of business plans and policies‚ prepared in advance‚ to be pursued in the future period of time. According to Certified Institute of Management Accountants‚ Budget is defined as “A budget is a financial and/or quantitative statement prepared prior to a defined period of time‚ of the policy to be pursued during that period for the purpose of attaining the objective”. Budget is a systematic plan for utilisation
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Budgetary Control is the process of establishing of departmental budgets relating the responsibilities of executives to the requirements of a policy‚ and the continuous comparison of actual with budgeted results‚ either to secure by individual action the objectives of that policy‚ or to provide a firm basis for its revision. The primary objective of budgetary control is to help the management in systematic planning and in controlling the operations of the enterprise. The primary objective can be
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a. Traditional Budgeting Wildavsky (1978‚ p.502) mentions that "traditional budgeting is annual (repeated yearly) and incremental (departing marginally from the year before)". It is conducted on a cash basis in current dollar. It is also in the form of line-items such as personnel or maintenance. This system is essentially a financial plan of estimated expenditures expressed in terms of kinds and quantities of objects to be bought and the estimated funds needed to finance them during a specified
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1. What is budgetary slack? What incentive do managers have to create budgetary slack? Budgetary slack is when “managers intentionally underestimate budgeted revenues or overestimate budgeted expenses in order to make it easier to achieve budgetary goals” (1020). Managers have an incentive to do this to give them a little more rope when dealing with the budget. By giving the budget some slack they can give themselves a little room in achieving their goals‚ rather than simply dealing with a hard
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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
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topic: Budgeting in processing industries with West African Mills Company as a case study. 1.1 BACKGROUND OF THE STUDY A frequent asked question in formulating the corporate plan is “where do we see ourselves in ten years time”? To answer this successfully the firm must consider * What it wants to achieve (objectives) * How it intends to get there (its strategies) * What resources will be required (its operating plans) * How well it is doing in comparisons to the plan (control). (Source:
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Define traditional budgeting Traditional budget is a type of budget which uses the income and expenses from the previous year or month to predict the next month or year ’s budget. A traditional budget is easy to create since it is meant to predict a future period of finances in relation to the previous period. In most cases though‚ the traditional budget usually ends up being too rigid. http://blog.trginternational.com/trg-in-the-board-room/bid/162036/Traditional-budgeting-approach-advantages-and-disadvantages
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future." Budgeting actually refers to the process that‚ after the strategic plan of the business has been made‚ companies made a short term plan (usually one year) to meet the strategic purpose. Traditional budgeting has offered a lot of contributions in so many years’ practice. But it seems it is more and more unsuitable for the modern business. In this paper‚ I will give a brief induction for traditional budgeting; and then discuss the strengths and weaknesses of the traditional budgeting; last I
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IILUSTRATIONS - BUDGETES IILUSTRATION 1: PYE Ltd produces and markets a very popular product called P. The company is interested in presenting its budget for the second quarter of the year. The following information is made available for this purpose. 1. Its expects to sell 50‚000 bags of during the second quarter at a selling price of Rs 9 per kg 2. Each bag of P Requires 2.5 kgs of raw material Q and 7.5 kgs of raw material R. 3. Q costs Rs 1.20 per kg‚ R costs 20 paisa per kg
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“A budgetary planning and control system may include many individual budgets which are integrated into a ‘master budget’.” Budgeting is concerned with the implementation of long term strategic plans‚ by translating these long term plans into short term plans of action. A budget is a plan showing a firms short term objectives‚ and how management intends to acquire‚ use‚ and control the resources in order to attain these objectives. A firms budget should be comprehensive and co-ordinated. That
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