Objectives of budgeting
• Coordination
• Communication
• Control Motivation
• Clarification of Responsibility and Authority
• Planning
Steps followed in the planning process
• Identify the objectives
• Identifying the alternative strategies available
• Evaluation of strategies available
• Selection of the best course of action
• Implementation of the selected course of action
• Control
Stages in budgeting process
• Communicating details of the budget policy and guidelines to people responsible for preparation of budgets
• Determining the limiting factor
• Preparation of the sales budget
• Initial preparation of other budgets
• Negotiation of budgets
• Coordination and review of the budget
• Final acceptance of the budget
• Budget review
Limitations of budgeting
• Budgets are based on estimate
• Danger of rigidity
• Budgeting is only a tool of management
• It is an expensive technique
• Difficult to set levels of attainment
• Budgeting control is a terminate exercise and therefore variances may be of little use to
the current operations.
Organization of budgetary control
• The creation of budget centres
• The introduction of adequate accounting records
• The preparation of organization charts
• The establishment of a budget committee