Chapter%2020%20notes%20(Kimmel)[1]

Accounting: Tools for Business Decision Making

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Chapter 20 Budgetary Planning A budget is a detailed plan for acquiring and using financial and other resources over a specified period. Budgeting involves two stages: 1 Planning, which includes developing future objectives and preparing various detailed budgets to achieve those objectives. 2 Control, which involves the steps taken by management to attain the objectives set down at the planning stage. ADVANTAGES OF BUDGETING 1. It requires all levels of management to plan ahead and to formalize goals on a recurring basis. 2. It provides definite objectives for evaluating performance at each level of responsibility. 3. It creates an early warning system of potential problems so that management can make changes before things get out of hand. 4. It facilitates the coordination of activities within the business by correlating the goals of each segment with overall company objectives. 5. It results in greater management awareness of the entity’s overall operations and the impact on operations of external factors, such as economic trends. 6. It motivates personnel throughout the organization to meet planned objectives.
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Most entities use a “bottom-up participative approach.” The bottom-up participative approach is driven by involving lower-level
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Chapter%2020%20notes%20(Kimmel)[1] - Chapter 20 Budgetary...

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