As a guide to current operations and as a partial

Info icon This preview shows pages 174–177. Sign up to view the full content.

View Full Document Right Arrow Icon
as a guide to current operations and as a partial basis for the subsequent evaluation of performance’. (Gordon and Shillinglaw) ‘A budget is a financial and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during the period for the purpose of attaining a given objective’. (The Chartered Institute of Management Accountants, London)
Image of page 174

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
168 13.3.2 ELEMENTS OF BUDGET The basic elements of a budget are as follows:- 1. It is a comprehensive and coordinated plan of action. 2. It is a plan for the firm’s operations and resources. 3. It is based on objectives to be attained. 4. It is related to specific future period. 5. It is expressed in financial and/or physical units. 13.3.3 CHARACTERISTICS OF A BUDGET: The main characteristics of a budget are: A Comprehensive Business Plan showing what the enterprise wants to achieve. Prepared in Advance. For a Definite Period of Time. Expressed in quantitative form, physical or monetary terms, or both. For achieving a given objective. A proper system of Accounting is essential. System of Proper Fixation of Authority and Responsibility has to be in place. Need of Budget A budget is prepared to have effective utilisation of resources and for the realisation of objectives, as efficiently as possible. 13.3.4 BUDGETING Budgeting is the process of preparing and using budgets to achieve management objectives. It is the systematic approach for accomplishing the planning, coordination, and control responsibilities of management by optimally utilizing the given resources. In other words Budgeting is a technique of formulating budgets. Budgeting is the whole process of designing, implementing and operating budgets. The main emphasis in this is short-term budgeting process involving the provision of Resources to support plans which are being implemented. ‘The entire process of preparing the budgets is known as Budgeting’ (J. Batty) ‘Budgeting may be said to be the act of building budgets’ (Rowland&Harr) 13.3.5 ELEMENTS OF BUDGETING 1. A good budgeting should state clearly the firm’s expectations and facilitate their attainability. 2. A good budgeting system should utilize various persons at different levels while preparing the budgets.
Image of page 175
169 3. The authority and responsibility should be properly fixed. 4. Realistic targets are to be fixed. 5. A good system of accounting is also essential. 6. Wholehearted support of the top management is necessary. 7. Budgeting education is to be imparted among the employees. 8. Proper reporting system should be introduced. 9. Availability of working capital is to be ensured. 13.4 REVISION POINTS 1. Budget is a Pre-determined Statement of Management Policy During a Given Period Which provide a standard for comparison with the results Actually achieved 2. Budgeting is a technique of formulating budgets.
Image of page 176

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 177
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern