Budgeting involves preparing quantitative financial statements for a defined period to help achieve objectives. It includes designing, implementing, and overseeing budgets. Budgetary control establishes budgets and compares actual results to budgets to ensure policy objectives are met or provide a basis for revision. Budgeting advantages include aiding internal audits, optimal resource allocation, planning, improved communication, and motivating staff. Problems include perceived pressure and departmental conflicts over resources. The budgeting process specifies objectives, success factors, roles, budget centers, periods, committees, and manuals. A flexible budget recognizes variable costs change with activity levels, allowing accurate performance assessment and recasting to match changed conditions.

1. Budget & Budgeting

9. Budget has more application Budget has limited application Comparison are realistic since the changed plan figure are placed against actual ones Actual and budgeted performance cannot be correctly compared if the volume of activity differs It is designed to change according to a change in the level of activity It assumes that conditions would remain static It can be suitably recasted quickly to suit the changed conditions It remains the same irrespective of the volume of business activity Cost are classified according to the nature of their variability Cost are not classified according to their variability Flexible budget Fixed budget