This document discusses budgeting concepts including its characteristics, objectives, techniques/process, principles, advantages, and limitations. Budgeting is a technique used for future forecasting and planning based on business objectives. It helps improve managerial efficiency, cost control, and performance evaluation. The budgeting process involves formulating policies, drafting forecasts for areas like sales and costs, coordinating departmental budgets, and approving a master budget. Budgeting principles include sponsorship by top management, determining responsibility centers, and taking timely corrective action. Advantages are helping with planning, decision making, and resource utilization. Limitations include potential for bias and increased costs.

1. BUDGETING CONCEPTS

2. DR SHIV JHALANI
ASST PROFESSOR
BIYANI GROUP OF COLLEGES
JAIPUR

3. Characteristics of Budgeting-
Budgeting is a means of preparing a budget
Budgeting is a technique
Budgeting is a standard
Budgeting is used for future forecasting
Budgeting is based on aims/objectives/goals of a
business unit
Budgeting is for a definite period
Budgeting is a continuous managerial process.

4. Objectives of Budgeting- Budgeting help in-
 Increasing managerial efficiency
 Improving competitive strength
 delegation of authority
 diversion of work
 Cost control
 Cost reduction
 Fixing standards
 Comparison
 Performance evaluation
 Communication
 Controlling
 Coordination
 Planning

5. Techniques or/Process of Budgeting-
• Formulation of business policies- for example-
 Purchase policy
 Production policy
 Inventory/logistics policy
 Sales policy
 Finance/Money policy
• Drafting Budget forecasts- Budget forecasts includes-
 Sales forecast
 Purchase forecasts
 Production forecasts
 Capital expenditure/investment forecast
 Research and development expenses forecasts
 Budgets alternative plans and selection one best among them.
 Coordination among various departmental budgets
 Budget committee formulates master budget
 Approval of master budget in the meeting of the shareholders/owners.

6. Principles of Budgeting-
 Sponsored by the top management
 Determination of responsibility centers
 Determination of controllable costs
 Organizing budget seminars and training
 Pre determination of appropriate time period of budget
 Terminology of budget should be uniform
 Goals shall be one which can be achieved
 Economical cost of budget
 It should be flexible
 Top management approval
 Budget program evaluations
 Timely corrective action shall be taken

7. Advantages of Budgeting-
 Helps in planning, organizing, coordination, motivating and
controlling.
 Helps in future profitability projection.
 Helps in making decision of all employees
 There functions to be performed
 There responsibilities
 Helps in comparison of actual figures with budgeted ones.
 Helps in participation of workers in management process.
 Best and maximum utilization of business resources.
 Helps in regular and up-to-date accounting records
maintenance
 Helps in development of cooperation and inter dependence

8. Limitations of Budgeting-
 Effected by personal bias and prejudices
 Preparation of frailty budgets due to lack of
appropriate information.
 Budget failure due to lack of departmental
cooperation.
 Extra burden and cost increase due to budget
preparation.
 More attention on budget objectives and less
attention on employees.
 Budgets are simply estimates of future activities.
 Budget decision taken mostly at high level.
 Ignorance of lower level employees