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The Basic Framework of Budgeting

Find out more about the basic framework of budgeting.

What is a Budget?

A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.

  • The act of preparing a budget is called budgeting
  • The use of budgets to control an organization’s activity is known as budgetary control
  • Budgets aren’t just financial, they can be in terms of:
    • Time
    • Acquisition and use of various different materials
    • Manufacturing of multiple products

Difference Between Planning and Control

  • Planning: Involves developing objectives and preparing various budgets to achieve those objectives
  • Control: Involves the steps taken by management to increase the likelihood that the objectives set while planning are attained and that all parts of the organization are working together toward the goal

Responsibility Accounting

Managers should be held responsible for those items – and only those items – that they can actually control
to a significant extent.

Responsibility accounting enables organizations to react quickly to deviations from their plans and to learn from feedback.

Over to You

Who carries the main accounting responsibility over in your place of work? Do you think it is the right person? Why?

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Accounting for Today’s Dynamic World

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