QS Study

Essential of a sound budgeting system – A budget is a plan as well as a control tool. It is a blueprint for the future course of action and activities. Budgetary control refers to how well managers utilize budgets to monitor and control costs and operations in a given accounting period. A business budget is a plan covering all phases of operations for a definite period in the future. For an effective system of budgeting, certain prerequisites must be present.

These essential of a sound budgeting system are as follows:

  • The budgeting system should have the full support of top management.
  • There should be a well-planned organizational set-up with responsibility.
  • The accounting system should provide accurate and timely information.
  • Staff should be strongly and properly motivated towards the system.
  • It should be meaning full participation of all concerned.
  • A budget should be actually aiming as a coordinating device rather than a control device.
  • The budget should be flexible to permit the adjustments.