Concept, Types and Objectives of Budgeting

Concept, Types and Objectives of Budgeting
BY SHUBHAM SHARMA

Contents

What is a Budget? ______________________________________________________________ 3
The Objectives of Budgeting ___________________________________________________ 3
Planning _______________________________________________________________________ 4
Co-ordination _________________________________________________________________ 4
Communication _______________________________________________________________ 4
Control ________________________________________________________________________ 4
Evaluation _____________________________________________________________________ 4
Types of Budget ________________________________________________________________ 5
Differences Between Public Sector and Private Sector Budgeting __________ 5
Control and Motivational Objectives of Budgeting ___________________________ 6
Control theories and responsibility accounting _____________________________ 6
Motivational theories _________________________________________________________ 7
Conclusion ______________________________________________________________________ 8
References _________________________________________________________________________ 9

What is a Budget?
There are numerous definitions of the term 'budget' but it is most simply defined as:
"a plan expressed in financial terms".
An alternative definition which is more applicable to the public sector has been suggested by
Hadley et al, "Budgeting is a process of measuring and converting plans for the use of real
(i.e. physical resources) into financial values. It is the classic problem of how to add together
quantities of apples and oranges into a meaningful economic measurement, the only practical
way for everyday use is to express their economic values in terms of monetary costs and
revenues. Through the process of budgeting the finance function provides the essential link
between management planning and management control."
It is clear from these...