BUDGET AND BUDGETARY CONTROL AS A means OF achieving organizational OBJECTIVES
BUDGET AND BUDGETARY CONTROL AS A MEANS OF ACHIEVING ORGANIZATIONAL OBJECTIVES
A budget is a quantifiable plan of action developed in advance for the period to which it refers, whereas control covers all methods and procedures that lead employees towards accomplishing organisational goals.
This activity is done to learn how the budgeting process is used to achieve various goals within an organisation. A budget, in addition to assisting, planning, coordinating, and communicating an organization's actions, provides a financial blueprint that allows a corporation to organise all of its activities.
This research paper is divided into five chapters for easy comprehension.
The first chapter discussed the circumstances that led to the adoption of a budget and its control in an organisation.
Other chapters derived their foundations from this in order to confirm the facts, recommendations, and conclusion.
It is worth noting that budgeting and financial control have been a welcome and satisfying development in accomplishing organisational goals.
A budget is intended to convey revenue and expenditure forecasts for the upcoming fiscal year, which may correspond to the calendar year with the exception of primitive economics. T
he budget is the primary tool for expressing and carrying out management policies, concepts, procedures, plans, and objectives in quantitative and monetary terms.
Management of an enterprise is efficient when it is able to achieve the enterprise's objectives, and effective when it achieves the objectives with minimal effort.
Following the planning and establishing of defined goals, which essentially means creating a project in the form of a predetermined statement of managerial policy throughout a specific period that provides a standard for comparison with actual results in order to attain an organisational goal.
The company's progress towards these objectives must be tracked. Managers utilise controlling to assess their company's performance against specified goals, identify causes of divergence, and take corrective action as necessary.
Without budgets, there would be no plan against which to gauge performance, and hence the company's organisational goals would not be met.
A budget, according to Horngren and Foster (1999), is “a quantitative expression of a plan of action and an aid to coordination and implementation.”
Furthermore, Warren and fess (1998) defined budgeting as “a formal written statement of management plans for the future expressed in monetary terms.”
To manage personal money, almost everyone employs some type of budgeting, whether it is a written plan for how much to spend on rent, food, clothing, entertainment, vacation, and so on.
To keep this spending under control, they usually set spending restrictions for each item. As they incur real expenses, they compare them to the budgeted estimate.
The budget and budgetary control system are used by both governmental and private companies. Profit-oriented private firms, for example, seek for the most profit possible, which represents the primary objectives of the enterprises' financial goals.
An organisation needs plan in order to select what course of action to take in the future and how to do it effectively. Planning is crucial to an organization's performance because it leads to a critical appraisal of current conditions and offers the business a sense of direction.
Thus, budgeting is defined as a plan that is developed to illustrate how resources will be acquired and used over a period of time. A budgetary control is the use of it to control operations. A budget charts the direction of future activity, assisting management in carrying out its planning duty.
Managers choose diverse goals for their businesses, but a targeted profit is a common goal for almost every organisation.
To ensure that its objectives are met, a company must set spending restrictions and define what constitutes acceptable operating performance.
The restrictions are established in a master budget and are then compared to the actual results as the year proceeds. Without a budget, such a project's costs surpass an acceptable threshold. This results in the budgetary control system.