logo image

Budget Approaches Essay

There are a different number of budget approaches that an organization can adopt, namely incremental budgeting and zero-based budgeting. Incremental budgeting as its name implies is a procedure that is mainly based on the past costs of the company.  Indeed, expenditure is determined by referring to what was spent last year and adding an additional percentage to cater for inflation and other cost driver forces.  Even though commonly used in practice, incremental budgeting does not rectify past inefficiencies and thus diminishes effective use of the factors of production.

Zero-based budgeting, as its name implies, contends that all expenses start at zero.  In fact, under this system, all expenditure has to be justified in terms of its value rendered to the organization before being accepted every time a functional budget is prepared.  This results in a more effective use of the resources of the firm.  The main weakness of this system is that a lot of effort is required in its running by the managers involved.

Creation and Uses of Budgets

Budgets actually are the short-term plan that aid in putting the strategic plan into action.  Therefore budgets originate from the strategic plan set.  The appropriate use of budgets helps all levels of management in: planning and coordination the firm’s activities, clarifying the authority and responsibility of staff and management, communication the company’s objectives, motivating and controlling employees.

Responsibility of Monitoring Budgets

As already stated, budgets stem from the strategic plan that is normally conceived by the executive management of the company.  Indeed budgetary control measures are put by top management to ensure that the strategic objectives are reached.  This does not mean that operational management is not involved in the budgeting process.  Indeed there is the participative style of budgeting, which entails negotiations between top management and departmental management in setting of the budget figures.  A zero-based budgeting system, for instance, utilizes such approach.


Drury C. (1996). Management and Cost Accounting. Fourth Edition. New York: International Thomson Business Press.

Lucey T. (1997). Costing. Fifth Edition. London: Letts Educational.

Lucey T. (2003). Management Accounting

Need essay sample on "Budget Approaches"? We will write a custom essay sample specifically for you for only $ 13.90/page

. Fifth Edition. Great Britain: Biddles Limited.

Can’t wait to take that assignment burden offyour shoulders?

Let us know what it is and we will show you how it can be done!
Sorry, but copying text is forbidden on this website. If you need this or any other sample, please register

Already on Businessays? Login here

No, thanks. I prefer suffering on my own
Sorry, but copying text is forbidden on this website. If you need this or any other sample register now and get a free access to all papers, carefully proofread and edited by our experts.
Sign in / Sign up
No, thanks. I prefer suffering on my own
Not quite the topic you need?
We would be happy to write it
Join and witness the magic
Service Open At All Times
Complete Buyer Protection
Plagiarism-Free Writing

Emily from Businessays

Hi there, would you like to get such a paper? How about receiving a customized one? Check it out https://goo.gl/chNgQy

We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy