Planning, control and performance: Budgeting
‘The budget is God.’
Slogan at Japanese Company, Topcom (Economist, 13 January 1996)
Source: The Wiley Book of Business Quotations (1998), p. 90.
After completing this chapter you should be able to:
- Explain the nature and importance of budgeting.
- Outline the most important budgets.
- Prepare the major budgets and a master budget.
- Discuss the behavioural implications of budgets.
Go online to discover the extra features for this chapter at www.wiley.com/college/jones
- The two major branches of cost accounting are costing, and planning, control and performance.
- Budgeting is a key element of planning, control and performance.
- Budgets are ways of turning a firm's strategic objectives into practical reality.
- Most businesses prepare, at the minimum, a cash budget.
- Large businesses may also prepare a revenue, a trade receivables and a trade payables budget.
- Manufacturing businesses may prepare a raw materials, a production cost and a finished goods budget.
- Individual budgets fit into a budgeted income statement and a budgeted statement of financial position.
- Budgeting has behavioural implications for the motivation of employees.
- Some behavioural aspects of budgets are spending to budget, padding ...