Objectives of budgetary planning, Cost Accounting

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Objectives of Budgetary Planning

1) Coordination

The budgetary process needs that visible detailed budgets are developed to cover every activity, function or department in the organization. It is only possible whereas the effort of one department's budget is concerned to the budget of another department. In this way, coordination of activities, department and function is achieved.

2) Communication

The full budgeting process includes liaison and discussion with all levels of management. Both horizontal and vertical communication is essential to ensure suitable coordination of activities.

3) Control

This is the process for comparing real results along with the budgeted results and reporting upon variances. Budgets set a control gauge that assists to accomplish the plans set in agreed expenditure limits.

4) Motivation

Budgets may be observed as a bargaining process whether managers compete along with each other for scarce resources. Budges set targets that have to be achieved. Where budgetary targets are tightly set, several individuals will be positively motivated towards achieving them.

5) Clarification of Responsibility and Authority

Budgetary process necessitates the organization of a business into responsibility and budget centers along with clear lines of responsibilities of each manager. This decreases duplication of efforts.

6) Planning

It is via Budgetary Planning that long-term plans are place into action. Planning includes determination of objectives to be attained at a future predetermined time. Whereas monetary values are attached to plans they become budgets.


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