Budgeting

Abstract

When you have finished working through this chapter you should be able to

• Define the term budget and explain what is meant by budgetary control

• State at least four objectives of a budget

• Explain what is meant by responsibility accounting

• Define the terms management by objectives (MBO) and MANAGEMENT BY EXCEPTION (MBE)

• Contrast and compare the bottom up and top down approaches to budgeting

• Contrast and compare zero-base budgeting with an incremental approach to budgeting

• Explain what is meant by a master budget and name the three main components of the master budget

• In the context of a simple example, compile operating budgets for stock, debtor and creditor control, a CASH BUDGET, a BUDGETED PROFIT AND LOSS STATEMENT and a BUDGETED BALANCE SHEET; in other words, construct a master budget