The Role Of Budgeting And Its Problems Essay

792 Words Jan 31st, 2015 4 Pages
Budgeting is the establishment of budgets and the continuous comparison of actual to budgeted results either to secure the aims of the policy or provide a basis for revision (CIMA, 2000). (Peter Atrill & Eddie Mclaney, 2002) Stated that, it is very vital to recognise that budgets do not exist in a vacuum, they are an integral part of a planning framework that is adopted by well-run businesses. The role of the budget system is to answer the needs of management in respect of the discernment and decisions it is required to work and to provide a foundation for management functions for planning and control (Weetman, 2006). This essay will discuss the role and objectives of traditional budgeting and its problems. (Weetman, 2006) Assess that the budgetary process contributes to effective management in the following areas: planning, control, communication and co-ordination, and performance evaluation which ought to be looked into.

ROLE OF BUDGETING

o Communication and Co-ordination: A budget serves as a medium through which the action of different departments of an organisation come together and reconciled into common plan (Drury, 2006). Without any guidance, managers may each make their own decisions, believing that they are working in the best interest of a business. Therefore, communication plays a vital role as it ensures all departments are kept fully informed of plans and policies, and constraints, to which the organisation is expected to conform. (Drury, 2006) Confirmed…

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