Planning And Control Of Budgets Essay Example | Topics and Well Written Essays - 3000 words

Planning And Control Of Budgets - Essay Example Budgeting is a significant control system in almost all organizations (Armstrong et al., 1996; Ekholm and Wallin, 2000; Merchant and Van der Stede, 2003). A budget is defined as a quantitative statement, which comprises for a defined period of time. In which, planned revenue, assets, expenses, cash flows and liabilities may be included. And, it can be used for multiple purposes (Garrison and Noreen, 2003; Horngren et al., 2003).Additionally, a budget helps the organization to concentrate its current availability of resources; ensure an appropriate level of coordination has been put in place to ensuring budgetary objectives. In which, costs are highlighted to be controlled; and control is achieved when different types of budgets, such as master budgets, sales budgets, purchase budgets, production budgets are compared with the actual costs. On the other hand, planning comes after the step of determining budgets. Planning is strategy how to serve the budgetary objectives.Budgetary objec tives are achieved with the implementation of budgets. And, the prior study suggests that organizations use budgets for the attainment of their identical objectives and they are not determined in isolation (Moores and Yeun, 2001). Consequently, the reasons to the budget are going to be correlated (Shields and Shields, 1998). First, budgets are devised to be used as a means of communication horizontally and vertically. Horizontally, budgets can be used for the purpose of discussion among or between different departmental managers.