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Unit 6: Budgetary Control

Traditional Budgeting vs. Performance Budgeting Notes

The traditional budgeting gives more emphasis on the financial aspects than the physical aspects
or performance. As a result, control of the performance in terms of physical units and the related
costs is difficult to achieve.

Note Performance budget aims at establishing a relationship between the inputs and the
outputs.

Traditional budgets are generally prepared with the main objectives or items of expenditure. In
other words, the budget is structured in such a manner as to highlight the items of expenditure,
namely, salaries, stores and materials, rates, rents and taxes, and so on. In brief, the effort is to
show on what items the expenditure is to be incurred. But the main focus of the performance
budget is the purpose for which the expenditure is being incurred and not the items of the
expenditure. Therefore, in the latter, the emphasis is more on the functions of the organisation,
the programmes to discharge these functions and the activities which will be involved in
undertaking these programmes.

Self Assessment

Fill in the blanks:
9. A …………………… budget can be defined as a budget which is related to the current
conditions and is prepared for use over a short period of time.
10. The preparation of …………………… budget is generally the starting point in the operation
of budgetary control.

11. …………………… budget is another important budget its object is to indicate the flow of
funds and their requirements.
12. A …………………… budget means a budget which is prepared on the basis of a standard
or fixed level of activity.
13. A …………………… budget is also known as dynamic budget, sliding budget, variable
budget, step or expenses control budget.
14. This …………………… is considered as a nerve centre of the entire budgetary control
system.
15. Flexible budget is designed to …………………… in accordance with the level of activity
actually attained.”

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Case Study Budget Preparation

 The Kingdom of Imagination (KoI) was approved for a US $ 101m Round 9 HIV
grant. This grant is being consolidated under a Single Stream Funding with the
Global Fund R8 HIV grant.
 The TRP recommended this proposal for funding on the condition that the total
overhead and infrastructure budget of the Principal Recipient be critically reviewed
Contd...

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