Page 135 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Introduction

Budget is an estimate prepared for definite future period either in terms of financial or non-

fi nancial terms. Budget is prepared for any course of action or business or state or Nation, as a
whole. The budget is usually expressed in terms of total volume.
According to ICMA, England, a budget is as follows “a fi nancial and or quantitative statement

prepared and approved prior to a defined period of time, of the policy to be pursed during the
period for the purpose of attaining a given objective.”

It is in other words as “detailed plan of action of the business for a definite period of time.” It is

a statement of financial affairs/quantitative terms of an activity for a defined period, to achieve
the enlisted objectives.
Did u know? What is budgeting?
Budgeting is the course involved in the preparation of budget of an activity.

7.1 Meaning and Features of Budgeting

Budgeting means the process of preparing budgets. In other words, budgeting refers to the
management action of formulating budgets. Preparation of budgets involves study of business
situations and understanding of management goals as also the capacity of the organisation.
According to Welsch, “budgeting is the principal tool of planning and control offered to
management by accounting functions.”

In the words of J. Batty, “the entire process of preparing the budgets is known as budgeting.”
Rowland and Harr has defined budgeting as, “budgeting may be said to be the act of building

budgets.”

According to the definition, the essential features of a budget are as follows:
1. It is prepared for a definite period well in advance.

2. It may be stated in terms of money or quantity or both.

3. It is a statement defining the objectives to be attained and the policy to be followed to
achieve them in a future period.
4. It is a statement expressed in monetary and/or physical units prepared for the
implementation of policy formulated by the management.
5. It is laid down prior to the budget period during which it is followed.

6. The policy to be followed to attain the given objective must be laid before the budget is
prepared.

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