Ans. ESSENTIALS OF EFFECTIVE BUDGETING
A
good budgeting system requires good organisational system with lines of
authority and responsibility clearly mentioned. There must be perfect
co-ordination among different functions as well as participation of responsible
managers / supervisors in the decision making process. Thus, the main
essentials of effective budgeting may be as follows:
a)
There should be well-planned organisational set-up, authority and
responsibility clearly defined, budget committee should be formed consisting of
all top executives.
b)
There should be a good accounting system which provides accurate and timely
information.
c)
Variations should be reported promptly and clearly to the appropriate levels of
management.
d)
Budgets have no meaning unless they lead to control action as a consequence of
feedback provided.
e)
The whole system should enjoy the support and co-operation of top management.
f)
Staff should be strongly and properly motivated towards the systems.
g)
Budgets should be prepared on the basis of clearly defined business policies after
discussion held with the head of individual department so that they may provide
their suggestions in this regard.
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