The History Of Budgeting

For the following project we are required to prepare a paper which addresses planning and control budgeting. We are going to conduct this using a variety of sources including text books, journals, internet research and our own general knowledge. Budgeting is an important part of every person’s life, whether it be for personal or business use. It gives us a steady outlook on future expenditure and income. The subsequent reading incorporates the history of budgeting, the reasons for producing budgets, the steps that need to be followed in planning and budgetary process, the benefits that occur from successful budgeting, the criticisms that occur from incremental budgeting and the budgeting literature and the arguments regarding whether budgeting

Budgeting started out with governments. They brought to light an annual statement of revenues and expenditures which projected a surplus or deficit result. As a result of this, it was clearly noted that planning was needed to control the results. It provided control and limitations in organisations. This technique in commercial organisations grew steadily and became very popular leading into the 20th century. Budgeting was facilitated by the development of wide-ranging texts on budgeting and administrative accounting. As budgeting was classed as highly significant, the first International Conference on Budgeting took place in Geneva in 1930. This provided a prospect for discussion between applied and speculative consultants on the techniques of budget control. The budgeting technique spread quickly after the World War II from different countries and different sized firms. The popularity of budgeting grew ecstatically.

One of the concerns with budgeting is that it represents a fixed performance for an organisation. It is a commitment by managers to meet specific targets. A study took place in 1952 by a man called Chris Argyris in which he brought to light about the noticeable inefficient behavior effects of budgeting in an organisation. This highlighted the issues that budgets would create if brought about. This can be looked at as a criticism in relation to budgeting. (Clarke,

They following steps include - Communicating details of the budget policy: Information regarding the budget will have been set out previously as part of a long-term planning process. This is the beginning of the planning and budgetary process. Top management of organizations must communicate the effects with those who are planning, conducting and setting out the yearly budget. As well as this other significant changes and procedures should be quantified. For example changes in sales, productivity, changes in industry demand and output. If this is communication is established it will allow for collective procedures to be customary. Determining the factor that restricts performance: It is well known that in every organization there is some influence that restricts the prudent running in the business.it is said that demand is the main concern. Therefore it is important that this hiccup is identified while preparing the budget. Preparation of the sales budget: The level of sales and sales mix govern the level of a company’s operation, when sales demand is the aspect that hampers output. Sales therefore play a very important role in the budgeting process. Thus, we can argue that the sales part of the budget is a rigid part as it is totally reliant on customer actions as well as the state of the economy and whoever the organisation is competing with. Initial preparation of budgets: Each