Activity Based Budgeting And Budgeting

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Introduction- What is Activity Based Budgeting
Activity based budgeting (ABB) is a method of budgeting where the activities that incur costs in every functional area of an organization are recorded. Their relationships are defined and analyzed. Activities are tied to strategic goals, after which the costs of the activities needed are used to create the budget. Activity-based budgeting involves determining which activities incur costs within an organization, establishing the relationships between them, and then deciding how much of the total budget should be allocated to each activity. Activity-based budgeting is a planning system which costs are associated with activities, and budgeted expenditures based on the expected activity level . These activities are organized according to the company 's goals, and the costs of each are organized to compile the budget. ABB contrasts with traditional budgeting, which usually simply increases the previous year 's budget to account for inflation or revenue growth, ABB seeks out new opportunities and allocates resources in the budget based on them. ABB provides opportunities to align activities with objectives, streamline costs and improve business practices. ABB is a more accurate way to forecast budgeting.

Activity –based budgeting as a method of budgeting based on activity framework, using cost driver data in the budget setting and variance feedback processes. ABB focuses on activities rather than functions. As regards the stages
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