The Business 's Planning And Control Policy

1179 Words Nov 17th, 2014 5 Pages

In the most recent years budgets are considered to be one of the key factors about the business’s planning and control policy (Thomas, 1983, p. 133). Financial budgets show the business’s strategy concerning the following year compiled by financial statements, plus they are supposed to be the policy used in order to evaluate the managerial performance and be the principle of the management system (ibid). Budgets are considered to be attached to the concept of control.
It is really essential that firms create a written project that formulates which will be the objectives of the company, what kind of strategies should be followed and what outcomes are more likely, also known as performance targets (Merchant & Van der Stede, 2012, p.306). According to Drury (2004, p. 593) budgeting is affected by the fulfillment of the deep-rooted plan for the following year and, due to the shorter preparation boundary, budgets are supposed to be accurate and particularized. Budgets are a straightforward evidence of what should be anticipated to be accomplished throughout the duration of the budget period.
According to Hansen and Mowen (2003, p.992) “Budgetary slack is the process of padding the budget by overestimating costs and underestimating revenues”. Managers and workers in a firm need to be encouraged to participate in the budget. There are two main ways in which the participation in the budget takes place: the first one is the “top-down” approach, in which the managers give…
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