What are the requirements of a good budgeting system, Managerial Accounting

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Requirements of a good budgeting system

Following are the requirement of a good budgeting system:

1) Budgeting process should be backed and supported by the chief executive of an organization.

2) The organization goal should be quantified and clearly stated. These goals should be within the framework of organization strategic and long range plans.

3) The organization goals must be divided in functional goals.

4) The functional goals should not conflict with overall organization objectives.

5)  All in the organization should mentally accept the exercise of budget preparation.

6) The person responsible for execution of budget should participate in budget preparation

7) The budget should be realistic. It should represent goals that are reasonably attainable.

8) The budget should cover all phases of the organization

9) The budgeting should be a continuous exercise

10) Periodic reports should be prepared promptly comparing budget and actual results, i.e., there should be effective follow up

11) Clear cut organization line should be established with appropriate delegation of responsibilities for effective budget implementation.

12) The budgeting system should be based on information communication and participation.

 


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