Lecture 3- Budgeting (2)

Activity-based budgeting- An approach to [blank_start]budgeting[blank_end] that takes [blank_start]cost objects[blank_end] as the starting point, determines the necessary [blank_start]activities[blank_end] & then [blank_start]estimates[blank_end] the resources that are required for the [blank_start]budget period[blank_end]

Zero-based budgeting- An approach to [blank_start]budgeting[blank_end] in which [blank_start]projected expenditure[blank_end] for existing activities starts from [blank_start]base zero[blank_end], forcing [blank_start]managers[blank_end] to justify all [blank_start]budget expenditure[blank_end]

One benefit of activity-based budgeting is that it allows [blank_start]organisations[blank_end] to [blank_start]gain[blank_end] a [blank_start]thorough understanding[blank_end] of their business [blank_start]processes[blank_end] & [blank_start]cost[blank_end] behaviour which can be used to improve [blank_start]decision making[blank_end]

One drawback of activity-based budgeting is that it is [blank_start]costly[blank_end] & [blank_start]time consuming[blank_end] to [blank_start]implement[blank_end]

One benefit of zero-based budgeting is that it avoids the [blank_start]deficiencies[blank_end] of [blank_start]incremental budgeting[blank_end] & represents a move towards the [blank_start]allocation[blank_end] of resources by [blank_start]need[blank_end] or [blank_start]benefit[blank_end]

Another benefit of zero-based budgeting is that it [blank_start]focuses attention[blank_end] on [blank_start]outputs[blank_end]

One drawback of zero-based budgeting is that it is [blank_start]costly[blank_end] & [blank_start]time consuming[blank_end] to implement as it is [blank_start]built[blank_end] from [blank_start]scratch annually[blank_end]

Another drawback of zero-based budgeting is that it requires [blank_start]specialised training[blank_end] or [blank_start]personnel[blank_end] to accomplish, and requires [blank_start]more resources[blank_end] in general

Beyond budgeting- A term used to describe [blank_start]alternative approaches[blank_end] to [blank_start]annual budgeting[blank_end]

One benefit of beyond budgeting is that it is a [blank_start]more adaptive process[blank_end] than [blank_start]traditional budgeting[blank_end]

Another benefit of beyond budgeting is that it is a [blank_start]decentralised process[blank_end]

One drawback of beyond budgeting is that there is a [blank_start]lack[blank_end] of a [blank_start]road map[blank_end] which [blank_start]details[blank_end] where a [blank_start]business[blank_end] is & where it wants to go

Another drawback of beyond budgeting is that [blank_start]without[blank_end] a [blank_start]budget[blank_end], there is no [blank_start]overall framework[blank_end] of [blank_start]control[blank_end] which allows companies to [blank_start]plan[blank_end], [blank_start]co-ordinate[blank_end] and [blank_start]control[blank_end] their activities