Behavioural Aspects Of Budgeting

Question 1

What are budgets useful basis for?

What do they involve?

Answer 1

Exercising control over business

Making events conform to short term plans

Question 2

What is the routine for most businesses?(3)

Answer 2

Prepare budgets
Perform and collect data on actual outcomes
Respond to variances between planned and actual performance and exercise control

Question 3

What do senior management retain?
What is delegates to junior management?
What can senior management use targets for?
Ultimately doing what?

Answer 3

Control
Decision making and responsibility
To check whether targets are made are being met
Working towards objectives of business

Question 4

What is it called when senior management focus on the things not going to plan?

Answer 4

Management by exception

Question 5

Feedback control
What does this control involve?
What is the routine for this?(4)

Answer 5

Taking steps to get things back on track as soon as there is a signal they’ve gone wrong
Prepare budgets
Perform
Collect info on actual performance
Compare actual performance with budget and take action on deviations

Question 6

Feedforward Control
What is made and what is taken?
What might preparing budgets reveal?
What does it anticipate?

Answer 6

Predictions made as to what could go wrong and steps taken to avoid undesirable outcomes
Areas where problems will arise
Future problems

Question 7

When does budgeting embrace feedforward control?

Feedback?

Answer 7

When preparing budgets

When preparing budgets with actual outcomes