1. Chapter 9 Purpose of budgets
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld

2. Purpose of budgets
Planning: Necessitates setting of goals and establishing actions needed to attain goals.
Organising: Involves the allocation of resources.
Leading: Two main aspects are communicating & motivating.
Controlling: Process of setting standards, measuring current performance and taking remedial action if needed.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld

3. Behavioral aspects of budgeting
To maintain supportive and cooperative relationships with staff.
The use of punishment (authoritarian style) tends to encourage attempts to ‘beat the system’.
Padding the budget means overestimating costs and/or underestimating revenue.
Participation in the budgetary process tends to result increased productivity and satisfaction.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld

4. Advantages arising out of staff participation
Improved communication.
Greater understanding of what is involved.
Opportunity to thrash out problems.
Increased acceptance.
Improved commitment.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld

5. Factors affecting behaviour
Targets perceived by employees as being too difficult.
Targets that do not provide any challenge.
Insufficient flexibility.
Narrow-minded managers.
Emphasis on financial goals to the detriment of non-financial goals.
Copyright  2003 McGraw-Hill Australia Pty Ltd
PPTs t/a Budgeting, second edition, by Banks & Giliberti
Slides prepared by Mya Aronfeld