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FINANCIAL MANAGEMENT
ACCOUNTING
TOPIC :
PERFORMANCE BUDGETING
BY:-
Arpita jaiswal (37)Arun mishra (38)
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Performance budgeting: involves evaluation of theperformance of the organization in the context of both the
specific as well as over all objectives.
It is a financial plan providing a statement of mission,
goals, objectives and regular assessment of performance
as a part of the budgeting process, which creates linkage
between the necessary inputs for the implementation of
the strategic development plan and anticipated outcome
Presupposes crystal clarity of organizational
objectives in general and short term
Aims at continuous growth in long run
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COMPRISES OF THREE ELEMENTS :
The result (final outcome)
The strategy (different ways to achieve the outcome)
Activity (what is actually done to achieve the final
outcome)
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CHARACTERSISTICS OF PERFORMANCE
BUDGETING:
Identification of mission, goals, and objectives
Linkage of strategic planning information with
the budget
Development and integration of performance
measures into the budget
Disaggregation of expenditures into very
broad areas
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CONTROL RATIOS :
1) Capacity Ratio = Actual Hours Worked * 100
Budgeted Hours
2) Activity = Standard Hours For Actual production * 100
Budgeted Hours
3) Efficiency Ratio = Standard Hours For Actual
production
*100
Actual Hours Worked
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ADVANTAGES OF PERFORMANCE BUDGETING:
It presents clearly the purposes and objectives for which
funds are required.
It gives better appreciation of budgeting by legislature.
It improves budget formulation process .
It enhances accountability of the executives.
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PERFORMACE
BUDGETING
TRADITIONAL
BUDGETING1. In it, the flow of
decision is upward.
1. In it, the flow of
decision is downward.
2. It follows the
functionprogramme----
activity classification.
2. In it, the classification
of expenses is by objects.
3. It makes a prospective
approach with its focus on
future markets.
3. The approach it
retrospective in such
budgeting.
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It requires preparation of performance reports.
prepared by departmental head.
compare budget and actual data and show
existing variance
Deviations are identified.
Necessary actions to correct the deviations from the
budget are taken.
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CONCLUSION :
In the past two decades, there has been a
fundamental restructuring of the budget
management systems in various countries. The
new budget management model, indicated here
(perhaps a little loosely) as performance
budgeting, but with different titles in different
countries, aimed at forging a more direct link
between allocating resources through the budgetand performance in reaching stated objectives