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Budgeting system

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Budgeting system

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
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  • November 9, 2021 at 8:07 pm #640313
    HamzaYusuf
    Member
    • Topics: 38
    • Replies: 19
    • ☆☆

    Could you please tell me about the problems faced by the company when the traditional approach is revised to a new budgeting system and why it is revised?

    Secondly I don’t understand what is behavioral aspects of budgeting and the purpose of it and when to use that?

    Please help me with these two questions. I appreciate your help SIR 🙂

    November 10, 2021 at 7:24 am #640337
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51579
    • ☆☆☆☆☆

    If the method of budgeting is changed then it will take time for those preparing the budgets to get used to the new system and therefore the budgets are likely to be less accurate.

    I discuss the behavioural aspects in my free lectures on budgeting.

    November 10, 2021 at 8:40 am #640341
    HamzaYusuf
    Member
    • Topics: 38
    • Replies: 19
    • ☆☆

    But why would the company choose to revise its budget in the first place and introduce a new budget system?

    Is it true that there might be some arithmetical errors or previous errors carried forward in the current budget?

    What are the other reasons to revise the budget that you can tell ??

    November 10, 2021 at 4:23 pm #640370
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51579
    • ☆☆☆☆☆

    It is not because of errors (for them they might well revise the budget, but that would not be a reason for revising the system used).

    If, for example, they currently use incremental budgeting then they might decide that it would be more useful to change to zero based budgeting or to rolling budgets.

    Also, if at the moment it is top-down budgeting, they might decide that it would be better to change to bottom-up budgeting because it can be more motivating for their managers.

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