BUDGETING

TECHNIQUES

Clarin, Angelika Rose M.

LINE-ITEM BUDGETING

– Often referred to as “traditional approach” or “historical

approach”
– Within the budget, expenditures are classified by
organization and object of expenditure to control the use of
resources.
– It is the product of many “factorings” beginning at low
organizational levels whose requests are aggregated and
perhaps trimmed as they rose through an hierarchy.
LINE-ITEM BUDGETING

̶ The use of line item budgets creates valuable statistical

information that demonstrates trends and opportunities to
save money.
̶ It presents little useful information to decisionmakers on
the functions and activities of organizational units
 PERFORMANCE BUDGETING
– Is a budget that reflects the input of resources and the
output of services for each unit of an organization.
– Is defined as a budget based on functions, activities and
projects.
– The allocation of funds and resources are based made on
their potential results.
 PERFORMANCE BUDGETING
– It gives more comprehensive and reliable information to the
chief executive, the legislative body and the general public on
the policies of government.
– It focuses more on quantitative evaluation rather than
qualitative evaluation.
 PROGRAM AND PLANNING
BUDGETING
– Is a concept that stresses the importance of establishing a
strong linkage between planning and budgeting.
– The budget shows the purposes of the expenditure, the cost
of the “programs” proposed for those purposes and
measurements and result under each program.
 PROGRAM AND PLANNING
BUDGETING
– PPB aims to specify the objectives or “output” of government
spending programs and to minimize the costs. To do so
requires the systematic use of analysis in connection with
budget formulation, planning, program development and
evaluation.
 ZERO-BASED BUDGETING
– is a method of budgeting in which all expenses must be
justified for each new period.
– It necessitates each manager responsible for a major activity,
cost center or function to justify fully his budget proposal
following a systematic method of identifying, analyzing,
evaluating, and ranking present and new projects.
 ZERO-BASED BUDGETING
– Against the regular methods of budgeting that involve just
making some arbitrary changes to the previous year’s budget,
zero-based budgeting makes every department relook each
and every item of the cash flow and compute their operation
costs. This to some extent helps in cost reduction as it gives a
clear picture of costs against the desired performance.
 ZERO-BASED BUDGETING
– Zero-based budgeting is a very time-intensive exercise for a
company or a government funded entries to do every year as
against incremental budgeting, which is a far easier method.
– Making an entire budget from the scratch may require the
involvement of a large number of employees. Many
departments may not have an adequate time and human
resource for the same.