Budgetary accounting is a tool for formalising forecasts and for translating short and medium-term objectives and plans into figures. It is a set of arrangements that allow activities to be planned and the necessary resources allocated, so as to coordinate the organisation’s actions, motivate those responsible and evaluate performance.
It consists of preparing budget forecasts for the coming year, taking account of what was achieved in the preceding period and of the specific objectives set by management. The aim is to arrive at realistic forecasts, neither understated nor overstated.
Budgetary accounting takes account only of income and expenditure — costs, investments and so on — and applies to every part of the organisation: human resources, marketing, purchasing and the rest.
It carries no legal status and is not compulsory. Each organisation must therefore put in place the procedures that suit it.
Its purposes differ from those of general accounting. Unlike cash accounting, it uses neither the transactions associated with receipts and payments nor those concerning the financing of the organisation’s activities. Its object is rather to optimise:
the planning of forecasts;
the coordination of the organisation’s various strategies;
the analysis of variances between results achieved and results expected;
the correction of actions in progress in the light of that variance analysis;
control of the organisation.
A budget is a commitment by those responsible to the objectives to be met; it contributes to formalising the criteria of performance.
AUDICO is ready to assist you in putting in place an effective system of budgetary accounting, and so to contribute to your organisation’s performance.
