PLANNING, BUDGETING &

FORECASTING
MBA 202 : Advanced Managerial Accounting and Finance
BY: KHALED AL GHOSAIN
JHUNNA LAICA TEH
FAITH LEJARSO
RICKY LARA
RICHELL PAYOS
 MBA 202 : Advanced Managerial Accounting and Finance

BUDGETING METHODOLOGIES
FAITH A. LEJARSO
 MASTER
BUDGET
Also known as ANNUAL

BUSINESS PLAN or

PROFIT PLAN
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BUDGETING METHODOLOGIES
Six different budgeting systems that a company can use to create its budgets are:

1. Project / Program Budgeting

2. Activity – Based Budgeting

3. Incremental Budgeting

4. Zero-Based Budgeting

5. Continuous (or Rolling) Budgeting

6. Flexible Budgeting
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1. PROJECT BUDGETING
PROJECT / PROGRAM BUDGET

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2. ACTIVITY-BASED BUDGETING
Focuses classifying cost based on
activities rather than based on
departments or products

does not consider the past year’s

budget to arrive at current year’s
budget

is carried out to bring efficiency in

the activities of an organization.
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3. INCREMENTAL BUDGETING
• The allocation of resources is based upon allocations
from the previous period.
• based on the idea that a new budget can best be
developed by making only some marginal changes to the
current budget.
• It encourages "spending up to the budget" to ensure a
reasonable allocation in the next period. It leads to a
"spend it or lose" mentality.
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3. INCREMENTAL
The BUDGETING
impact of change can be seen quickly.
ADVANTAGES DISADVANTAGES

❑ Simplicity ❑ It promotes unnecessary

❑ Operational Consistency spending
❑ Funding Stability ❑ Discourages innovation
❑ Reduces internal rivalry
❑ Fails to account for changes
and external factors
❑ Lacks an incentive for a
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4. ZERO-BASED BUDGETING

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ZERO-BASED BUDGETING

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5. CONTINUOUS / ROLLING BUDGETING

Rolling budget is a continuous budget that is

updated regularly when the earlier budget period
expires or we can say it is an extension of existing
period budget.

Rolling Budget is also known as budget rollover.

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5. CONTINUOUS / ROLLING BUDGETING

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6. FLEXIBLE BUDGETING

It establishes a base cost budget for a

particular level of output , plus a an incremental
cost volume amount that show the behavior of
cost at various volumes.

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6. FLEXIBLE BUDGETING
It is used more as an analysis tool for determining
variance of the plan than for creating the original
budget.

Characteristics of flexible budgeting: Easy to change

according to variation of production and sale volumes.
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