FINANCIAL MANAGEMENT

ACCOUNTING

TOPIC :
PERFORMANCE BUDGETING

BY:-
Arpita jaiswal (37)
Arun mishra (38)
Performance budgeting : involves evaluation of the
performance 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

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)
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
 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
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.

PERFORMACE TRADITIONAL
BUDGETING BUDGETING
1. In it, the flow of 1. In it, the flow of
decision is upward. decision is downward.

2. It follows the function 2. In it, the classification

—programme---- activity of expenses is by objects.
classification.
3. It makes a prospective 3. The approach it
approach with its focus on retrospective in such
future markets. budgeting.
•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.
 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 budget
and performance in reaching stated objectives