Question

In 100 words or fewer, explain the differences between participative budgeting and traditional budgeting.

Answer 1

Budgeting is considered to be one of the most important, successful and useful tool ortechnique used in managerial accounting (Pietrzak, 2013). Nowadays almost everyorganization relies heavily on budgets and budgetary systems to achieve strategic goals and itcan reap handsome rewards if they are properly understood and implemented.

Traditional budgeting will receive the information or budget numbers from the CEOand pass it to front line manager. Traditional budgeting is a top-bottom approach. On theother hand, participative approach is more a collaborative approach. The information is takenfrom the front line managers and informs the CEO or executive.When participativebudgeting is used throughout an organization, the preliminary budgets work their way upthrough the corporate hierarchy, being reviewed and possibly modified by mid-levelmanagers along the way.

Some more differences:

1.The traditional budgeting (TB) gives more emphasis on the financial aspect than the physical aspects or performance. PB aims at establishing a relationship between the inputs and the outputs.

2. Traditional budgets are generally prepared with the main basis towards the objects or items of expenditure i.e. it highlights the items of expenditure, namely, salaries, stores and materials, rates rents and taxes and so on. In the PB latter the emphasis is more on the functions of the organisation, the programmes to discharge these function and the activities which will be involved in undertaking these programmes.