In: Accounting
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.