In: Accounting
self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels. Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management. Do you think if this type of budget has, any Advantages if so discuss these advantages of Self-Imposed Budgets?
A budget that is prepared with the full cooperation and
participation of managers at all levels. A participative budget is
also known as a self-imposed budget.
Most companies do not rely exclusively upon self-imposed budgets in
the sense that top managers usually initiate the budget process by
issuing broad guidelines in terms of overall profits or sales.
Advantages of Self-Imposed Budgets:
1. Individuals at all levels of the organization are viewed as
members of the team whose judgments are valued by top
management.
2. Budget estimates prepared by front-line managers are often more
accurate than estimates prepared by top managers.
3. Motivation is generally higher when individuals participate in
setting their own goals than when the goals are imposed from
above.
4. A manager who is not able to meet a budget imposed from above
can claim that it was unrealistic. Self-imposed budgets eliminate
this excuse.