It is a process of budgeting whereby each responsibility center submits to the immediate
superior level (bottom-up approach) a budget. Following the chain of command,
organization wide, an overall company budget is developed.
Self-imposed budgets have some distinct advantages:
A.All involved feel part of the team through their participation.
B. The persons preparing the budgets are in the best position to forecast their
own operations and needs.
C. People who make their own budgets tend to live within their own budgets.
D.The authors of the budget are responsible for potential deviations from it.
However, employee freedom to make their own budget sometimes may promote
inefficiency and waste.
2. zero based budgeting
It is a budgeting process whereby all proposed costs and expenditures must be justified as
if the proposed functions or programs were initiated for the very first time. Previous
allocation of resources, past practices and customs are irrelevant. Everything is planned
and budgeted for as if it was a completely new operation. Fresh start leads to questioning
and rationalization of existing budgets instead of adding to and subtracting from recent
3. project budgeting
A Project budget is associated with the completion of a given project. Costs and time
constraints are considered. Time is relevant only as to the level of completion and
completion date. For example, 20% completion within the first quarter of the year means
that the project will be 20% complete by March 31.
4. Master budget
The master budget comprises from a series of sub budgets summarizing all planned
activities of all sub-units. It normally consists of the following sub budgets:
It is based on a sales forecast. A sales forecast can be affected by:
•Past experience (sales volume)
•General economic conditions
•Company’s market share (existing and target share)