PERFORMANCE BUDGETING VS PROGRAM BUDGETING SERIES COMPARISON OF

Performance Budgeting Vs Program Budgeting Series Comparison Of

Purposefunding-linked performance targets with a program budgeting mechanism. It helps the help managers to estimate whether the budget for the current year is in line with the previous yearвЂ™s budget or more. For instance, if previous yearвЂ™s budgeted expenditures for a department were 1.8 million, the department may request a 4 percent increaseLine Item Budget is the presentation of expenses in column format, wherein such expenses are grouped according to its category like Advertisement, Canteen Supplies, Transportation reimburment etc and provide the time series comparison of year wise performance. It begins with previous yearвЂ™s budget and adjusts up or down from that budget to reflect changing assumptions for the new year. Traditional budgeting uses the incremental approach.

Line item budget is mainly used by small businesses that donвЂ™t know about sophisticated accounting systems Accounting Systems Accounting systems are used by organizations to record financial information such as income, expenses, and other accounting activities. Differing utility of performance measurement for small versus large programs. The 1994 Government Performance and Accountability Act required the governor to submit performance-based program budgets for the executive agencies to budget, with appropriate controls for the political content of programs.

The comparison between the past and present expense figures always acts as a sign of warning for the mangers. The primary purpose of Line Item is to help managers to control their expenses. It doesnвЂ™t reflect revenue they only show the expense. So they depend on this simple budget where several categories of Expenses are presented in a line. Read more as well as donвЂ™t have the infrastructure and budget to set up one.

Several categories of expenses are represented column-wise, and each category can be compared with the previous year in a single row. Line Item Budget is a columnar representation of expenses. He has prepared the Line budget for January 2020 and is planning necessary steps that should be taken to not deviate from the yearly planned budget. X is the budget specialist for a small business that operates in New York.

Usually, it is a prepared month wise. Now after the month has passed, fill the real expense and see how much you deviated from the projected budget. Decide the budget and fill the column with an approximate budget. For the current year column, decide what should be the budget considering inflation and several other economic factors Economic Factors Economic factors are external, environmental factors that influence business performance, such as interest rates, inflation, unemployment, and economic growth, among others. If it is seen that for a particular category, the expenses are rising year on year, then it may be due to inflation in that specific category, and it should be balanced by reducing expenses in other categories.

Here we discuss characteristics, the purpose of the line-item budget along with an example, advantages, and disadvantages. Recommended ArticlesThis article has been a guide to Line Item Budget and its definition. So this thing should be kept in mind whenever you make a decision based on Line Item Budget. Being over the budget doesnвЂ™t necessarily mean that cost has shot up it could be that revenue has increased due to the extra cost.