Q: which style of budget is suitable in non-profit making organization..?

Imposed budgetsA budget developed by top management with little or no input from operating personnel. Participative budgetsThe budgeting approach in which managers prepare their own budget estimates is called self imposed budgeting or participatory budgeting. This is generally considered to be the most effective method of budget preparation. Managers at all levels participate and coordinate with each other in budgeting process.THE INITIAL FLOW OF BUDGET DATA IN A PARTICIPATIVE BUDGETING SYSTEMTop Management

Middle ManagementMiddle Management

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Best Times to Use Imposed Budgets In start-up organizations In extremely small businesses In times of economic crisis When operating managers lack budgetary skills or perspective When organizational units require precise coordination of effortsMerits of Imposed Budgets Increase probability that organizations strategic plans will be incorporated in planned activities Enhance coordination among divisional plans and objectives Use top managements knowledge of overall resource availability Reduce the possibility of input from inexperienced or uninformed lower-level employees Reduce the time frame for the budgeting processDemerits of Imposed Budgets May result in dissatisfaction, defensiveness, and low morale among individuals who must work under the budget Reduce the feeling of teamwork May limit the acceptance of the stated goals and objectives Limit the communication process among employees and management May result in unachievable budgets for international divisions if local operating and political environments are not adequately considered Best Times to Use Participative Budgets In well-established organizations In extremely large businesses In times of economic affluence When operating managers have strong budgetary skills and perspectives When organizational units are quite autonomousMerits of Participative Budgets Provide information from persons most familiar with the needs and constraints of organizational units Lead to better morale and higher motivation Provide a means to develop fiscal responsibility and budgetary skills of employees Develop a high degree of acceptance of and commitment to organizational goals and objectives by operating management Are generally more realistic Allow organizational units to coordinate with one another Allow subordinate managers to develop operational plans that conform to organizational goals and objectives Include specific resource requirements Provide a social contract that expresses expectations of top management and subordinates Demerits of Participatory Budgets Require significantly more time Create a level of dissatisfaction with the process approximately equal to that occurring under imposed budgets in cases in which the effects of managerial participation are negated by top-management changes Create an unachievable budget in cases in which managers may be ambivalent or unqualified to participate May cause managers to introduce slack into the budget May support empire building by subordinates May start the process earlier in the year when there is more uncertainty about the future year.Decision After observing the advantages and disadvantages of both the imposed and participative budgets I can say that Participative budget is more suitable for non-profit making organizations.

Link from where i search this data www.swlearning.com/accountingwww.accountingformanagement.com

Advance Performance Management (P5)

TopicImposed & Participative Budgeting

Resource PersonMr. Gulzar

Submitted by: Muhammad Nawaz100645-002

Date:4th March, 2011