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TRADITIONAL BUDGETING SYSTEM (TBS) - Coggle Diagram
TRADITIONAL BUDGETING SYSTEM (TBS)
TBS is considered as a method of preparation of last year's budget which is taken as a base. Therefore, only items in traditional budgets need to be justified over previous budget.
Advantages:
Easy to implement
Brings stability in organization functionality
Promotes decentralization
Gives opportunity to consolidate projects into larger one
Easy to prepare
Disadvantages:
Fix and rigid budget
Prepared by top management
Excessive reliance on past year's data
Deliberate increase in budgeting cost
No priority for resources allocation
Characteristics:
Emphasis on 'how much'
Monitoring toward the expenditure
Operates in vertical communication
Based on last year's fugures future projections carried forwards
Examples:
Revenue Budget:
Income Budget: Hospital budget.
Expenditure Budget: Materials and supplies
Capital Budget
Investment in long term assets. For example, loans to finance capital projects