Budgetary accounting is a management framework that can be used in public administration to control expenditures. Through budgetary control measures, the formal practice of budgetary accounting provides a precise mechanism that can trace expenditures. This system should be implemented due to the numerous benefits it will have on the organization. The budgetary accounts usually constitute the appropriation of the budget, allotment, and incumbrances ( Hammer, 2016 ). It remains an important activity to have the data presented in the budget requests, and the appropriations are compatible with the data presented in the accounting system. Compatibility between the budgets facilitates the comparison between the actual and proposed expenditures. The data obtained through this process is useful in enhancing the evaluation of the performance. This process also reveals the reporting of the financial expenditures by the organizations.
The benefit of budgetary accounting is that it allows the comparison of the current budgets with that of the previous fiscal periods. This system helps in performance evaluation and understanding due to the ability to show the compatibility of the accounting systems within different accounting periods. By demonstrating the budget compatibility between two different periods, the budgetary accounting practice assists in planning. It allows the budget team to team to prepare for the future allocation of resources to various departments and processes. With the full data of the expenditures between different periods, budgetary accounting can help the board of directors monitor and have to control the organization's financial activities. However, care must be taken when using budgetary accounting due to the disadvantages it can present to the organization or public institutions. One of the critical weaknesses of budgetary accounting is the possible inaccuracy in the budgets. It relies on the comparison of past and present data to monitor the present expenditures and plan for the future. However, the inaccuracy in the budget may affect both the present and future expenditures. Due to the changes in the market structures and the economy, past budgets may not be realistic, and relying on future planning data may be misleading. Appropriation is the number of funds that are set aside to meet the specific budgetary line. At the start of the financial year, the budget estimation for a particular area is made, and funds are set aside from the ones available. This process is important in the budgetary process to ensure that the specific budgetary line is funded. The best practice for budget appropriation requires an understanding of the past and present budgets to give a clear estimation for the future. Expenditures are the amount of money spent on various budgetary lines ( Isaac, Lawal & Okoli, 2016 ). Budgetary accounting provides for accounting to have full control of expenditures. Usually, the expenditures must be encumbered before any obligation is made. The encumbrances entail the reservation of the appropriation for any specific item. Maintaining the budgetary accounts for each of these concepts ensures that there are control and monitoring of the resources. It provides the board of directors with clear oversight of the whole budgetary process and to have monitoring of the costs.
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References
Hammer, J. (2016). The budgetary process with the use of modern approaches in cost management. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, 64 (3), 939-947.
Isaac, L., Lawal, M., & Okoli, T. (2015). A systematic review of budgeting and budgetary control in government-owned organizations. Research Journal of Finance and Accounting, 6 (6), 1-11.
