2. COST ACCOUNTING CONCEPTS FOR IS ORGANIZATIONS › 2.2 Budgeting Concepts

2.2 Budgeting Concepts

Most organizations implement accounting and chargeback either
to improve their IS resource allocation and control or to
bolster their IS management and planning.  Having gained
insight into the actual period-to-period IS expenditures,
many find that they need a base of comparison, independent of
the actual expenditures, to judge the effectiveness of their
plans and controls.  Most choose to make that comparison to
an individual user's IS budget.

From a resource control perspective, the budget represents an
approved maximum allocation expressed in monetary, rather
than technical, terms.  From a management planning
perspective, the budget quantifies anticipated expenditures
for which sufficient resources have to be made available.

The potential for a serious budget development, analysis, and
approval effort to reduce actual expenditures should not be
underestimated.  After all, by the time an actual expenditure
is reported by the accounting system, it has already been
incurred and, in many cases, represents an ongoing cost for
the user into the foreseeable future.  The beauty of working
with budgets is that the costs they represent have yet to be
incurred.

The following sections provide an introduction to budgeting
philosophies, budgeting development, and utilizing budget
information in reporting scenarios:

 1 - What is a User Budget?
 2 - Budget Detail, How Much is Enough?
 3 - Steps in Developing a Budget
 4 - Reporting Budget Information