Activity based budgeting(ABB) is a method of budgeting which is based on an activity framework, utilizing cost driver data rather than the more traditional functional cost centres and overhead absorption ratios.
ABB involves defining the activities that underlies the financial figures in each function and using the level of activity to decide how much resource should be allocated, how well it is being managed and to explain variances from budgets.
Some of the improvements that ABB can brings to the budgeting process might include the following:
- costs will be better managed and understood between ABB recognizes that the aim is to control the causes(drivers) of costs rather than the costs themselves Continue reading What is Activity based budgeting and briefly describe how it could bring improvements to the budgeting process of an organization
FCCA,CA(MIA)with more than 26 years of post-qualifying working experiences. Previous working stints with one of the big accounting four, Regional GFC & Group Treasurer in a group of Malaysian and Group CFO in Singapore public listed concern.
Also author to another very popular free educational accounting cum finance blog: http://basiccollegeaccounting.com under the branding of College Accounting Coach.
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