Question

. In which of the following circumstances is the use of a participative budgeting process appropriate? (i) In decentralised organisations (ii) When acceptance of the budget as fair and equitable is essential. (iii) When an organisation's different units act autonomously A. All of (i), (ii) and (iii) B. (ii) and (iii) only C. (i) and (ii) only D. (iii) only

Answer 1

Answer: Option A. All of (i), (ii), and (iii)

Participative budgeting refers to the bottom-up approach to budgeting wherein participation of the subordinates or the lower level management in the budgeting process is encouraged. This makes the participative budgeting process more fair and equitable rather than the top-down approach wherein the budgets are imposed by the senior management. Also due to the involvement of the operational management, this form of budgeting is conducive to large, decentralised organisatons and to organisations in which the different units act autonomously. Hence, option A. is correct.