Budgetary planning and control

  • Clive Emmanuel
  • David Otley
  • Kenneth Merchant


Budgetary planning and control is the most visible use of accounting information in the management control process. By setting standards of performance and providing feedback by means of variance reports, the accountant supplies much of the fundamental information required for overall planning and control.

However, budgetary information serves a variety of potentially conflicting purposes within an organization. Budget standards may be set as motivational targets or as best estimates of expected outcomes. Reported actual results compared with those budget standards may be used as a means of evaluating the performance of managers or the units for which they are responsible. Thus budgetary figures are subject to a variety of pressures for bias and manipulation.

These problems become most severe in conditions of high uncertainty and when there is a great deal of inter-dependence between organizational sub-units; yet these are the circumstances in which the budgetary system is most needed. The way in which managers use the admittedly imperfect accounting information with which they are provided is crucial to effective control. Thus, although accounting information has a vital role to play, it has to be used in a manner that takes account of its imperfections and limitations.


Cognitive Style Accounting Information Transfer Price Motivational Target Budgetary Planning 
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Copyright information

© Clive Emmanuel, David Otley and Kenneth Merchant 1990

Authors and Affiliations

  • Clive Emmanuel
    • 1
  • David Otley
    • 2
  • Kenneth Merchant
    • 3
  1. 1.University of GlasgowUK
  2. 2.University of LancasterUK
  3. 3.Harvard UniversityUSA

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