A Study On Thoughtfulness Of Activity-Based Budget's Compilation

Owing to the limitation of an enterprise's resources compared with its strategy goals, budget is one of managerial control tools that can incorporate the key elements of enterprise management into one system. It plays the key role in the enterprise's control system due to its function of planning, organization, coordination, control, motivation and evaluation. Budget is widely applied in western countries and also recognized and put into practice in our country step by step.However, with the change of management environment in modern enterprises, the management concept is tending to operation and development. Traditional budget, which focuses on the products and financial target, can't meet the requirements of management in new era. How to effectively develop the varied functions of budget and at the same time overcome the limitations of traditional budget, which can not link with enterprise strategy and operation management, is an urgent issue to be solved.It is essential to put the idea of "activity" into budget to closely contact enterprise strategy and operation management. It will be beneficial to achieve the effective connections among budget, strategy goals and the costs. Nowadays, Activity-Based Budget (ABB) has been studied extensively abroad, though it is underway in China. In order to generalize ABB in China the paper was developed to make a detailed study on ABB's compilationThe conception and background of ABB were firstly presented in this paper. The point should be emphasized is that ABB must be used throughout all the enterprise's management processes.ABB was compared with traditional budget on the basis of analyzing the limitations of traditional budget, which is gradually disadvantageous for modern enterprises because of its mere focus on aggregate financial result. On the other hand, ABB can providedetailed activity information for the operation management because it successfully integrates process, strategy with management.The principle of ABB's compilation, compiling steps of single process and design thoughtfulness of ABB's compilation was put forward and detailedly analyzed in this paper. The variance analysis of budget result was also discussed. From the point view of "activity" and "value chain", the paper circumstantiated the method on how to apply ABB to achieve the coherence of management process and enterprise strategy.Finally, certain general problems about the application of ABB, as well as personal opinion on ABB's application in China, were brought forward in this part.