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CMA Intermediate · Cost Accounting · Budget and Budgetary Control

Which feature distinguishes Performance Budgeting from traditional line-item budgeting?

Performance budgeting links the budget to programmes and activities with measurable output targets, relating the money spent to the results achieved. Traditional line-item budgeting only lists expenditure by the nature of inputs, such as salaries and stationery, without relating them to outputs.

  1. AIt links the budget to programmes, activities and measurable output or performance targetsCorrect
  2. BIt fixes expenditure only by the nature of items such as salaries and stationery
  3. CIt ignores physical targets and focuses only on cash flows
  4. DIt reviews each year only the incremental increase over the past year

Explanation

Performance budgeting presents the budget by programmes and activities, with physical targets and unit costs, so inputs are related to outputs. Line-item budgeting only lists inputs by nature of expense.

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