Traditional versus Activity-based Budgeting in Non-manufacturing Companies

  • Żaneta Pietrzak University of Lodz
Keywords: budget, traditional budgeting, activity-based budgeting, case study


The objective of this paper is to determine the utility of activity-based budgeting (ABB) taking into account advantages, possibilities, and difficulties associated with the implementation of this approach by an illustration of the budgeting process in a service company. This article is the result of literature studies in which techniques, such as critical analysis, generalization of other authors' views, and conclusion formulation have been used. To illustrate and extend, the case study method has been chosen for the analysis.

Literature studies have led to the conclusion that companies do not plan to move away from traditional budgeting altogether; they prefer modifying it and adapting to management needs with the possible use of new techniques, such as activity-based budgeting. The case study has offered the possibility to present advantages and disadvantages of using the method in a service company and has also served as a confirmation of surveys conducted by other researchers. It has added a more holistic and richer contextual understanding of the ABB nature and helped explain how it could change the budgeting procedure, and, further, the management. This paper bears theoretical and practical significance. From a theoretical point of view, it contains critical analysis of the possibilities for implementing new trends in budgeting. From a practical point of view, it could expand managers' knowledge about a new approach to budgeting.