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IN THE past decade budgets have become widely accepted as the key element in the corporation's planning and control system. This is evident both from the extensive writings on the subject and from a random sampling of current textbooks in management in which the discussion of operational planning and control centers about the role and use of financial budgets. 1

Financial budgets represent the firm's plans for the coming year summarized in projected financial statements. Because financial budgets are plans they become the criteria by which managerial performance is measured and therefore the basis of the control system. Indeed, whereas budgets have this dual role, of being plans and performance criteria, they are generally viewed as synonymous with control and not with planning. 2 Moreover, it is their use as control devices that has made budgets the focus of much criticism by behavioral scientists who …