The Two Budgeting Theory And The Theory Of Budgeting

2.2.2 Budgeting Theories

According to Rubin (1997), the function of theory is to provide orientation to a field, to state assumptions, to point to certain problems as of key significance, and to come up with some hypotheses about what causes what. Budgeting theory is helpful in explaining what budgeting is and how it operates. As Rubin (1997) explains much of the literature has taken the perspective that budgeting is decision making, and the task of theory is to provide decision making that occurs during the budgeting. While there is no widely accepted set of linked hypotheses concerning cause and effect in the field of budgeting (Rubin, 1997), recent studies (e.g. Hall, Smith, Mitton & Bryan, 2016; Lazenby 2013) have shown that in the past century, two theories of budgeting have dominated: incrementalism and rationalism.

2.2.2.1 Incrementalism Theory

Incrementalism has been the predominant theory of budgeting and has been defined in many ways. Scholars drawing on the works of Lindblom (1959), Wildavsky (1964), and others have shown that incrementalism is defined by budgetary outputs that it is almost never actively reviewed as a whole every year. Instead, it is based on last year’s budget with special attention given to a narrow range (5 to 10 percent) of increases or

Likewise, Arthur (2016) defined budget management as the internal organizational procedure to be followed in preparing, approving and implementing the budget. Thuita and Kibati (2016) viewed it as the principles, procedures and practices of achieving given objectives through budgets. As shown by Field (2012), budget management involves typically two steps that are preparation and control. Budget preparation involves calculating, negotiating, revising, and agreeing the budget, whereas, budgetary control involves checking, investigating, projecting and