Budgeting Process in Management Accounting
Added on 2021-06-15
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Budgeting Process in Management Accounting 1BUDGETING PROCESS IN MANAGEMENT ACCOUNTINGStudent (Name)Professor (Name)CollegeCourseDate
Budgeting Process in Management Accounting 2BUDGETING PROCESS IN MANAGEMENT ACCOUNTINGIntroductionBudgets are usually the integral parts of management accounting or management controlbuilt to uphold the efficient and effective utilization of resources and give support for othercrucial functions of an organization. The degree to which any budget is successful is extremelydependent on its embrace and the attitude of the organization towards it. Therefore this paper isbased on the critical roles of the behavioral aspects of budgeting and how comprehending itsusefulness results in a desirable budgeting process. It presents the scope and the nature ofbudgeting and gives critical analysis regarding budgeting in management accounting. Similarly,the paper shows the importance of budget to organizations and its impact on workers and finallyits behavioral aspects.The sequence of the budgetary processA budget sequence alludes to the procedure by which governments make and endorse afinancial plan, which is as per the following: The Financial Service Department gets readyworksheets to help the office head in the planning of office budget estimates. The Administratorassembles a conference of managers, and they show and talk about plans for the next year'sprojected level of activity. The directors can work with the Financial Services, or work alone toset up a budget estimates for the divisions coming year. The finished spending plans aredisplayed by the supervisors to their Executive Officers for audit and endorsement. Avocation ofthe spending solicitation might be required in composing (Schick 2015). Much of the time, thechief administrators chats with their regulatory officers about spending necessities. Changes bythe spending accommodation might be required because of this stage all the while. Budgeting is
Budgeting Process in Management Accounting 3the setting of expenditure levels for every one of an association's capacities. It is the estimationand portion of accessible capital used to accomplish the assigned projects of a firm.In Management Accounting, for managers to make informed or rational decisions andcoordinate their decisions and activities of the various organizational divisions, they need toestablish a plan for profitability. Typically they would create annual budgets, which onceassented or approved becomes the Annual Budget. This will ultimately help management gainconsensus how the organizational resources should be allocated towards the realization of thecompanies desirable and goals for that particular year. It will also act as a goal setting plan thatprovides the metric for the assessment and evaluation of the company performance (Bryer 2007).Managers will also use budgets as a framework for the approval of the company process handprojects at every level. Now, to be very effective, the budget process should contain severalfundamental elements for instance; Effective Communication, Clearly Defined Goals,Management Involvement, Coordination, and Actual Performance Reporting.Effective CommunicationIt is imperative for the management team to embrace effective communication to helpthem translate or coordinate goals into a working budget (Denison 2009). They have to create atimetable to set clear their expectations and timeframes. An organization convening tocommunicate such processes is aiming at ensuring that everyone receives the same and relevantinformation. After that, a budget package is disseminated to management with the relevantmessage to help establish the budgets.Clearly Defined GoalsAt the very start of the processes, the financial goals or objectives of the organizationneed to be made clear. Generally, a typical goal would focus on net income growth, revenue
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