Financial Reporting Standards | Top-Down And Bottom-Up Budgeting

Added on -2020-02-05

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Financial Reporting Standards1
Table of ContentsINTRODUCTION ..............................................................................................................................3Question 1............................................................................................................................................3a. Discussing the behavioural issues which are associated with the top-down and bottom-up budgeting ........................................................................................................................................3b. Explaining the human factors that have high level of influence on the success of budgetary process ............................................................................................................................................4c. Outlining the theories and practices that attempt to minimize the dysfunctional human responses to the budgetary process .................................................................................................5Question 2.............................................................................................................................................6a. Discussing the significance of the principle of goal congruence within an organizations..........6b. Explaining the relationship that takes place between the budgeting and goal congruence .......7CONCLUSION...................................................................................................................................7REFERENCES.....................................................................................................................................82
INTRODUCTION Budgeting may be defined as a process is undertaken by the firm with the aim to makeoptimum use of the financial resources. Such financial plan clearly presents the income or expenseswhich are highly associated with the near future. Thus, company needs to undertake budgetingprocess which in turn helps in making optimum use of finance. The reason behind this financialframework provides deeper insight to personnel about spending pattern or criteria. In this regard,the present report will discuss the issues that are facing by business units in relation to top-downand bottom-up budgeting. Further, it will develop understanding regarding the various aspectsbudgeting and goal congruence. QUESTION 1a. Discussing the behavioural issues which are associated with the top-down and bottom-up budgeting Top-down budgeting: In this, budget has been prepared by the higher level managers then itis circulated by them to the lower level. Hence, in top-down budgeting only senior managers haveauthority to take decision about budgeting framework. Bottom-up budgeting: Under this, budgeting process starts with the lower level personnel.In this, operational level managers decide the money which they need to spend for performing thedifferent kind of activities. Thereafter, managers send the financial framework to the highermanagement for getting approval. There are several behavioural issues that closely causing the top-down and bottom-upbudgeting process are:Time required: One of the main issues of bottom-up budgeting is that it consumes moretime of the managers. The reason behind this managers primarily prepare their own budgetsby taking into consideration the past framework and doing cost projections. Thereafter,upper level managers make review of such budget and thereby prepare the final one(Advantages & Disadvantages of the Bottom-Up Approach, 2016). In this way, it is highlytime consuming process and thereby affects the productivity of firm. Furthermore, ifmanager will devote their time in framing the strategies then it results high profit margin. 3

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