Role of Budgeting in Management Accounting

Management
Accounting

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
Management Accounting refers to use of different types of financial provisions in an
effective manner so that the managers are able to take the correct decisions (Kumarasiri and
Gunasekarage, 2017). In this essay, focus will be made on the role which budgeting plays in the
organizations in helping them in planning and making the use of various opportunities.
MAIN BODY
Budgeting refers to a process through which budgets can be framed within an
organization (Nitzl, 2018). It is helpful for the managers to plan and take the different types of
decisions in a highly effective manner. They have to prepare a budget to keep expenses in check
and to forecast the incomes in the future time period.
Types of budgets-
Sales Budget- It refers to a comprehensive forecast of the sales over a particular period of
time. It helps the managers in organizations to identify the level of sales in the future and make
decisions related to it.
Cash Budget- It means detailed forecast of cash receipts and expenditures over a certain
period of time. It is prepared so that proper management of cash is done within the companies by
the managers so that there is no shortfall in the cash whenever there is a requirement. For the
managers in an organization, it can be helpful in proper management of cash and for the purpose
of maintenance of liquidity.
Production Budget- In it, forecasting of production requirements within an organization is
done. In an organization, the managers are required to make its use so that they are able to
estimate their production effectively.
Master Budget- The use of this budget has to be made so that the overall level of
information regarding the various processes of the organization can be obtained. For the firms,
its use is required to estimate the requirements in an appropriate manner.
Role of budgeting-
Planning- Budgeting process helps the managers in planning for the future course of
action which they are required to take in the organization. Short-term, Medium-term and Long-
term plans can be framed for the same purpose. In the organizations, this can be quite helpful as
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