Merits and Demerits of Budgeting Styles in Management Accounting: A Case Study of IKEA

Management Accounting
- Essay

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
CONCLUSION...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Management accounting is common but essential aspect of an organization which assist
to covert all the raw data into useful information to facilitate management with efficacious
decision-making. Budgeting is also a significant approach in management accounting which
support management planning and decision-making task (Alsharari, 2019). The essay covers
comprehensive discussion about major merits and demits of budgeting styles, connection among
budgeting and business short-term decision-making and impact of changes in environment on
budgeting styles in context of IKEA a Dutch-based-Swedish multinational furniture retailer
corporation. Further it evolutes advantages and disadvantages of participatory budgeting and its
major implications on business.
MAIN BODY
The budgeting can be characterized as a structured business operation that includes the
creation, execution and assessment of a planing for provision of services as well as real property,
including productive assets, like cash or current assets, over a specified time-frame to
accomplish the required financial objectives. In simple words, budgeting process
is distribution/allocation of resources, which can be used by entity to meet the goals prespecified
or defined by the organization (Harun, Carter, Mollik and An, 2020). There are different
budgeting styles which are adopted by management within a corporation like IKEA as pet their
specific requirements and goals like participative budgeting style, imposed traditional budgeting
style etc. Different budgeting styles have their unique characteristics, benefits and drawbacks.
Analysis of merits and demerits of budgeting styles enable managers to effectively adapt them in
line with management structure and business's size, scale operating level etc.
The budgeting styles separates management within enterprise from its shorter-term, day-
to-day control of the company and encourages it to focus on longer-term objectives. Another
advantage of budgeting style may be analysed as it is simple to loose sight about where a
organization makes most of their profits during day-to-day management rush.
Major disadvantage of budgeting styles can be understand as sometime an experienced
management can tend to implement a budgetary sluggishness, which entails intentionally
reducing sales projections and growing expenditure estimates, such that desirable budget
variances may be easily achieved. It could be a major issue and needs significant monitoring to