Budgeting Techniques for Decision-Making in Management

MANAGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
ASSESSMENT 1.............................................................................................................................1
Budgeting.....................................................................................................................................1
Budgeting used for decision-making...........................................................................................1
Budgeting styles and its merits and demerits...............................................................................2
Suitability in the changing environment......................................................................................3
Static and flexible budgeting ......................................................................................................3
Participative budgeting with pros and cons.................................................................................4
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
This project shall be highlighting the technique of budgeting which is used by the managers in
the decision-making process of the organization. It shall show how various budgets are prepared
which can be utilized for proper allocation of resources, future profitability and growth
prospects. It shall demonstrate the various budgeting styles like the activity based budgeting,
zero based budgeting and the incremental budgeting and its merits and demerits posed on an
organization. It shall also be disclosing the most suitable style of budgeting that can cope up with
the changing environment. It shall be explaining the static and flexible budgeting and its uses in
different types of situations. Lastly the report shall be describing the participative budgeting and
the pros and cons of applying it in an organization.
ASSESSMENT 1
Budgeting
Budgeting is a technique that is used by the management to formulate a successful
business plan describing where we are and where we want to be. The budgets are formulated
with the help of business plans and it shall disclose the level of activity that is to be undertaken
in order to generate the desired profitability and growth for the company. Budgeting facilitates
the controlling function of management enabling to compare the actuals with the budgeted and
determining the level of deviations (Barasa and et.al., 2017). It shall prove to be helpful in proper
allocation of resources, assigning the roles and responsibilities, determining goals and objectives
and its achievement.
Budgeting used for decision-making
The various budgets that are prepared can serve as the backbone of the company and
shall be facilitating the short term and the long term decisions of the company. It shall act as a
blueprint for conducting the various activities in the business. There are certain major decisions
that can be facilitated by the preparation of the budgets like the determining the short term and
the long term financial decisions, ascertaining the need and the availability of funds, deciding the
hierarchy and division of the roles among the employees etc (Bogsnes, 2016).
The short term and the long term goals are ascertained and accordingly the activities are planned
like the inventory management, cash flow management, capital budgeting decisions etc. Such an
act of governing short and long term goals shall be providing clarity and direction to the
subordinates.
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