Role of Budgeting in Management Decision Making

Essay

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................6

INTRODUCTION
Management Accounting refers to the use of different types of provisions by the
managers so that they are able to make sure that they take the appropriate decisions (Cooper,
Ezzamel and Qu, 2017). This essay will focus on the role which is played by budgeting in the
taking of decisions by the management.
MAIN BODY
Budgeting refers to the creation of a specific plan by the managers so that they are able to
take the various types of decisions (Hall, 2016). A budget refers to an estimation of revenues and
expenses over a specified future period of time and is complied and re-evaluated on a periodic
basis (Budget, 2020). In this process different types of budgets can be prepared by the
management such as Cash Budget, Production Budget, Sales Budget, Master Budget etc. The
role which it plays in influencing decision-making is stated as follows-
Helps in forecasting- With the use of budgets the managers are in a position where they
can forecast what will happen in the future time period without problems and issues. Thus in this
way they are able to decide what they will do so that they are able to take firm towards the
achievement of sustainable success.
Keeps expenses in check- When the budgets are used in the right manner by the
management this helps them in keeping the expenses within check and within a certain limit as
pre-decided by them. In this way the managers will be able to make sure that they are able to
bring more efficiency in the operations of the firm by taking correct decisions.
Planning- Budgets are highly effective for the managers in the preparation of the
appropriate plans for the future time period. These can be short-term, medium-term or long-term
in nature depending upon the needs and requirements. Therefore the management can make sure
that it is able to plan in a correct manner with the appropriate use of the tools of budgeting. With
this the managers will be able to attain the required goals and objectives in an effective manner.
Determination of surplus or deficit- When the budgets are prepared by the management
they are able to determine whether there will be a surplus or a deficit in the organization. Thus in
this way they will be able to prepare a specific strategy.
Therefore, it can be said that with the use of budgeting in an appropriate manner the
managers are able to take correct decisions in a constantly changing environment. In dynamic
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