Role of Budgeting in Management Accounting

Essay

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

INTRODUCTION
Management Accounting refers to making use of different types of financial provisions
and data in an effective manner so that a business is able to attain its goals and objectives
(Doktoralina and Apollo, 2019). In this essay, focus will be made on the role which budgeting
plays in order to ensure the right decision-making within the organizations.
MAIN BODY
Budgeting refers to a process through which budgets are prepared within the
organizations. These budgets are framed for a specific time period and ensure that an
organization is able to take the right decisions by comparing and making the correct and accurate
conclusions and recommendations (Hutaibat and Alhatabat, 2019).
Types of budgets-
Incremental budgeting- Incremental Budgeting is a type of budgeting which is based on
slight changes from the preceding period's budgeting results (Incremental Budgeting, 2019). In
this type of budgeting, addition or subtraction of amount is done to the figures of the last year to
show the changes which have taken place. With the use of this method the organization can be
able to correctly determine the various types of changes and implement them effectively in its
budget.
Activity-based budgeting- When this type of budgeting is used it can identify the types of
inputs which are required to support the output requirements of the organization. By making the
use of this method the companies are able to determine the profit which they are going to earn in
a particular financial year.
Value proposition budgeting- The use of this type of budgeting method is required in the
organizations for the purpose of creation of value. It ensures that everything which is included in
the budget by the managers is able to create value for the organization.
Zero-based budgeting- The use of this budgetary method must be made within the
organizations by assuming the base as zero and starting from the scratch. By making its use the
companies are able to start from the scratch and justify the expenses which they are going to
include in it.
Role of budgeting-
1