Role of Budgeting in Management Accounting

MANAGEMENT ACCOUNTING

INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Management accounting plays several roles in which they conduct a number of challenges to
make sure financial stability for their company, effectively managing all financial affairs and
thus helping to promote the effective operations and strategy of the business (Azudin and
Mansor, 2018). Managing money is help in determining arrangements for pay and benefits. This
essay based on the critical evaluation of role of budgeting which helps the company’s managers
to make effective decisions in the changing business environment. It also includes the flexible or
statics budget, along with its merits or demerits which required evaluating by the managers
before taking any decision on the basis of it.
MAIN BODY
Budgeting is the mechanism whereby company build a strategy to invest their money. The
investment schedule is named a budget (Biancolini and Cella, 2020). Developing this budget
plan gives the freedom to the managers to decide in advance whether they will have enough
funds to do the activities which manager's need or want to do. It's an essential method of
preparation and projecting which help managers to handle company's finances by matching
their costs against with revenue. If organization don't have enough resources to do whatever they
would like to do, so managers should use this budget tool to organize their expenses and
concentrate on their funds on the most important tasks for the company. Since budgeting helps
managers to build a spending schedule with the finances, it means they'll actually have enough
funds for the operational activities they need and the things that matter to them. With the help of
budgeting, a manager is able to make effective decisions in respect of the organization and which
work with the changing environment or make sure balance overall production as well as
profitability. Budgeting plays essential role in the organizations and allow managers to make
effective decisions in respect of the company to maximise firm’s production or profit margin.
Some of its role mentioned below:
Budgeting plays essential role in the communication because it is a systematic approach to
convey a firm’s plans to its key stakeholders, such as directors, departmental heads, and those
who have a concern or obligation for controlling the firm’s performance. Budgeting includes
managers to plan for both income and expenditures.
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