Management Accounting Overview Assesment

Running head: MANAGEMENT ACCOUNTING
MANAGEMENT ACCOUNTING
Name of the Student
Name of the University
Author’s Note:

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Table of Contents
Answer to question 1:......................................................................................................................2
Answer to question 2:......................................................................................................................5
Answer to question 3:......................................................................................................................6
Answer to question 4:......................................................................................................................8
References........................................................................................................................................9

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Answer to question 1:
Budgetary control is defined as a process of preparing budgets for the future time and
comparing them with the actual performance for getting any differences. The purpose of
budgetary control are as follows:
 To set the targets and achieve these targets by giving extra effort, and accurately utilizing the
available resources.
 To ensure the resources are utilized at its best to maximize profit and expanding the
production.
 Provide co-ordination among different activities and enabling management to facilitate its
working towards its success (Hopper and Bui 2016).
 Provide motivation to the employees to achieve their desired goals.
There are different forms of budgetary control a management accounting system may utilize
having some advantages and limitations which are discussed below
Advantages of Cash Flow Budgeting
 Helps in recognizing potential deficits as one can easily determine if they have sufficient
cash to meet their obligations or not. If cash is not available it ensures to take corrective
actions to reach the budget estimation.
Disadvantages of Cash Flow Budgeting
 To meet future expectations, it depends on estimates as, the inflows and outflows from the
previous year are used to distribute cash for line items in the next year (Weetman 2019).
Hence, it shows that there is an estimation of budget on the basis of results generated from

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previous year which reflects that there is no guarantee of similarity between cash flows by
each year for any budget.
 It leads to cause distortions as the cash inflows do not correspond to profit and the decrease
amount of cash flow is a need of concern.
Advantages of Capital budgeting
 Focuses on estimation whether it will be beneficial for the company to accept the project or
not.
 Helps to know the different risks related to an investment opportunity and their impact on the
returns of the company.
 Helps company to choose their investment carefully and ensure to make strategic investments
for long-term.
Disadvantages of Capital budgeting
 Decisions taken for Capital budgeting decisions are irreversible in nature as they are of long-
term. In addition, wrong decision can affect the longevity of the company if they are not
taken by professionals.
 Future is uncertain and the techniques are based on the estimations and assumptions which
can give incorrect results.
Advantages of Zero Based Budget
 It focuses on analyzing cost-benefit as it helps in considering the importance of expenses and
benefits that can be derived from expense unlike focusing on knowing the changes why there
is an increase or decrease in it.