Management Accounting - Types of Budget, Advantages of Self-Imposed Budget, Cash Budget and Variances

This article discusses the various types of budget used in management accounting, such as master budget, labour budget, cash budget, financial budget, and cost budget. It also explains the advantages of a self-imposed budget, including high accuracy and employee motivation. The article includes a statement showing a cash budget and variances, along with insights into budgeting techniques and their importance. The subject is management accounting, and the course code and college/university are not mentioned.

Running head: MANAGEMENT ACCOUNTING
Management Accounting
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MANAGEMENT ACCOUNTING
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................3
Question 3........................................................................................................................................4
Question 4........................................................................................................................................4

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Answer to Question 1
A budget is a tool which is used to forecast financial information and other resources of a
company or individual for a particular period of time. It is a common practice of organizations to
prepare budget for the purpose of supervision or controlling the activities of the business. There
are various types of budget which are used by businesses which are master budget, labour
budget, cash budget, financial budget, Cost budget and similar other budget relating to other
resources.
The main use of the budget is to set a standard on the basis of which the actual work
forces are followed. In other words, it provides a framework for the performance and sets target
which are to be achieved by the organization. More importantly it is used in the process of
planning and controlling which are quite essential for the overall development of the business.
Planning activities involves planning for future situations, profits, projects which requires
budgeting. In addition to this is useful in allocation of resources and controlling the performance
of the business following the goals and objectives of the business.
I have used budgeting techniques in the day to day cash management which is followed
in my home. The budget which was prepared by me required me to forecast the revenues and
expenses. I prepared the plan and anticipated the expenses which will be incurred by me for the
month. And also forecasted the contingencies which can happen. The budgeting allowed me to
anticipate the savings which could be generated. The aspect which I could improve about of my
budgeting policies for additional expenses which can be incurred during the month. In addition
to this I can always improve the accuracy of the forecasting of my revenues and expenses. The
budget can also include weekly estimates of my expenses and variances if any which occurs
between actual budgeted figures and the standard set.

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Answer to Question 2
A self-imposed budget is budget which is prepared by the cooperation of all the managers
of the company of different departments and therefore this a budget with is prepared with the
contribution of all the departments of the organizations. The advantages of a self-imposed budget
are as follows:
1. In this type of a budget, the views and opinions of all the individuals are taken and
decisions of the budget preparation are based on the such opinions and views.
2. As the budget is prepared by the line managers of the company there will be more
accuracy in the budget in terms of estimates of the budget.
3. In such a budget the motivational level of the employee will be high as the goals are set
by themselves instead of the goals which are set from the top level of management.
4. The budget which is not prepared by the managers might be claimed to be unrealistic. In
case of a self-imposed budget this kind of an excuse has no scope.

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MANAGEMENT ACCOUNTING
Question 3
Figure 1: (Statement Showing Cash Budget)
Source: (Created by Author)
Question 4
Figure 2: (Statement showing Variances)
Source: (Created by Author)