UGB106: Budgetary Process and Behavioural Aspects Report

This report provides a comprehensive analysis of management accounting, focusing on the budgetary process and its behavioural aspects within the context of Sainsbury, a major UK supermarket chain. It begins by outlining the crucial role of management accounting in financial analysis and decision-making, emphasizing the importance of budgeting as a key component. The report then delves into the techniques employed in management accounting, including cost accounting and inventory management, before elaborating on the budgeting process itself, from goal setting and data gathering to budget preparation, monitoring, and adjustment. Furthermore, the report examines the behavioural aspects of budgeting, such as setting realistic standards and ensuring continuous monitoring, highlighting their impact on effective planning and control. The report concludes by reiterating the significance of management accounting in driving company success through informed financial decisions and efficient resource management.

INTRODUCTION TO
MANGEMENT
ACCOUNTING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Budgetary process and issues of behavioural aspect of budgeting process............................3
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Management accounting is that branch of accounting which deals with analysis of the
financial information and then taking the decisions for the betterment of the company. Under
management accounting the budget system is a crucial component as it helps in estimating the
income and expenses in advance and then work in accordance to that (Otley, 2016). The present
report is based on the company Sainsbury which is the second largest supermarket chain in UK
and founded by John James Sainsbury in 1869. The present report will outline the role of
management accounting in Sainsbury. Further the budgetary process and the issues relating to
behavioural aspect of budgeting process will be discussed.
Budgetary process and issues of behavioural aspect of budgeting process
Role of management accounting
The management accounting plays a crucial role within the managing and maintaining
the operations of the company. The major role of management accounting within Sainsbury is to
collect and analyse and evaluate all the financial information from the results of financial
accounting and then to analyse them and take decisions for the betterment of the company. the
management accounting plays the intermediary role within the finance function and other
functions of the company (Black, 2017). This accounting helps the company in properly
planning and controlling all the activities going on within the company. This is necessary for the
increment of the profitability and productivity of the company.
Techniques in management accounting
There are many different tools and techniques which are used under management
accounting for proper planning and controlling of the business activities. The different
management accounting techniques and tools followed in Sainsbury are as follows-
Cost accounting system- This is a system which is used in order to estimate a cost for the
product and services produced by the company. this cost is estimated and fixed after analysis of
so many factors like the inventory, time of production, production cost, profit margin and many
other factors.
Inventory management system- This is a system which is used by Sainsbury in order to
manage its inventory (Bui and De Villiers, 2017). This is very necessary because of the reason
that this helps in proper management of the inventory that is whenever the inventory is needed it
is being provided by the system. This system maintains and oversees the inventory form the time

it comes and is converted into work in progress and the making of finished products and
transferring them to the end users (Schaltegger, 2018).
Budgeting- This is another technique of management accounting which is used by
Sainsbury in attaining success and maintain profitability. This is an important tool of
management accounting which helps the company in making an estimated plan of all the income
and expenses which can be incurred in future and to take care of them from the present time.
Basic budgeting
The budgeting is an important planning tool in management accounting which assist the
company in preparing a plan for all the possible income sources and the possible application of
the expenses which might take place in future. It is helpful for Sainsbury in making budget
because this will be taken as a roadmap that the company has to do the things in the planned
manner in accordance to the planned budget. This budget will help the company in knowing in
advance that the income can be generated form which sources and how much expense can be
incurred and on which activities (Ax and Greve, 2017).
Thus, this will help the company in planning in advance that how they will manage all
these expanses with the provided set of income. Also, the budgeting helps Sainsbury in
maintaining the balance between the income and expenses so that there is not any situation of
loss for the company. Thus, this budgeting helps the company in maintaining a balance between
all the possible income and the estimated expenses. Further, this budgeting also helps the
company in taking some decisions like if the estimated income is not enough to meet the
estimated expenses then form where to arrange for money to cater to those expenses.
Budget preparation or process
It is very crucial for Sainsbury to have effective budgeting and controlling system so that
the company works effectively and efficiently (Zeng, 2018). Thus, for this Sainsbury need to
follow the whole process of budgeting which is discussed as follow-
Defining goal and gathering data- The first step in the process of budgeting is to
establish and define the goals of making the budgets. This will provide a guide to the company
that in which direction they have to go. Also, in accordance with the goal the data is to be
collected which is matching to the established goals.
Forming expectation and reconciling data- This is the second stage wherein the
gathered data is analysed and then reconciled with the established aims and goals of the business.

Also, some of the assumptions and expectation are set that the following budget will at least
achieve this much of level of performance. This is done in order to check that whether the
collected data is matching with the goals of the business or not (The budget process, 2019).
Create budget- This is the step wherein after the reconciliation of the data the budget is
prepared that is the estimation of the income and the expenses are made in order to plan for the
activity. Here the estimation of the past trends of income and expenses in Sainsbury are studied
then after its evaluation the budget is finalised.
Monitoring and analysis of deviation- After the preparation of the budget it is
continuously monitored and analysed. This is done in order to analyse the fact that what was
thought in the budget is taking place in actual or not. Here the variance or the difference between
the actual and the standards set in the budget. This will help Sainsbury in outlining any deviation
if present between standards and actual.
Adjusting budget- After the analysis and monitoring of the budget it is very necessary for
Sainsbury to recheck the budget with the goals or the expectations of the business (Holopainen,
Niskanen and Rissanen, 2019). This is majorly important because of the reason that the business
runs in dynamic environment and there are many changes within the environment which might
impact the income and expenses of the company. Thus, after identifying the deviation among the
planned and the actual output it is very important for Sainsbury to make necessary changes for
the betterment and improvement of the budget in accordance with the goals of business.
Behavioural aspect of budgeting process
As discussed above it is clear that the budgeting is very important for Sainsbury and any
other company because this assist in effective planning and management of the income and the
expenses of the company. The budgeting helps the company in identifying that fact that which
expenses are necessary to be incurred and which are not. In similar way the budgeting is also
important in outlining all the sources from where the company can avail and get finance for the
better working of the company. This help Sainsbury in maintaining a balance between the
income and expenses of the company (Rikhardsson, 2017). The behavioural aspect of the process
of budgeting are discussed as below-
Realistic standards- The first and foremost aspect pertaining to behaviour of the
budgeting process is to set the realistic standards. This is majorly pertaining to the fact that if the
standards set for the making of the budget are not realistic then it will not be possible for the

company to achieve it. Thus, the major behavioural aspect of the process of budgeting is to set
the goals which are achievable and attainable by Sainsbury.
Frequent feedback and monitoring- This is another behavioural aspect of process of
budgeting where the budget is continuously watched and reviewed. This is done to ensure that all
the working of Sainsbury is going on with accordance to the planned budget (Malina, ed., 2017).
This monitoring will ensure that the budget is being followed in the same manner as it is thought.
Thus, this will outline any loop hole of flaws in the budget if present there.
CONCLUSION
From the above study it is concluded that management accounting plays a crucial role
within the success of the company. This is majorly because of the reason that management
accounting assists the company in taking effective decision for the betterment of the company.
Thus, the present report started by discussing the role of management accounting which is taking
effective decision for the improvement of the company. Further the discussion highlighted some
of the techniques of management accounting like budgeting, cost accounting system and many
others. Next the discussion described the concept of budgeting and the process of budgeting. The
process of budgeting involves many different stages like goal setting, gathering of data,
preparation of budget and monitoring and evaluation. In the end the behavioural aspect of
budgeting process was discussed like continuous monitoring, setting realistic goals and many
others.

REFERENCES
Books and Journals
Ax, C. and Greve, J., 2017. Adoption of management accounting innovations: Organizational
culture compatibility and perceived outcomes. Management Accounting Research. 34.
pp.59-74.
Black, W.H., 2017. Book review: History of Management Accounting in Japan: Institutional &
Cultural Significance of Accounting.
Bui, B. and De Villiers, C., 2017. Business strategies and management accounting in response to
climate change risk exposure and regulatory uncertainty. The British Accounting
Review. 49(1). pp.4-24.
Holopainen, R.M., Niskanen, M. and Rissanen, S., 2019. Management Accounting and
Profitability in Private Healthcare SMEs. International Journal of Public and Private
Perspectives on Healthcare, Culture, and the Environment (IJPPPHCE). 3(1). pp.28-44.
Malina, M.A. ed., 2017. Advances in management accounting. Emerald Group Publishing.
Otley, D., 2016. The contingency theory of management accounting and control: 1980–
2014. Management accounting research. 31. pp.45-62.
Rikhardsson, P.M., 2017. Information systems for corporate environmental management
accounting and performance measurement. In Sustainable Measures (pp. 132-150).
Routledge.
Schaltegger, S., 2018. Linking environmental management accounting: A reflection on (missing)
links to sustainability and planetary boundaries. Social and Environmental Accountability
Journal. 38(1). pp.19-29.
Zeng, H., 2018. Reciprocal Interaction between Management Accounting and Other
Management Roles. Open Access Library Journal. 5(11). p.1.
Online
The budget process. 2019. [Online]. Available through: <
https://saylordotorg.github.io/text_personal-finance/s09-01-the-budget-process.html>