Critical Assessment of Budgeting in Management Accounting Decisions

This report provides a comprehensive analysis of budgeting within management accounting, focusing on its pivotal role in business decision-making. It begins with an introduction to management accounting and the case study of Softconic Company, an IT solutions provider. The report delves into the definition and types of budgeting, including sales, overhead, personal, fixed, flexible, and master budgets, and emphasizes their significance in business decisions. It explores how budgeting aids in forecasting funding needs, prioritizing projects, and ensuring proper financial management, especially in light of volatile business environments. The report then examines different budgeting systems, such as Excel or Google Spreadsheets, and the concept of participative budgeting, highlighting its benefits and implications for business performance. Key aspects discussed include the merits and demerits of various budgeting styles, the critical links between budgeting and short-term decision-making, and the impact of changing environments on different budgeting styles. The report concludes by summarizing the key findings and emphasizing the importance of budgeting for effective financial resource management.

Management Accounting

Table of Contents
INTRODUCTION.................................................................................................................................3
Part A....................................................................................................................................................3
Budgeting..........................................................................................................................................3
Types of budgeting............................................................................................................................3
Role of Budget in business decision making.....................................................................................3
Changing environments.....................................................................................................................4
Real world example...........................................................................................................................4
Part B.....................................................................................................................................................5
Budgeting systems.............................................................................................................................5
Participative Budgeting.....................................................................................................................5
CONCLUSION.....................................................................................................................................5
REFERENCES......................................................................................................................................7

INTRODUCTION
Management accounting is all about managing the accounting transactions entertained
by company in a respective financial year. This report is based on the case study of Softconic
Company. This is an information technology company and engaged in selling various
technological solutions to all its customers. In this report different aspects related to
budgeting will be discussed. Henceforth, report will emphasis on budgeting and different
types of budgeting system management accounting has. In what manner the budgeting helps
management of company to take business decision will also be discussed. What is suitable for
changing environment will also discuss in this report. Furthermore, detailed discussion over
budgeting system would also discuss in this report. Detailed information over participative
budgeting will be discussed. How does the budgeting help in making decision in changing
environment will also analyse in this report.
Part A
Budgeting
Budgeting is all about analysing the financial requirements of company and based on
the analysis [proper budget is prepare to match such financial needs of company. Budgeting
is a predetermined report of company’s financial need in coming year (Aziz and Shah, 2020).
This includes all such expenses that company will entertain potentially in the coming year.
This involves all fixed and flexible nature of expenditure company will entertain in the
respective financial year. Budgeting is conducted so that all financial requirements or
liquidity needs of company can be managed effectively.
Types of budgeting
Budgeting is of different types. On the basis of the needs and requirements of
company different types of budgets are prepared. Budgets are off different types that are
titled as sales budget, overhead budget, personal budget, fixed budget, flexible budget, master
budget and many other types of budgets are prepared under management accounting. All
these budgets have its own significance for taking business decisions.
Role of Budget in business decision making
Budgeting play the following roles in the business decision making.

Forecasting funding needs: Budgeting allows company to forecast its funding needs for
business operations (Chakraborty, 2016). Budgeting is all about forecasting the funding
requirements company will be entertained in the coming financial year for channelling
various functional activities of company. This provides better chances of financial
management in organisation.
Prioritizing projects: Budgeting supports company in prioritizes the projects. On the basis
of profitability and financial resources company can prioritise its projects. This is an
important aspects associated with the budgeting in Softconic Company.
Proper financial management: Budgeting helps in proper financial management at the
organisation. This allows company to manage its financial resources properly. Financial
management play crucial role in the growth of the company as it improves the decision
making of company.
The above mentioned are the key impacts budgeting create in business.
Changing environments
As per the views of Henttu-Aho, (2016) business environment is very volatile in
nature. The valiantly of business environment allows the environment to constantly create
changes in business environment. Constant changes always offer new challenges for the
company. In order to deal with all such challenges flexibility plays a crucial role for company
to deal with such challenges. To deal with the constant changes business environment create
it’s important for the company to deal with flexible budget as it provide scope to deal with
the flexibility involved in the business environment. This provides scope of funds for dealing
with such flexibility involve in business environment.
Real world example
For example many companies like Samsung, Apple and other big companies follow
the concept of flexible budget for dealing with the volatility of business environment. All
these companies give emphasis on flexible budget for channelizing financial management at
organisation. Flexibility creates more ease in financial management practices at organisation
level. As per the Schiavo-Campo,(2017) flexible budget provide more clear information for
different financial need of company this is also a reason by all companies like Samsung,
Apply and all others prefer flexible budget over fixed budget.

Part B
Budgeting systems
Budgeting systems are defined as types of approaches that can be used to prepare
budgets for the financial management role in company. Organisation use techniques or
systems like cash envelop system, paper or ledger system excel or Google spread sheet
system, Every Dollar system, YNAB, Mint and many other systems are available to prepare
the budget. Softonic Company usage the Excel or Google Spread Sheet system to prepare the
budget of company. This system is well advanced system for preparing budget. Different
option is also available in this system that why accounting department of company prefers
this system over any other system available for budgeting.
Participative Budgeting
Softconic Company follows the concept of participative budgeting in the organisation.
Swaner, (2017) has projected that participative budgeting is a technique involve lower level
employees of company to prepare the budget in company. Lower level designated individual
in management get participation in budgeting process. Unlike the imposed budgeting process
participative budgeting shares the responsibility with lower level managers to give them the
sense of ownership in company’s operations. This is an important and productive technique
to improve the operational efficiencies of company. Lower level management also participate
in the functions of company by involving in this budgeting technique.
Participative budgeting in decision making
Participative budgeting is a process that allows leaders to make feel the lower level
manager’s part of the organisation hierarchy to be more important and specific. This allows
them to feel the ownership in operations of company. This budgeting technique is more like a
motivation gesture for the lower level of management authority in organisation. This allows
management at lower level to take a proper control over lower level operations of company.
On the basis of the operational funds they get to perform all their responsibilities.
CONCLUSION
This report has projected the precise information about the budgeting in organisation.
Budgeting is all about managing the financial resources of company in such a way that it can
match up all financial requirements of company. In budgeting company analysis the expenses

it needed to entertain in coming year so that proper planning for company’s financial
resources can be done.

REFERENCES
Books and Journals
Aziz, H. and Shah, N., 2020. Participatory Budgeting: Models and Approaches. arXiv
preprint arXiv:2003.00606.
Chakraborty, L., 2016. Asia: A survey of gender budgeting efforts. International Monetary
Fund.
Henttu-Aho, T., 2016. Enabling characteristics of new budgeting practice and the role of
controller. Qualitative Research in Accounting & Management.
Schiavo-Campo, S., 2017. Government budgeting and expenditure management: principles
and international practice. Taylor & Francis.
Swaner, R., 2017. Trust matters: Enhancing government legitimacy through participatory
budgeting. New Political Science. 39(1). pp.95-108.