HI5017 Managerial Accounting: A Detailed Report on Budgeting Approach

This report explores the managerial accounting technique of budgeting, analyzing two journal articles to identify similarities, differences, and key outcomes related to the budgetary process. The first article examines budget development in Japanese aviation companies, while the second investigates spending patterns in U.S. Army hospitals with lapsing budgets. The analysis covers various aspects of budgeting, including estimation of revenue and expenditure, resource allocation, and the impact of government subsidies. The report concludes that budgetary preparation depends on the administrative department of the organization and can be influenced by government policies and the organization's operational expenses.

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Exploratory approach to Budgeting
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Executive Summary
This paper concentrates on the managerial accounting and one of its important technique
called budget and budgetary process. Two journal articles has been selected to carry out the
research work. Explanation for the selection of the journal is mentioned. The differences
and the similarities of the two journal articles has been discussed in this study. Along with
this the outcomes or the findings from the two articles related to budgetary process has also
been discussed.

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Table of Contents
Exploratory approach to Budgeting...........................................................................................1
Executive Summary....................................................................................................................2
Introduction...............................................................................................................................4
Budgeting and its Processes.......................................................................................................4
Purposes for the selection of the journal articles......................................................................5
Similarities and Dissimilarities in the Findings...........................................................................6
Outcomes from the selected Journal Articles............................................................................7
Conclusion..................................................................................................................................8
Reference List.............................................................................................................................9

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Introduction
According to Kumra (2016), budgeting is an important technique which is widely used by
organizations across the world. Budgeting is the estimation of the revenue generation of a
company and its expenditure for the future period or for the upcoming financial year (Shah,
2007). Two journals have been selected to carry out the research. The two articles which are
selected are “The development of budgets and their use for purposes of control in Japanese
aviation, 1928-1945” written by M. Noguchi and T. Boyns and the other one is “Spending
patterns with lapsing budgets: Evidence from U.S. Army Hospital” written by R. Balakrishnan,
N.S. Soderstrom and T.D. West. These two articles are used to analyze and evaluate the
techniques, which are used for making budgeting decisions.
Budgeting and its Processes
Budget is an estimation of expenses and revenue over a specific time period (Towey, 2013).
Budgeting is an important management accounting technique that can be used to allocate
resources for the upcoming year. Budgeting technique is also considered a quantitative plan
(J.K. Shim, Siegel, and A.I. Shim, 2011). Budgeting is also considered to be a technique which
is generally used by the management team of any particular organization. There is a concept
called balanced budget which means at the end of a particular period the expenses and the
generated revenue are expected to be similar. Another concept which comes is known as
the surplus budget which means the expenses has exceeded the revenues which has been
generated. According to Jeston (2014), budgetary process clearly depends on assumptions
based on previous years.
The process of budgeting includes estimation of the cost, which will be incurred for the
production process in the upcoming year; it helps to identify the trend of sales of a company
(Chohan, 2016). The process of budgeting also helps to give an economic view of any
particular sector. Budget is considered a financial plan but it includes financial as well as
non- financial information (Dropkin, Halpin and Touche, 2011). Budgeting is mainly
considered as a forecasting technique. In contrary to the discussed explanation, Wyatt
(2012) has mentioned that in various organizations there can be a political infighting
because managers of the organization are approving capital budget.
There are various forms of budget and budgetary process, which is discussed below:

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Personal Budget
When any individual plan their budget to allocate resources for the expenses in the
upcoming year and to manage their personal finances is termed as Personal Budget (Barr,
and McClellan, 2008).
Fixed Budget
The budget, which is not changed in its tenure even though there are any proper changes
which as, occurred in that specific period (Alviniussen and Jankensgard, 2015). In a static or
fixed budget the figures, which is being allocated for resources, also remains unchanged in
that particular tenure (Duncombe, 2018).
Master Budget
In this kind of budget, a financial plan is set to carry out various activities is generated for
the upcoming year. In a master budget the financial plan which is formed aims at sharing to
the shareholders or the investors of the company.
Flexible Budget
In this form of budget, the expenses and the revenue, which is being allocated changes with
the change in various factors like change in sales, change in productions and many more.
Cash Budget
The budget, which is created to identify the cash inflow and outflow of the organization, is
known as cash budget (Rumble, 2018).
Purposes for the selection of the journal articles
The journal which is written by Balakrishnan, Soderstrom and West (2007) explains how the
concept of unutilized funds is affecting organizations. It explains the importance of the
effective utilization of resources for carrying out business operations without any disruption.
In this research paper it has been mentioned that there has been an exhaustion in the
budget of the U.S. Army Hospitals and thus it illustrates the concept of Budget Lapsing. The
selection of this article has two purposes. The first purpose is that the writer has evaluated
the discrepancies which has occurred while allocating the expenditures. The second purpose
for the selection of this article is that it has explained the relationship between the

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organizational objective and the technique of resource allocation. In this article it has been
seen that the management department of the U.S. Army Hospitals had to face problems due
to improper budget management. The issues which has raised is due to budget
maximization and improper interpretations of revisions of budgets. One research question
which has been evaluated by the writers of this article has a relation to monthly expenses of
the hospitals, total number of permanent employees and how the budget lapsing had an
impact on the hospital in the first few months of the financial year.
The other selected article written by Noguchi and Boyns (2011) evaluates the role of Japan
in the process of budget development within few companies especially operating in the
transportation sector between the year span of 1928 to 1945. The organizations which are
mentioned in the article is Japan Air Transport (JAT), Japan Airways, Japan Mail Streamer
(JMS). The research question which has been evaluated in this article is related the entire
process which is used for budget developments. This article deals with the budget
development of specific region i.e. Japan. This article also answers a research question by
using sociological concepts and gives an insight on the decoupling between formal policies
in the organizations and the actual practices.
Similarities and Dissimilarities in the Findings
In both the research paper there exists limited similarities. In one of the paper the
budgetary process is taken in to account while in the other research paper the trends of the
income and the expenses of one particular organization is evaluated. The pattern of the U.S
Army hospitals management team is different from the budgetary preparation pattern of
the Japan companies.
Along with the similarities the two articles there exists various dissimilarities also. The article
which is written by Noguchi and Boyns (2011) legitimize the subsidies of the receipts from
the government for preparing the budget of the two companies mentioned in the article i.e.
Japan Mail Streamer and Japan Air Transport. On the other hand, the article which is written
by Balakrishnan, Soderstrom and West (2007) states that according to the saving-dissaving
model the administrator of the U.S. Army Hospital tends to pile up the stocks of various
supplies including medicines till the end of the upcoming year. This means that the
administrator aims to reserve the resources which would be utilized in the upcoming

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financial year. Thus, this budget aims at generating reserves after all the monetary and non-
monetary resources gets accelerated. Thus, from the above discussion it can be said there
exists differences between the two journal articles. As per the findings of the journal article
written by Balakrishnan, Soderstrom and West (2007) there exists a trend in the
expenditures though the budget is already laid out whereas the journal article written by
Noguchi and Boyns (2011) mentions the various process in which a budget is prepared.
Outcomes from the selected Journal Articles
The outcomes from the article written by Balakrishnan, Soderstrom and West (2007)
describes the pattern of expenses that is followed by the U.S. Army Hospitals. In this article
it has been found that the expenditure at the end of one particular financial year increases
approximately by 15% from the budgeted expenditure. From the findings of this journal
article it can be said that the regulation which has been passed by Continuing Resolution
Authority (CRA) it divides the funds which are available across various TRICARE branches
and armed forces. So, it can be said that a budget uncertainty is created and it leads to
decrease in expenses when the financial year starts.
It has been found out from the articles that the patients who visit U.S. Army Hospitals delay
their treatment in the first quarter of the year due to less budget allocation. It has also been
researched that the expenses in the first part of the year is much less as compared to the
ending time of the financial year. The another outcome extracted from this research paper
is that the budgeting of the U.S. Army Hospitals is done by dividing the departments in to
four segments. The four segments are ambulance services, ancillary services, inpatient care
services and support services. Among this four services the segment which deals with
inpatient services follows uniform budgeting system and the pattern of expenses in this
segment is dissimilar from the pattern of expenses of other segments.
The major outcome which comes out from the article written by Noguchi and Boyns (2011)
is that before 1938 the government was required to offer statements of budgets.
Government subsidies was offered to Japan Mail Streamer (JMS) to maintain its routes both
domestic as well as international. So, in Australian companies the expenses related to
particular branch can be considered as a method of budget preparation.

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On the other article it has been seen that Japan Airways prepared its budget through the
preparation of income and other operating expenses in the entire budget statement. The
outcome which can be extracted from this article is that budget cannot be formulated on
the basis of actual figures but it can be formed by estimating various operational expenses
of the organization. So, it can be concluded that various Australian companies can formulate
the budget on the basis of estimated figures and not on the basis of the actual results from
the previous years.
Conclusion
From the entire study it can be concluded that the budgetary preparation of organizations
like U.S. Army Hospitals and Japan Airways primarily depend on the administrative
department or the management department of the organization. It has been mentioned in
one of the research paper that various organization like the U.S. Army Hospital tend to
lower down the expenditure in the beginning of any financial year but the expenditure
increases when the financial year comes to an end. On the other hand, the other research
paper suggests that when an organization prepare and budget before the start of its
operations it is mostly influenced by the government of that particular country where the
organization is carrying out its operation. It can also be concluded from the research paper
is that there are various organizations who prepare the budget keeping in mind the actual
figure of the previous year.

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Reference List
Alviniussen, A. and Jankensgard, H., 2015. Enterprise risk budgeting: bringing risk
management into the financial planning process. 6TH ed. London: McGraw Hill.
Balakrishnan, R., Soderstrom, N.S. and West, T.D., 2007. Spending patterns with lapsing
budgets: Evidence from US army hospitals. Journal of Management Accounting
Research, 19(1), pp.1-23.
Barr, M.J. and McClellan, G.S., 2018. Budgets and financial management in higher education.
7TH ed. New Jersey: John Wiley & Sons.
Chohan, U.W., 2016. The idea of legislative budgeting in Iraq. International Journal of
Contemporary Iraqi Studies, 10(1-2), pp.89-103.
Dropkin, M., Halpin, J. and La Touche, B., 2011. The budget-building book for nonprofits: A
step-by-step guide for managers and boards. 5TH ed. New Jersey: John Wiley & Sons.
Duncombe, W., 2018. Lecture Notes in Public Budgeting and Financial Management. World
Scientific Books.
Jeston, J., 2014. Business process management. 6TH ed. Abingdon: Routledge.
Kumra, N., 2016. The case for rights-based budgeting and spending in India. Evaluation
Journal of Australasia, 16(1), pp.38-42.
Noguchi, M. and Boyns, T., 2012. The development of budgets and their use for purposes of
control in Japanese aviation, 1928-1945: The role of the state. Accounting, Auditing &
Accountability Journal, 25(3), pp.416-451.
Rumble, S., 2018. Prepare operational budgets. 8TH ed. AU: Cengage Learning.
Shah, A. ed., 2007. Budgeting and budgetary institutions. The World Bank.
Shim, J.K., Siegel, J.G. and Shim, A.I., 2011. Budgeting basics and beyond. 6TH ed. New Jersey:
John Wiley & Sons.
Towey, D., 2013. Cost management of construction projects. New Jersey: John Wiley & Sons.

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Wyatt, N., 2012. The financial times essential guide to budgeting and forecasting: how to
deliver accurate numbers. 7TH ed. UK: Pearson.