Budgeting in Management Accounting: Executive Summary and Analysis

This report provides an executive summary of budgeting within the context of management accounting. It explores the significance of budgeting in maintaining financial balance and efficiency, detailing various approaches like top-down and bottom-up methods, along with their respective advantages and disadvantages. The study further analyzes two scholarly articles focusing on budgeting's role in sponsorship decision-making processes. The first study highlights the crucial role of budgeting in performance evaluation, while the second emphasizes its function as an authorization tool. The report concludes that effective budgeting is essential for achieving success and efficiency in management accounting, offering valuable insights for management accountants. The report also touches upon the role of accounting personnel involvement in the sponsorship management.

MANAGERIAL ACCOUNTING

EXECUTIVE SUMMARY
Budgeting is termed as very important concept in management accounting. It helps to
keep appropriate balance in its income and expenses in efficient aspect. The present study is
discussing about budgeting with context of management accounting. It will provide detailed
information associated to budgeting with its type of approaches. These approaches are
described with its merits and demerits in management accounting. Further, there is selection of
two scholarly articles which are based on budgeting with management accounting in
sponsorship decision making process. From study 1, its major finding is of significant budgetary
role for evaluating performance and from study 2 it reflects active budgetary role as
authorisation. Further it could be summed up by stating that budgeting helps in attaining
success in efficient aspect.

TABLE OF CONTENTS
INTRODUCTION..............................................................................................................................1
MAIN BODY ................................................................................................................................... 1
Explanation of Budgeting.......................................................................................................... 1
Explanation about question and purpose of study ...................................................................4
Discussion about both study with its findings...........................................................................5
Specific lessons and outcome from two studies which are useful for management
accountants...............................................................................................................................8
CONCLUSION................................................................................................................................10
REFERENCES................................................................................................................................. 11

INTRODUCTION
Managerial accounting is also referred as cost accounting with process of interpreting,
analysing, communicating, identifying and measuring information to managers with context of
objectives of business entity. Budgeting refers to process of framing plan for spending money as
this expenditure plan is known as budget. It helps to keep appropriate balance in its income and
expenses in efficient aspect. The present study is discussing about budgeting with context of
management accounting. It will provide detailed information associated to budgeting with its
type of approaches. These approaches are described with its merits and demerits in
management accounting. Further, there is selection of two scholarly articles which are based on
budgeting with management accounting in sponsorship decision making process. The other
scholarly article which will be chosen will show budgetary role with context of sponsorship
management as contingency perspective. It had provided explanation of purpose of both study
with its method which is used for exploring topic. In the same series, it had been discussed
contrasting aspect of both study with its outcome which are important for management
accountants.
MAIN BODY
Explanation of Budgeting
Budgeting refers to process for creating plan for spending money. The plan of spending
is known as budget. In simple words, the creation of this spending plan helps for allowing for
identify in advance about presence of sufficient money to perform activity according to need.
Generally, it balances expenses with its income. If there is high spending as compared to
income, then it creates problem. If spending or budget plan is followed in appropriate manner
then it will help for keeping free from debt (Cowton, 2018). The basic principles of budgeting
are:
Planning annual operations
Setting coordination in work of different parts of business
Communicating plans to managers
Motivating manager for attaining goals
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Controlling activities
Evaluation of managers performance
Planning annual operation: Usually, business will frame plans for long term perspective.
Business could not be switched over night and it is difficult to account long term plan while
dealing with regular operations. The managers must be ensured through annual budget and
planning for future by manager as they transform long term plan to manageable steps.
Setting coordination in work of different parts of business: In business, there are
various departments so it is difficult to ensure about performing its operation in appropriate
aspect. Budget also helps in ensuring about work of each department which is directly directed
according to attaining about best feature for business.
Communicating plans to managers: Budget communicates operation of each
department for attaining objective of organization. In the same series, it reflects about activity
for performing and how it fit to other departments.
Motivating manager for attaining goals: Planned outcome had been provided through
budget. Generally, it depends on environment as it breaks its results for shorter duration.
Controlling activities: Various business operation as management by exception, as they
use reporting system which reflects about not attaining budgeted activity (Hiebl, 2018).
Evaluation of manager’s performance: The manager knows about what activity they
have to perform with its measure. They provide appropriate basis for identifying quality of
manager for performing their job.
Approaches of Budgeting
There are two approaches of budgeting which are stated below:
 Top Down approach
 Bottom Up approach
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Illustration 1: Approaches of Budgeting
(Source: Budgeting, 2018)
Top Down approach: In this approach, budget had been prepared through top
management with context of its aim of business entity and it passes to its managers for
implementation perspective. Recommendations and inputs for budget are considered by
managers before its preparation but these are considered as solely on discretion by
management. It begins with estimating cost at its higher level. Whole budget is divided in task
of first level followed by second and third level task.
Advantages: There is presence of corporate functional approach instead of divisional
approach since concern of management would lead to organization's overall growth. It would
go to experienced hands and management with requirement of taking help from outside. The
process of preparing budget would be fast and it would avoid inter departmental issues. In the
same aspect, it would be aggressive for growth of business entity.
Disadvantages: It would be demotivating lower management as they have absence of
ownership over budget which will directly create feeling by management linked to set target is
impossible. Biases of information to top management might impact budget. The considerable
time of management would be considered in this which might lose from strategy's path.
Bottom up approach: In this approach, budget is prepared according to department or
business entity linked to information and previous and present experience about management
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for approval and input. It directly begins by determining various task and operation performed
through firm. Every unit has to disclose about its required funds and resources in its individual
budget.
Advantages: Managers are motivated and committed to organization because of
budget's ownership with them. The presence of better knowledge related to organization's
operation. Overall business strategy would be concentrated by senior management instead of
unit wise business. It could be quite more accurate for individual task as it provides overall
accuracy to its whole budget.
Disadvantages: It might not be par with its full objective of organization as it is prepared
through managers at business unit level. The process of preparing budget would be slow and
create dispute among inter department. Control can be lost by management for forecasting of
organization. Target could be set through managers which are easy to attain for decreasing
pressure (Su, 2018).
Explanation about question and purpose of study
Study 1: [In search of management accounting in sponsorship decision making
process]
In this study, it is about role and functions of budgeting and accounting in sponsorship
management. The potential associated to accounting procedure has to be directly invoked in
management and there is considerable control on sponsorship. It had reflected this study with
context of budgetary processes via senior management. In simple words, it had shown role of
budget in sponsorship decision making process (Delaney and Guilding, 2010).
Study 2: [An examination of budgetary roles in context of sponsorship management: A
contingency perspective]
In this study, budgetary roles are examined with reference to sponsorship management
and factors had been identified with its significance. In simple words, they had extracted
importance of budgeting with decision making process in sponsorship management Delaney,
(Delaney and Guilding, 2011).
Questions set out for exploring topic
Study 1
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 What are the main roles of budget in context of sponsorship decision making?
 What is importance of following budgetary role?
 Is a formal budgeting and analysis of project had undertaken? Is so, by whom and how it
is extensive?
Study 2
 Examine importance and nature of role of budget associated to sponsorship investment
decision making?
 Identify the factors which affects importance of budgetary role in sponsorship context?
Discussion about both study with its findings
Findings of study 1
Its findings are classified in three categories related to:
Sponsorship Decision making procedure
Role of budget in sponsorship management
Degree of accounting personnel involvement related to sponsorship management
Sponsorship Decision making procedure: It is very important for considering
institution's sponsorship allocation of budgetary process, which could be comprised in three
different phases. The first phase directly deals with decision on university-wide with proportion
of total university investment has to be allocated to activities of sponsorship. The followed
phase is directly related to method of investing on campus based in its Australian university.
Both the decision making phases could be observed as located with level of chief executive
officer in hierarchy linked to university. So, third phase for decision making incur at campus
level.
Role of budget in sponsorship management: It had provided awareness among
requirement of budgeting linked to sponsorship management which was apparent with
manager's discussion. The importance placed with application of budget associated to
sponsorship management was directly viewed with connection to campus's manager oversight
of expenditure of sponsorship. It does not signify active budgetary role played thorough any
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particular accounting personnel. Initially, it was anticipated before this study that appearance
of predominant function of budget in concern of sponsorship management with identification
of amount could be expended. It is referred as authorisation role.
The literature of this study had conceived budgetary monetary function as outcome for
identification of maximising sales or for striving cost minimisation target. It is ensuring about
way of spending with underscore the method as sponsorship budget does not represent any
specific target to strive. For this concern, motivation was referred through one manager with
connection to budget of sponsorship, as it appears better for interpreting comment of manager
which signify same.
In the similar aspect, budgetary role as promoting cross organizational coordination and
communication had been referred. It had been directly appeared about level of sponsorship
budget and carried implication for extent. It had formed communication among campus
managers which had raised sponsorship budgets and provided increment in cross campus
discussion on proper method to expend budget. The managers did not observe increment of
cross organizational coordination and particular form through process of sponsorship budgetary
process.
Further, it had extracted other significant budgetary role which is directly concerned for
performance evaluation. It is accepted on wide aspect about potential of role would be muted
with context to discretionary expenditure where result of financial quantification of
expenditure is problematic. It had directly supported this aspect, but managers had
acknowledged performance evaluation as huge importance.
Degree of accounting personnel involvement in sponsorship management: The
accounting personnel of Australian university were not performing with appropriate active roles
with association of sponsorship management. It had observed procedure of formal budgeting
and conducted appropriate analysis. Generally, it is stated that no senior manager is
responsible for budget of sponsorship with qualifications of formal accounting.
Findings of study 2
It had been extracted that motivation is considered as second highest role of scoring
budget. It had provided insight about significance of budgetary role associated with
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sponsorship management. With reference to its findings, it had given strong recommendation
about expenditure authorisation which is significant function in sponsorship management. It is
suggested that other role of budget had exhibited degree of importance associated to various
budgetary roles as it had original set of measure which could be applicable or adapted in future
work by laying special emphasis on appraising these budgetary roles on generic or specific
context. The role of performance evaluation was stated as very less important as it provides
support for widely held budget which in not used for measuring performance of discretionary
expenditure.
Insights for industry practice had been provided in its findings which appears on
inconsistent aspect with its academic literature which supports for marketing. The financial
terms are used by sponsorship managers for optimising instruments through budget for
control, planning and performance evaluation. Limited importance had been extracted for
authorisation budgetary role in this conducted study. Its observation is in-congruent with this
study.
In its finding sponsorship is directly regarded with archetypal form related to
discretionary expenditure as budgets are used predominantly with authorisation of sponsorship
expenditure. It directly carries intuitive merit on considerable aspect. The assertions are not
qualified with context of function of budgetary in such manner which considers relative
importance on direct base with enquiry on contingency model. It has recognition of various
budgetary usage among different industries, functional and organizational setting in its
organizations. In the same series, it had directed specifically for tracing formulation of
sponsorship budget.
Study 1 Study 2
It is based on management accounting in
sponsorship decision making process.
It is based on Budgetary roles in context of
sponsorship management.
Its findings are classified in three categories as
Sponsorship Decision making procedure, role
of budget in sponsorship management and
Degree of accounting personnel involvement
It has provided finding on basis of importance
of budgetary role in sponsorship management.
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related to sponsorship management.
It had shown findings by performing
qualitative analysis.
It had shown findings by performing
quantitative analysis.
It does not signify active budgetary role as
authorisation.
It signifies active budgetary role as
authorisation.
Significant budgetary role for evaluating
performance
Role of performance evaluation was very less
important.
Specific lessons and outcome from two studies which are useful for management accountants
The lesson which are essential for management accountants especially in Australian
companies are stated below:
Study 1
In this study, it had been concluded that sophistication of manager level for bearing
sponsorship management which is dependent on resources quantum expended on
sponsorship. If there is higher level of allocation of fund, then great importance is directly
attached to management funds expended along with sophisticated process of evaluation. It had
advanced appreciation of reality and potential of use of management accounting in sponsorship
management in numerous methods. From the review of literature with its sponsorship,
investment appraisal and function of budget is given in numerous method.
With context of sponsorship, practices of management accounting has potential which is
important as it shows discipline with need of translation of vision and strategy in denominated
terms. Accounting had played limited function in sponsorship management which is beyond
identification of budgetary fund with availability of expenditure. It had also monitored
expended sponsorship funds which had given validation degree. In this report, practice of
management accounting had been implemented in investment decision making of sponsorship
with requirement of economic justification of investment perspective. While ignoring benefits,
it derives appropriate implementation of this practice. The evidence's strength is directly
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concerned to authorisation function of budget as it beckons field work for exploring contextual
problems which directly impact manner of usage of budget.
The strong evidence had been given for involvement of limited accountant in process of
sponsorship management which would directly appear with scope of conduct. In the same
series, normative exploration of accounting techniques for drawing yield on great sophistication
in organization's range in sponsorship management. The sponsorship expenditure could be
observed for constituting particular discretionary expenditure form. It had also attempted for
building research initiative with alternative enquiry line for pursuing comparison of nature of
accounting control. It is applied to sponsorship management in such aspect accounting is
invoked in management with its kind of discretionary expenditure like training and advertising.
In its finding, it has been stated that degree of accounting linked to personnel
involvement in sponsorship management. Usually, managers infrequently draws expertise in
finance and marketing department to assess provision of project of value of money. It had given
appropriate exposure on accounting job with virtue of administrative nature of position in its
Australian university.
Study 2
According to this study, sponsors have huge demand of demonstrable return on
investment. If there is lack of financial discipline and credibility then it creates various issues.
The efficient manner where budget provides support to sponsorship management which could
be observes as particular interface of accounting facet. Budgets could be used for rational
model for measurement, identification, analysing and communicating information for
application of process of investment decision making. Sponsorship could be significant
expenditure for befitting over long term perspective as it could be constituted as investment
form. This development is posing various issues of accounting.
In the similar aspect, sponsorship could be directly viewed as investment as it might
anticipate deployment of accounting on basis of techniques of investment appraisal with
various other methodologies of management accounting with context of sponsorship process
of investment decision making. The findings had recommended various other role of budgetary
which had been given importance with reference to motivation, planning and forecasting.
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Performance evaluation is not given huge importance as widely held budget are not implied for
measuring performance associated to discretionary expenditure.
Interesting insights related to industry practice had been given which are inconsistent
and sponsorship uses different financial terms and instruments are optimised like budget for
process of planning, controlling and evaluating performance. It had extracted more informed
approach for identifying importance of function of budget on basis of enquiry on contingency
model. Generally, it recognises various application of budgetary in various industries and
organizational setting with its role in business entity.
Planning, motivation and forecasting are very important for management accountants
and in this study, these are recently documented on budgetary role of generic research.
Planning will be of huge importance in context of sponsorship decision making. It was directly
on basis of prior to entering in agreement of sponsorship. In this similar aspect, this study has
huge concern for identifying factors which impacts significance of budgetary functions in
investment decision making process of sponsorship. It had given support by giving proposition
with consideration of trust which is less important and attaching to function of budgetary with
huge risk. With the findings of report, trust could be diminishes instead of creation, with
application of formal accounting and contracting procedures, which are been documented
precisely with its performance and obligation. It had stated high risk and uncertainty situations
with huge degree of intuition would be framed in decision making of management. For
minimising risk and uncertainty, managers with sponsorship scenarios are featured with high
risk with reference to function of budgetary which is raising its importance. The usefulness of
budgets is due to exception of expenditure with authorisation role as in this study, no
budgetary role rose above midpoint of scale employed measurement.
CONCLUSION
From the above report, it is been concluded that management accounting plays very
important role in every organization. Along with this, budgeting with context to management
accounting is mandatory concept for business entity. Its principles are articulated which are
very important for attaining objectives and goals of the company or to achieve success. In the
similar aspect it had shown two types of approaches of management accounting as top down
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and bottom up approach. It had been articulated from above report that budget plays
appropriate role in sponsorship decision making process. It had shown various factors which
helps in significant role of budgetary function such as trust, risk and size. From study 1, its major
finding is of significant budgetary role for evaluating performance and from study 2 it reflects
active budgetary role as authorisation. Further it could be summed up by stating that budgeting
helps in attaining success in efficient aspect.
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REFERENCES
Books and Journals
Cowton, C .J. 2018. Management Accounting and New Information Technology. In Management
Information Systems: The Technology Challenge (pp. 115-126). Routledge.
Hiebl, M. R., 2018. Management accounting as a political resource for enabling embedded
agency. Management Accounting Research. 38. pp.22-38.
Su, T. T., 2018. Public budgeting system in Taiwan: Does it lead to better value for
money?. VALUE FOR MONEY. p.79.
Article
STUDY 1: Delaney, D and Guilding, C., 2010. In search of management accounting in the
sponsorship decision-making process. Accounting, Accountability &
Performance. 16(1/2). p.25.
STUDY 2: Delaney, D and Guilding, C., 2011. An Examination of Budgetary Roles in the Context
of Sponsorship Management: A Contingency Perspective. Journal of Applied
Management Accounting Research. 9(2).
Online
Budgeting. 2018. [Online]. Available through:
<https://www.mymoneycoach.ca/budgeting/what-is-a-budget-planning-forecasting>.
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