LCBB5002 Management Accounting Essay: Budgeting and Sony Corporation

This essay delves into the realm of management accounting, examining its role in internal reporting and decision-making, with a specific focus on the Sony Corporation. It meticulously explores various budgeting styles, including static and flexible approaches, analyzing their merits and demerits within the context of the chosen company. The essay investigates the crucial link between budgeting processes and short-term decision-making, highlighting how different budget types contribute to informed choices. Furthermore, it assesses the impact of changing environments, such as fluctuating demand and interest rates, on budgeting methods. Finally, the essay evaluates participatory budgeting, discussing its advantages, such as information sharing and employee motivation, alongside its drawbacks, including time consumption and potential budgetary slack. The conclusion emphasizes the significance of planning within an organization's financial structure and its broader impact on economic performance.

Management Accounting

INTRODUCTION
The MA could be interpreted as a manner of tracking, analyzing quantitative
and monetary data with view to producing internal reports. Such reports shall be addressed to
management in order to take necessary action (Petrosyan, 2020). The selected company in
the study is the Sony Corporation. The organization manufactures and markets different
electronic products. It is located in Kōnan, Minato, Tokyo. The study report is focused on the
significance of budgeting process and its contribution to decision-making process. For this
motive, the study includes a thorough overview of the various forms of budgeting styles and their
key roles and importance.
MAIN BODY
1. Different types of budgeting.
In general, the term budgeting can be defined as a way in which budgets are
prepared or projection of future income and expenses is done in a detailed manner for a
financial year (Rubin, 2019). The budgeting is essential for each types of business or
company whether it is large or small. By help of this approach, it becomes easier for
managers to prepare effective policies and plans. This becomes possible because
necessary information about financial perspective is derived by help of different kinds of
budgets. There are a range of budgeting styles which are being applied in companies. In
the context of Sony corporation, below mentioned budgeting styles can be used in order
to make competitive planning and strategies by their managers:
Static budgeting style- This is defined as a form of budgeting approach under which
estimated value of income and expenses cannot be changed in portion to change in
production volume. This is one of the key feature of static budgeting as finance managers
do not need to make update in projected financial data. This approach is used for those
activities and operations which are possible to remain same in an accounting cycle such
as rent of building, salary of employees and many more. In the context of above
mentioned company, Sony corporation they can implement this budgeting approach. This

will lead to below mentioned advantages and disadvantages for them which are as
follows:
Merits:
The key merit point of this budgeting style is that it is quite easier to enforce in
companies. This is so because of lack of adjustments in estimated values. Due to this,
managers of above company can focus on main activities and operations as they do not
need to worry about making changes in financial plan.
Demerit:
The drawback of this method is that it is not suitable in the case when there is dramatic
change in organizational activities. Such as huge increase or decrease in sales and
expenses. It is so because in the case of major changes, companies cannot make
modification accordingly which lead to many obstacles.
Flexible budgeting style- This style of budgeting is completely opposite of above method.
It is defined as a budgeting style in which companies can make modifications in
accordance of variation in total production volume (Demir, 2019). In regards to Sony
corporation, they can apply this budgeting style for those operations which may flex in a
particular accounting period. It has some merits and demerits such as:
Merits:
This budgeting style allow companies to make modifications as per the need of business.
Due to it, managers can become aware about progress of company in terms of financial
perspective. As well as performance of each activity can be tracked by managers by help
of this budget.
Demerit:
The negative point of this budgeting style is that it is quite costly and time consuming. It
is so because due to more and regular changes, it becomes difficult for small businesses
to maintain it for long time period.

2. Relation between budgeting and short term decision making.
There is quite a pivotal linkage among budgeting processes and short
term decision making processes. It's just so since by support of diverse styles of budgets,
supervisors can collect crucial facts about numerous facets. Just like cash budgets offers
an outline of more sources of revenues and spending. This information could even
contribute to take proactive action for impending time frame. As well as in respective
company's business, their executives make shorter term plan and decisions in accordance
with details extracted from varied sorts with budgets.
A main feature/characteristic of budgeting process is that, it has quite a variety of
budgets in alignment with nature with processes/tasks. Such as a sales budget for
handling operation pertains to sales as well as a purchase budget and so many more.
Growing of them participate in an appropriate sense in attempt to make crucial decision
for shorter to medium term decision taking.
As in aforementioned business, their financial department make decision for
shorter time-frame on the grounds of operating budget since in such kind of budget
details about various processes and activities for scheduling period has been included.
Alongside, longer term plans are worked out on grounds of approaches of capital
budgeting.
3. The impact of changing environments on various budgeting styles.
The outer world includes a number of variables and each one of these has a potential to
affect overall results. And also budgeting types of businesses often get influenced owing
to alteration in environmental influences (Morrin, 2019). In respective corporation, their
budgets may also have impacted owing to these listed factors, as follows:
 Changing Demand- It is one key factor which can impact the different sorts of
budgeting methods. This is so that when customers’ demands declines then sales

budget may be impacted adversely. As in Sony corporation if they planned a
selling budget for forthcoming time frame which indicates positive result. In case
where customer changes their choice or purchasing habit then organization can
face problems since projection of budgeted figures would be incorrect.
 Fluctuations in interest-rates- This variable can influence the cash or purchasing
budgets of a business. This is so since if interests rate rises in upcoming
period then projected cash proceeds sum can be incorrect and also business
may face problem in purchasing budgets' forecast. For example, in
respective corporation, their various types of budgets can get influenced in both
positively and negatively way owing to shift in interest rates.
4. The merits and demerits of participatory budgeting and its implication on business
performance.
The participatory budgeting process has increased exponentially over the years, as the
importance attributed to it has been increasingly used. Budget support includes the
contribution of subordinates to the definition of financial plans. Collaboration in the
planning process includes the influence of representatives on the latest financial plans and
direct letters (from bosses to subordinates and from subordinates to bosses). In this way,
partnership planning is considered the least influential in defining financial plans.
Merits:
1. Transfer of information upwards
One of the positive aspects of collaborative planning is the sharing of data from
departmental leaders to senior management. It gives sub-managers the opportunity to
comment on some authoritative issues.
2. Employee motivation
When representatives are involved in the cost planning process, they have the option of
requesting part of the planning process. It gives them a sense of ownership when their
proposals are considered by senior management. They also feel that their executives

increase in value every time they get the chance to interact with the best leaders and offer
their opinions on specific focus points. The involvement of staff in the process improves
their morale, giving them a greater inclination to work more diligently towards achieving
the goals that have helped to set.
3. Goal congruence
Goal congruence refers to the understanding between the goals of the employee and the
goals of the general organization. Together, in order for the organization to achieve an
achievable cost, both management and staff need to set goals that move in the same
direction.
Demerits:
1. Time-consuming
The broadest limitation of a participative budget is that time has passed in opposition to a
forced spending plan. As spending planning starts from the regional level upwards, too
many investments may occur which could ruin the approach. The inclusion of
representatives in all sectors means that exchanges may take too long for employees to
agree. In the event of a lack of understanding, the administration should provide for an
official option, which means that employees should accept a forced choice.
2. Budgetary slack
The other constraint is the budget path. Producers can go overboard with expenses and
also don't think of many of the revenue projections as a way to control the potential
benefit spending plan. to have. It means that the deputy directors have focused on making
sure they perform and even continue in the next financial year. This is largely the case
where the boss's presentation is assessed based on the execution of the financial plan. By
making the financial plan simple to implement, management will be viewed as exceeding
your goals.

CONCLUSION
From the evidences that have been given above, it can be concluded that one of the important
functions of planning is to be performed in the financial structure of an organization. Almost all
recently created testing strategies have been a side effect of planning to improve performance.
An important part of the travel industry, as we have seen, has just evolved due to consideration
of a valid design to make it work. In this sense, it can be said that not only the future potential of
an organization is subject to the kind of planning that follows, but that they also affect the
national economy of the country. The United Arab Emirates could never have had such a place
without the development of perhaps the most popular structures on the planet.

REFERENCES
Books and journal:
Rubin, I.S., 2019. The politics of public budgeting: Getting and spending, borrowing and
balancing. CQ Press.
Demir, F., 2019. Cognitive Considerations In Interface Design For Children With Asperger’s
Syndrome: A Proposed Budgeting Tool. American Journal of Qualitative Research, 3(2),
pp.42-51.
Petrosyan, L.M., 2020. THE ESSENCE OF PLANNING, PROGRAMING, BUDGETING
SYSTEM. СОВРЕМЕННЫЕ ПРОБЛЕМЫ И ПЕРСПЕКТИВНЫЕ НАПРАВЛЕНИЯ,
p.61.
Morrin, A.M., 2019. Faculties’ Behaviour and Response to Decentralized Budgeting at a Large
Research-Intensive University (Doctoral dissertation).