Managerial Accounting Report: Budgeting and Kmart Analysis

This report provides an executive summary of budgeting within managerial accounting, using Kmart Australia Limited as a case study. It explores the significance of budgeting in financial planning, decision-making, and control, referencing articles from "Accounting, Auditing, and Accountability" and the "Journal of Management Accounting Research." The report explains budgeting processes, including estimating future sales, activities, and cash flows, and how these are integrated into pro forma financial statements. It highlights the shift from cash-based to accrual-based budgeting and its application in Kmart's accountability framework, including the preparation of budgets, review processes, and performance monitoring. The report further discusses the purposes of accounting, auditing, and accountability journals, emphasizing their role in financial reporting and the interconnectedness of these elements. It also examines the importance of budgeting in management accounting research, strategy, and the need for audits to ensure accuracy and prevent fraud within Kmart, concluding with the similarities and differences between the two studies. The report explores how budgeting enhances management efficiency, forecasts the future, and helps maintain accounting records.

MANAGERIAL
ACCOUNTING

EXEXUTIVE SUMMARY
Budgeting is all about estimation of funds and designing plans for allocating funds to
distinct department. Basically, their main objective is to control the probabilities of errors and
mistakes by accomplishing things in systematic manner. Along with this, company design their
yearly, monthly and quarterly budget for managing their funds in most suitable manner.
Therefore, main objective of this assignment is to highlight the need of budget at workplace by
throwing lights on necessary factors. However, specific articles is get selected in this project for
explaining the benefits of budget for organization. Last but not the least, proper usage of making
plans and strategy is also outlined for enhancing the performance of an organization by satisfying
the clients needs or demands.

Table of Contents
EXEXUTIVE SUMMARY.............................................................................................................1
INTRODUCTION ..........................................................................................................................2
MAIN BODY...................................................................................................................................2
Purpose of accounting, auditing and accountability journal.......................................................4
Purpose of journal of management accounting research ............................................................6
Similarities and differences in the findings of the two studies...................................................7
Outcomes.....................................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11
1

INTRODUCTION
Managerial accounting is the systematic process and procedures of identifying,
measuring, analysing, interpreting, and communicating information for managers for achieving
an organization's goals. Managerial accounting provide that information to manager to take
decision for improvement of the company (Hilton and Platt, 2013). The selected topic which is
selected to continue in this report is budgeting and for that two articles are selected named as
Accounting, Auditing, and Accountability and journal of Management accounting research. For
the study of journal articles selected a real life organisation is Kmart Australia Limited. Kmart
Australia limited is retail brand was established as reputable discount department store and they
have 228 across stores Australia and New Zealand. Its offers entertainment or home products
such as mobile phones, gifts, clothing, phone accessories, party décor items and many other
things. On the basis of these articles define purpose of studies and research question and discuss
about similarities and differences of two studies. After two studies what outcomes comes that
will be justify to management accountants.
MAIN BODY
Explanation Of Budgeting
Budgeting is the process of preparing budget plan for the organization to spend money in
systematic manner. A budget is based on quantitative plan and used as a tool to deciding that
which activities giving priorities according to future time period.
In a business for the preparation of budget including these operations are following as –
(1) preparing estimates of future sales (2) preparing future day to day activities of the
organization (estimate) (3) preparing future cash disbursement and collections (4) summarizing
these estimates into an income statement and balance sheet. The budgeted balance sheet and
income statement are also known as pro forma financial statement. After preparation and
approved, organization used that budgeted balance sheet and income statement for controlling on
future activities.
Budgeting according to Accounting, auditing and Accountability journal that last decades
governments of many western countries are using system of transfer is cash based system into
accrual based system. But now they using cash based system and the ultimate transfer in
budgeting needs to convert cash into accruals after the assessment the value of users and not
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working under pressure of accounting experts. In the world government of various countries are
changed their accounting system last few decades and they are converting traditional cash mode
to accrual based system. Budgeting helps in to prepare final accounting of the organization
because budgeting called pre per forma of final accounting.
In Kmart managers apply this budgeting process in accountability firstly define budget
objectives for achieving the goals of organization after that they access last year and current year
data for the research. On this research based they are develop a base budget according to the
process, after that access all data and prepare budget. This budget pre plan of operating activities
for the future. After preparation coming on next step that review of budget that budget will be
again cross check that all items will be included in and after that follow this budget plan. On next
process see post and reports of result that will be according to budget or not and after that
monitor progress and amend on budget.
In auditing helping to managers of Kmart Australia limited to evaluation of business
budget for create financial report through gather to necessary data. On the behalf of this budget
taking decision in auditing and improve to system. And in accountability easily solve through
budgeting because it makes easy and simple.
Budgeting helping to management accounting to improve maintain data and Kmart
Australia limited through budgeting keep all data information and follow the budgeting plan for
management accounting. Management accounting is systematic process and this process will
going on in systematic way so they keep track on budgeting plan.
Purpose of accounting, auditing and accountability journal
The purpose of this journal that how budgeting helps in accounting, auditing and
accountability. And budgeting is most important for accounting, auditing and accountability.
Budget is a tool which is very helpful in decision making, providing estimates, improving
relations with stakeholders (Park and Jang, 2014). It provides necessary information about
resources available, revenues, expenditures etc. Vertical budget consists of incomes and
expenditure in a financial year, horizontal budget includes comparison of present incomes and
expenditure with prior estimates. There are various forms of budget used in different
organizations such as Line-item budgeting, function/object budgeting, zero-based budgeting,
program-planning-budgeting systems, site-based budgeting etc.
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New public financial management change in Australia aimed to bring more effective,
efficient and accountable public services. Word accountability here refers to the performance
signs of management and accounting technologies prevailing in private sector. Australian Public
Service (APS) is an administration body which governs public service management in Australia
(Weygandt, Kimmel and Kieso, 2015). Changes occur in accounting and management
technologies according to new reforms are categorized in different sections are first is financial
reporting system, second is development of commercially based market oriented management
systems pricing and provision of public services, third is Development of a performance-
measurement approach and fourth one is Delegation of budgets, and last one is Effectiveness and
efficiency of service-delivery functions in internal and external public-sector audits.
Change from adopting procedural model to corporate governance model in Australia was
influenced by RCAGA 1976 and this model is used to bring management efficiency ,
accountability in management programs and financial management systems.
Accountable governance includes three aspects namely responsibility, accountability and
responsiveness, where responsibility and accountability relates with activities of delegation and
supervision of authority. While responsiveness is related to decision-making and policy
administration towards citizens. Budgeting, accounting, auditing and accountability are different
terms but they are interconnected with each other in providing financial information to interested
users.
Accounting structure or system of Kmart Australia Limited is communicated in the
budget and after that it will be used in auditing system. Fourth purpose of accounting is budget
preparation. There is shift in budgeting systems from past years, earlier cash based accounting
models were used but now output-based budgeting is more preferable. Output- based budgeting
is a type of accrual method. And in new system of budgeting, non-financial information is also
getting presence. For transparent budget, all the key financial data of Kmart Australia limited
should be disclosed like performance measures and targets, targeted and actual beneficiaries,
annual procurement plan, implementation, same accounting policies for all fiscal reports etc.
Every company needs to update information and assumptions to the public. Additional budget
also provides updated information and facts to ensure accountability and transparency and this
additional budget is a constituent to main budget.
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As budget comprises of decisions related to appropriation and allocation of funds in
accordance to different departments and projects, so auditing helps in identifying whether funds
are used appropriately or not and ultimately leads to eradication of resource misappropriation.
Auditing also helps in obtaining information about future budgets as from auditing, one can
identify allocated funds to different departments and also for which departments funds are access
or low (Krom, 2012). Auditing also helps in collecting data for budgeted reports. From financial
auditing reports, management of Kmart Australia limited can analyse about wellness in
execution of decisions and plans, in addition they can improve areas which requires
improvement. Auditing ensures compliance of laws and regulations in respect to preparation of
budget, appropriation and allocation of budgets. Purpose of budgeting also serves accountability
in financial reporting. Objectives of accountability in relation to budgets are that budgets should
be balanced in a way that revenues are adequate to pay for services, these should be prepared
according to applicable laws, rules and regulations. Financial reporting system of Kmart should
ensure compliance of accounting systems, budgetary appropriations of financial resources. With
the help of budgetary integration, financial accounting system turn into a primary instrument to
prove financial accountability. Research questions arises out of this after exploring this topic are
as:
 How budgeting helps in enhancing efficiency and effectiveness of management
practices?
 How budgeting helps in forecasting future of Kmart Australia limited?
Purpose of journal of management accounting research
The main purpose of this journal is to identify that how budgeting help in management
accounting and how managers can estimate future events with the help of budgeting.
Management accounting research involve budgeting for estimate price and follow budget to
getting goals of kmart Australia limited. Management accounting research should include
participative budgeting for the consequences and in this research budgeting effect to individual
work and that work effect to accounting. In accounting include all outcomes and that will be
come by budgeting because planning will be depend on budget. The other instrument afraid with
the management accounting practice and includes budget goal commitment and budget
participation (Demski, 2013) . Kmart Australia limited managers follow budgeting plan for
management accounting according to this journal “Turmoil in Government Disclosure: An
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Investigation of Budget Disclosures in Australia” is create strategy for management accounting
for influence to budgeting plan and follow budgeting process for this strategy. The public sector
in Australia in past few decades has faces of fiscal, structural management and financial
management are transformation. Audits are necessary for efficient management and it should be
on regular basis to prevent from errors, frauds and to insure accuracy. There are internal and
external audit conducted in Kmart Australia limited. External audit concentrates on resources
and operations and are of three types:
 Financial compliance audits
 Program compliance audit
 Performance audit
Internal audit checks information with the help of budgeting that internal control
procedures, balances system, and accountability to perform financial audit. Accounting is a
process that involves recording, classifying, summarizing and interpreting financial information
into meaningful words for interested users. Both accounting and budgeting involves planning,
allocating and maintaining monetary resources of Kmart Australia limited. Budgeting involves
heavy planning and these are based on accounting of different fiscal years including
expenditures, revenues etc.
Kmart Australia limited managers take helps in budgeting for helping in mangement
accounting and they follow riles according to that. And after this studies will cone thses
questions -
1. Which strategy apply on management accounting ?
2. How Budgeting helps in maintain management accounting?
3. How managers take help from budgeting plan for analysing to data?
Similarities and differences in the findings of the two studies
Similarities between accounting, auditing, accountability and management accounting are
mention below :-
Basis Accounting, auditing and
accountability
Management accounting
Meaning Accounting is the process of recording
all the transactions in books, auditing
Management accounting is the process of
recording, analysing, observing,
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refers to the procedure of analysing the
transactions that are recorded in the
books and accountability is a process of
observing the recorded elements in
financial statements.
measuring and controlling all the
information of business activities in
different reports. These reports include
information of cash, revenues, costs and
other receivables.
Use of
budgeting
In auditing, accounting and
accountability budgeting is used to
analyse business performance and to
estimate possible future events that may
take place. It also help to plan for
unfavourable events by reserving funds
for such type of consequences.
In management accounting budgeting is
used to plan and forecast budget. It guides
the managers to analyse possible future
events and plan to deal with the same. It
helps the managers to make plans to
distribute funds to different activities and
operations of the company.
Differences between accounting, auditing, accountability and management accounting are
mention below :-
Basis Accounting, auditing and
accountability
Management accounting
Compulsi
on
Accounting, auditing and accountability
are compulsory for the organisations to
analyse and examine performance of the
company. A company have to follow
Australian accounting standards and
corporation act 2001.
There are no specified standards and acts
for management accounting and it is not
compulsory for the organisations to
maintain reports or accounts under
management accounting.
Stakehold
ers
External stakeholder analyse the reports
that are prepared using budgeting in
accounting to identify that how
organisation is performing its activities.
External stakeholder are government,
customers, suppliers, creditors and other
investors.
Management accounting reports are
presented to the internal stakeholders to
analyse that how organisation is using
resources that are available within the
organisation.
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Outcomes
There are four outcomes are elaborated below after analysing the concept of budgeting
from two article.
Accounting, auditing, and accountability journal – From this research two specific outcomes
are such as -
Increased efficiency - Budget is the most important part of the organisation. By the help
of the budget organisation able to prepare their accounts properly and to control the expenses
involve in different business activity. Through this type of estimation business able to know the
expenses which are going to happen in the upcoming future so that if the funds are not present
than establishment can make arrangement for it. When firms expenses and activities are decided
properly than it help organisation in increasing their efficiency. Budget is the financial plan used
for fulfilment of financial and operation goals (Proctor, 2012) . It help business to increase the
sales , past activities of the business, profit and market share. Forecast support accountant to
understand business and its various activities properly which able to know the difference
between the actual position and the estimate material. When business get deviate from their path
than budget tell the areas in which it get occurred. Budget is prepared on the basis of past
information so that organisation be able to know which area need to more allocation of the fund
to get the desired result.
Increase performance level – increase per level, - Increase per level- According to
the given article it has been understood that company can easily enhance the performance level
of an organization in various manner. For example; aids in controlling probabilities of losses,
managing each or every unit of an association, reduce wastage of capital and so on. But,
foremost thing is that overall performance of an organization is automatically enhance by
allocating work to various department in most suitable manner. Along with this, company is
automatically estimate the future funds which is required by an organization. Basically, it helps
selected organization by maximizing their profit level at higher extent. Budgeting is really plays
a crucial role in managing business activities as every one knows that whole business is depend
upon sufficient amount of funds (Marius, Denisa and Florina, 2012).
Journal of management accounting research – two specific outcomes come from this
research that will be as follows -
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Planning tools: From the journal for management accounting research it has been
identified that budgetary planning tools can help the accountants to reduce the possibility of
negative events. There are three types of planning tools that are used in management accounting.
These tools are contingency, scenario and forecasting tools. These tools can help the accountants
to forecast possible future events and make plans to deal with the same. In management
accounting these tools can help the accountants to increase their ability to make plans for future
uncertainty in three different ways. Implementation of such tools can lead the organisation
toward success, by providing information of possible favourable or unfavourable events that may
affect the operational activities of an organisation. Accountants can predict future conditions in
advance and make plans to avoid the same. Scenario planning tools, contingency planning tools,
and forecasting planning tools have benefit to organization for planning.
Estimating future: Budgeting and management accounting helps an organisation to
estimate their future vents. Budgeting is a process in which a manager develops various budgets
such as cash budget, expenditure budget and many more. These budgets are the written
document for prediction for future events. For example: A company such as Kmart can prepare
their expenditure budget so that they can determine the amount of expenses which can occur in
future and can prepare contingency plan for that event. Management accounting Theresa is a
base for budgeting as budgets requires facts and figures which can be determined by trend
analysis and past experiences (Baiman, 2014) (King and McConnell, 2010).
Budgeting helps in estimating future events such as profitability, expenditures and
incomes. From the article of managerial accounting research this learning outcome has attained
that companies such as Kmart can use the process of budgetary and can predict future events and
can even develop contingency plan for future.
CONCLUSION
From the above report it has been summarised that budgeting aids in controlling heavy
losses which is faced by an organization. There are many benefits which are derived by
organisation from application of different budgeting tools. This will aid in improvement of the
performance of employees along with overall organisation. There are many purposes which are
fulfilled by budgeting tools. The overall contribution of this in accomplishment of end results of
an organisation.
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REFERENCES
Books and Journals
Hilton, R.W. and Platt, D.E., 2013. Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Financial & managerial accounting. John
Wiley & Sons.
Matherly, M. and Burney, L.L., 2013. Active learning activities to revitalize managerial
accounting principles. Issues in Accounting Education. 28(3). pp.653-680.
Lui, G. and Shum, C., 2012. Outcome-Based Education and Student Learning in Managerial
Accounting in Hong Kong. Journal of Case Studies in Accreditation and Assessment, 2.
Weygandt, J.J., Kimmel, P.D. and Kieso, D.E., 2015. Managerial accounting. Wiley..
Park, K. and Jang, S., 2014. Hospitality finance and managerial accounting research: Suggesting
an interdisciplinary research agenda. International Journal of Contemporary Hospitality
Management, 26(5), pp.751-777.
Krom, C.L., 2012. Using FarmVille in an introductory managerial accounting course to engage
students, enhance comprehension, and develop social networking skills. Journal of
Management Education, 36(6), pp.848-865.
Demski, J., 2013. Managerial uses of accounting information. Springer Science & Business
Media.
Hall, M., 2010. Accounting information and managerial work. Accounting, Organizations and
Society, 35(3), pp.301-315.
Ahmed, A.S. and Duellman, S., 2013. Managerial overconfidence and accounting
conservatism. Journal of Accounting Research, 51(1), pp.1-30.
Proctor, R., 2012. Managerial Accounting: Decision Makling and Performance Management. FT
Press.
Marius, C.D., Denisa, C.M. and Florina, B.R.I., 2012. Managerial accounting–a source of
information for an efficient management in SME. Procedia-Social and Behavioral
Sciences, 62, pp.521-525.
Baiman, S., 2014. Some ideas for further research in managerial accounting. Journal of
Management Accounting Research, 26(2), pp.119-121.
King, G.H. and McConnell, C., 2010. Using a Common Experience to Teach Introductory
Managerial Accounting. Journal of Instructional Pedagogies, 4.
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