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Budget in Management Control Systems - Essay Example
The purpose of this paper is to critically evaluate the use of budgets in management control systems. For this matter, it is essentially important to understand the exact implications of what a budget effectively is, what it entails and what allusions it would have on the company which employs it for its financial management…
(Abernethy et al, 1999)
The first and most critical step of this paper is to understand what a budget actually is and what it entails for an organization. The budget is written documented statement of the future plans of a company set forth by the management which are demarcated in monetary terms is known as a budget statement. This report is basically indicative of the future performance of the company in accordance with the perceptions of the managers. The process of budgeting in the eyes of many is basically the lawful marriage of the accounting and the managerial entities that exist inside a business. However, according to most of the renowned personalities in this field, the process of budgeting is more the prerogative of the managerial function of the business rather than the financial function which is backed by the rationale that the formulation of this plan is in an attempt to better aid and abet the managers of the firm in the proper and utility maximizing mechanism of management of the firm. (Churchill, 1991) Systems for decision making, determining the objectives for the company and earmarking the main concerns of the organization all come under the jurisdiction of the formulated budget. ...