Furthermore, management accounting also aids an organisation to devise strategies as well as plans for improving competencies and efficiencies of an organisation. Management accounting is also known as internal accounting which is useful in improving internal business operations as well as effectiveness of an organisation. Management accounting is mainly utilised by managers of an organisation for enhanced decision making as well as in initiating strategies for successful performance of an organisation. Cost accounting is a process of determining production cost as well as cost involved in conducting business activities of an organisation. Moreover, cost accounting also offers valuable information as well as facilitates in making decisions for effective control along with reduction of cost (The Institute of Cost Accountants of India, 2012).
The paper will emphasize on the terms planning, control and budgeting as well as on the relationship between these terms. Moreover, the processes involved with the preparation of master budget of an organisation will be discussed. Furthermore, the paper will emphasize on the behavioural issues which arise due to the process of budgeting. The usage of budgetary information will also be discussed in the paper.
a) The terms Planning, Control and Budgeting Planning Planning is the first stage of the budgetary process. Planning is usually formulated with the objectives of accomplishing certain specific goals in future prospects. Moreover, plans are formulated on a long-term basis for better controlling as well as directing operations of an organisation for accomplishing organisational objectives in an effective manner. Long-term planning is also known as strategic planning. Whereas, planning for short period of time is also known as budgeting. Budgeting assists in better allotment of resources of an organisation as well as in determining financial resources available with an organisation (Drury, 2007). There are a few stages involved in the planning process which are as follows: Stage 1: Establishing Objectives This is the first stage of the planning process which relates to the development of objectives. The objectives are required to be established in accordance with the mission of an organisation for improved performances of the organisation. Long-term planning is formulated with the intention of directing operations in a more effective manner in the future prospects. There should be certain measurable methods for monitoring objectives which are accomplished. Moreover, monitoring accomplished objectives will aid in bestowing motivation among people involved with an organisation (Drury, 2007). The objectives of an organisation are differentiated into three forms which are as follows: Mission of an Organisation An organisation usually conducts business operations with certain specific mission. The organisational mission provides purpose as