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Some Management Accountants Argue That Budgets Are Great for Planning, but Not For Control. What Do You Think They Mean - Essay Example

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Some Management Accountants Argue That Budgets Are Great for Planning, but Not For Control. What Do You Think They Mean

First of all, control can mean making sure that the real numbers match the ones that were set out in the budgeting plan. It can mean ensuring the goals are met by controlling the expenditure, controlling the employees’ actions and controlling the outcome. Additionally, the use of planning cannot be underestimated. It is identified as an activity to plan a particular set of activities in order to serve a number of objectives. On the basis of objectives, the process of planning is identified and carried out. And, with the help of budgets, the process of planning is determined, discussed, highlighted and finally implemented. Without the use of budgets, the planning becomes ineffective and meaningless. On the other hand, controlling is a subsequent process, which can be achieved when an organization becomes in a position to compare the budgeted figures with the actual results. On the basis of such comparison, the organization is enabled to control the excessive costs or costs that can be reduced. On the basis of this understanding, planning serves different objectives with the use of budgets in comparison with the control that is there to bring different aspects of the management results. Although both are significant to the entire process of budgeting, yet they cannot be underestimated at the cost of each other. ...
In this essay, the above statement will be discussed in more detail and conclusion will be made whether I agree with the statement or not. Budgeting and its objectives Budgeting is a significant control system in almost all organizations (Armstrong et al., 1996; Ekholm and Wallin, 2000; Merchant and Van der Stede, 2003). A budget is defined as a quantitative statement, which comprises for a defined period of time. In which, planned revenue, assets, expenses, cash flows and liabilities may be included. And, it can be used for multiple purposes (Garrison and Noreen, 2003; Horngren et al., 2003).Additionally, a budget helps organization to concentrate its current availability of resources; ensure an appropriate level of coordination has been put in place to ensuring budgetary objectives. In which, costs are highlighted to be controlled; and control is achieved when different types of budgets, such as master budgets, sales budgets, purchase budgets, production budgets are compared with the actual costs. On the other hand, planning comes after the step of determining budgets. Planning is strategy how to serve the budgetary objectives. Budgetary objectives are achieved with the implementation of budgets. And, the prior study suggests that organizations use budgets for attainment of their identical objectives and they are not determined in isolation (Moores and Yeun, 2001). Consequently, the reasons to budget are going to be correlated (Shields and Shields, 1998). First, budgets are devised to be used as a means of communication horizontally and vertically. Horizontally, budgets can be used for the purpose of discussion among or between different departmental managers. This communication greatly helps them to coordinate ...Show more

Summary

Some management accountants argue that budgets are great for planning, but not for control. What do you think they mean? Do you agree with the statement? Explain why? Every organisation, company, governmental organisations have budgeting process that determines expenses and revenues, sales and savings and sets financial goals for the future…
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Some Management Accountants Argue That Budgets Are Great for Planning, but Not For Control. What Do You Think They Mean essay example
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