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How do the differences between profit and non-profit organisations affect the way in which they should employ budgetary controls - Essay Example
Author : estevan59
Finance & Accounting
Pages 4 (1004 words)
Name Instructor Course Date How do the differences between profit and non-profit organizations affect the way in which they should employ budgetary controls? The main objective of almost all business organizations is to make profits. However, there are some business establishments whose main aim is not to realize profits (Kaplan, 2001)…
Budgetary controls involve regulating the operations of an organization by establishing targets and standards with regard to expenditure and income. This regulation is done to ensure performance of a business institution. It incorporates various methods of applying financial values to financial forecasts in the management of a business organization. These values are usually compared to actual estimates. Irrespective of whether business is profit or non-profit oriented, having budgetary control is essential since it makes sure that the organization realizes success. However, non- profit organizations usually use budgetary control methods that are different from those used by profit oriented business establishments (Kaplan, 2001). Budgetary control methods used by business establishments usually involve management accounting (Lanskroner, 2002). Management accounting refers to the process whereby the management of a business establishment uses accounting information that is provided to them in order to make decisions concerning the future of the company. For companies whose main intention is to realize profits, the accounting information is fundamentally future oriented and not past oriented. The information is also model based and not case based. ...