Essay Example on Budget though seems straightforward is very complicated on its Own








INTRODUCTION Budget though seems straightforward is very complicated on its own It has covered a long passage of time since the emergence of bookkeeping now Traditionally budget means formulating a plan and strategy of allocation of resources that one desire to spend in the coming future It basically specifies when and how the estimated amount is to be spent for predetermined objective during the given set of time And since its emergence the budget has played a vital role in the emergence and success of an organization an efficient budgetary control system assists the managers to execute various managerial functions whereas if the same has not been compiled and executed the way it has been can lead the same organization to touch the rock bottom But with the advancement of computer based information technology the budget has seen its ever new zenith Budget its history and its evolution The very definition and origin are different according to different authors In general for layman budget is it s making sure that you re spending less than you're earning and planning for both the short and long term Fontinelle 2017 The concept of the budget came in view in around 1580 s during the rule of Queen Elizabeth 1 in England but the concept of annual budget was appeared in the early 18th century http www telegraph co uk 2007

An effective budget aims to direct an organization to achieve its targeted objectives It allows the allocation of the current assets to be handled and managed proficiently Whereas if the predetermined budget is either over allocated or under allocated can rather have an adverse effect on an organization which may force the management to abandon their project Cunningham 2015 p 3 budgetary under arrangement may bring about activities being given the thumbs up which generally would not have been accepted or would have been given preference This causes troubles when unavoidably the additional assets must be found at a later stage The setback brings about rare financial resources being redirected from other maybe additionally meriting open activities Over arrangement then again is inefficient and brings about paying excessively Thus other goals and targets may or must be dropped No theory or concept can be perfect there will always be some shortcoming but a potential gain for other so new approaches are always attempted due to this reason which in further helps to make budgeting more reliable for all Along the way to the development of budgeting a new concept called beyond budgeting has been emerged The management often uses the budgets to determine the strength and weakness of their managers as it's their managers who on their behalf helps them to attain The concept of beyond budgeting was first introduced in 1998 by Jeremy Hope and Robin Fraser they in cooperation called beyond budgeting and roundtable incorporated their ideas and published their paper in 2003 Heupel Schmitz 2015 

Beyond Budgeting is an innovative technique whipped out from the accounting management which tends to refine and boost the execution of budgeted target budgets depend on the vital activity design and give the best gauge for short and long term goals Target setting is an essential piece of planning and setting up of budgets and the reward structure is regularly in view of the achievement of spending targets Budgeting performs two very vital functions i e planning and control Garrison Noreen Brewer 2018 p 363 According to Garrison and rest managers formulate various goals and targets and then further prepare budgets to attain them They also collect the feedback from all the varied and feasible sources to ensure that the formulated plan cum budget is implemented accurately as well as with the contingency for any modification for any future uncertainties Issue and debate Irrespective of the viability and Importance of budgets in the management of an organization the practice and use of budget is a very heated issue As mentioned in Garrison Noreen Brewer 2018 a survey was conducted in which 152 officials of the corporations were asked whether they prepare budgets or not if yes then what kind That study revealed an astonishing data a majority of them were still preparing annual budgets and among them only one fifth have a contingency plan for any unforeseen market conditions it also revealed that around half of all the participants of the survey the data which is used in the preparation of budget becomes out of date within 4 5 months of setting up the annual budget Merchant 2013 This survey raised many questions all at once should the budgets be made Why should budgets be made it s not resourceful If yes then how should be made And the answer to all problem lies in the last question itself The limitations of budgeting in management accounting was thoroughly mentioned by Alino Schneider 2012 They cited many of various research that the unethical and self egoistic stereotypes spark off a faultline in different departments of the same organisation which hinders the group development which further disarray the management from its budgeted goals all due to the snag of human mind s shortcoming like ego lethargicness anxiety and many others Alino Schneider 2012 pp 4 9

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