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Advance Accounting Theory - Essay Example

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Traditional budgeting is mainly based on the past information and the past performance which has negative impact on the aspect of budgeting. One…
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Advance Accounting Theory
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Download file to see previous pages he traditional budgeting is the performance budgeting where the budgeting is done on the basis of the evaluation of the performance at the end of the financial year which can affect the preparation of budget since the preparation of budget at the end of the year can result in the deficiencies since under traditional budgeting the budget is prepared on the basis of the historical cost and on the basis of the past data and information and traditional budgeting is unfavourable for establishing cost and benefit relationship since the process of traditional budgeting is very complex in nature. 15
The concept of beyond budgeting have been introduced in order to overcome the deficiencies of the traditional budgeting which explains that beyond budgeting is considered as the most appropriate method of budgeting which includes responsiveness, flexibility and coordination. The concept of beyond budgeting has been introduced in order to abandon the concept of traditional budgeting since the beyond budgeting will focus on both financial as well as on non financial measures. This process of beyond budgeting is required to focus and establish standards or benchmarks and identify its competitors rather than framing or establishing its internal targets. The concept of beyond budgeting has become popular in the recent years among the various multinational companies for example a Scandinavian bank has adopted the concept of beyond budgeting which has facilitated the bank to undergo cultural change from establishing of budgets to setting of targets and the improvement in the performance that has resulted in the cutting down of cost. Beyond budgeting has facilitated each unit to have different and separate profit centre. Therefore beyond budgeting is considered as an important budgeting that will overcome the limitations and the disadvantages of the traditional budgeting (Hope and Fraser, 2003). 16
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