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Management Accounting - Essay Example

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Hansen et al(2003 p.1) in their publication Practice Developments in Budgeting:An Overview and Research Perspective, identifies that is at the cornerstone of any management process as so does Comshare (2000). This means that for any management process to be deemed as…
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Download file to see previous pages On the other hand, there are those who view budgeting as one of the major impediments of the process of goal achievement. Marcino (2000) as well as Jensen (2001) are key advocates of this theorem. The two argue that the allocation of resources within an organization is to large extent being hindered by the various budgetary processes adopted by the various organizations. “Myopic decision making and other dysfunctional budget games” are cited to be some of the reasons why achieving these budgets becomes difficult and even where achieved, there is little difference that can be attributed to it.
Bergstrand and Olve (1996) defined budgeting as the traditional way of managing and controlling companies. Companies use the budget to plan and coordinate for the preceding financial period. Some of the main objectives of the budgetary process include resource allocation, employee motivation and operations coordination. It also helps in the evaluation of performance (Libby and Lindsay 2003). Looking at all this therefore the budgetary process has for a long time been used for the same reason, and thus the majority of the organizations has resulted in using the same traditional budgetary processes over and over again. The traditional budgetary process has resulted so different problems in various organizations including but not limited to top down command orientation issues as well as poor planning and performance evaluation processes.
While doing their research Neely et al. (2001) identified a number of budgetary weaknesses that were associated with the majority of the traditional budgets. Some of them includes the time consuming nature of the budgetary processes, constrain responsiveness and the most common barrier to change, lack of focus and presences of contradictions, the over emphasis on cost reduction with less focus on value, infrequent budget development and updating, improper preparation of the underlying assumptions and their inability to reflect ...Download file to see next pagesRead More
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