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Management Accounting---Critically discuss the effectiveness of budgetary control in unpredictable and dynamic environments. Your discussion should highlight potential solutions that might be deployed where planning-based systems fail - Essay Example

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This is because they provide a framework within which a budget can be streamlined and directed to reflect issues and matters that occur in reality. Hence, budgetary controls are…
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Management Accounting---Critically discuss the effectiveness of budgetary control in unpredictable and dynamic environments. Your discussion should highlight potential solutions that might be deployed where planning-based systems fail
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Extract of sample "Management Accounting---Critically discuss the effectiveness of budgetary control in unpredictable and dynamic environments. Your discussion should highlight potential solutions that might be deployed where planning-based systems fail"

Download file to see previous pages “A budget is a quantitative expression of a proposed plan of action by management for a future time period and is an aid to the coordination and implementation of the plan” (Stefan et al, 2006; p357). This implies that budgeting is about the presentation of the quantitative elements of an entity and this include the estimations of the income, revenue, capital, assets and liabilities for a futuristic period. This involves the drawing up of a financial statement based on expectations for the future.
A master budget is an integration of strategic objectives and operational plans to present a summarized financial statement that is expected of a corporate entity over a period in future (Freeman, 1997). The strategy of a company is formulated when a firm examines its internal capabilities and matches it with the current trends in the external environment in order to draw a plan that makes the best use of the firms opportunities and minimise threats in order to attain the best results (Johnson and Scholes, 2010). Thus, the plans and strategy that a firm formulates is valued and costed and integrated into a financial statement that becomes known as the master budget.
Budgets are not an end in itself. This is because there is no known ways of predict the future with absolute accuracy. Hence, a budget is used as a means to the attainment of the end – utilising a firms resources appropriately to meet expected ends. In most situations, there are variances that result from the fact that the budget is not the same as the actuals (Henderson, 2012). This means that budgets are not always accurate or perfect. Hence, there is therefore the need for some kind of controls and streamlines to ensure that budgets are suitable for dynamic and unpredictable periods.
Due to the need for careful consideration and analysis, budgetary processes are slow. This is because there is the need for budgets to deal with ...Download file to see next pagesRead More
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