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Critically evaluate the use BUDGETS in management control systems ( Module: Financial Control in Management Control Systems ) - Essay Example

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For this matter, it is essentially important to understand the exact implications of what a budget effectively is, what it entails and what allusions it would have on the…
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Critically evaluate the use BUDGETS in management control systems ( Module: Financial Control in Management Control Systems )
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Download file to see previous pages The paper would be concluded by ascertaining whether the given statement at hand has been vindicated by the conducted study or whether it still remains unproven. (Abernethy et al, 1999)
The first and most critical step of this paper is to understand what a budget actually is and what it entails for an organization. The budget is written documented statement of the future plans of a company set forth by the management which are demarcated in monetary terms is known as a budget statement. This report is basically indicative of the future performance of the company in accordance with the perceptions of the managers. The process of budgeting in the eyes of many is basically the lawful marriage of the accounting and the managerial entities that exist inside a business. However, according to most of the renowned personalities in this field, the process of budgeting is more the prerogative of the managerial function of the business rather than the financial function which is backed by the rationale that the formulation of this plan is in an attempt to better aid and abet the managers of the firm in the proper and utility maximizing mechanism of management of the firm. (Churchill, 1991) Systems for decision making, determining the objectives for the company and earmarking the main concerns of the organization all come under the jurisdiction of the formulated budget. Now, the budget is not merely a managerial instrument but rather has accounting implications as well as the future goals of the company are interpreted into financial goals which have to be met. Therefore, it would not be wrong in considering that a budget is perhaps the most effectual mode of business management that is present in the contemporary business landscape. (Demski, 1994)
The level of revenue that will be appropriated for the business activities of the business will be determined by the budget and this allocated amount will determine the level of outlays that the business can ascertain and the ...Download file to see next pagesRead More
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