With the fast development of in the country of direction accounting, more and more directors are cognizant of the importance of the budgeting, “ budgeting is an of import control system in about all organisations ” ( Stephen C. Hansen, Wim A. Van der Stede, 2004, Management Accounting Research, Multiple aspects of budgeting: an exploratory analysis, ) , and it “ provides an look of the stairss which direction must take in the current period if it is to carry through organisational aims. ” ( M.W.E.Glautier and B.Underdown. ( 1997 ) Accounting Theory and Practice, p531, 6th Edition, Great Britain: PITMAN PUBLISHING ) .
This paper will discourse that what is budgeting and the budgeting commission, the budgeting intent and types of budget, the benefits and restrictions in the budget, and how to be a successful budgeting.
The budgeting procedure focuses on the average term period, usually one twelvemonth, and it is an look of program in pecuniary footings, which is purpose to accomplish the organisational aims, as Colin Drury said “ the budget is a fiscal program for implementing the assorted determinations that direction has made. “ ( Colin Drury. ( 2008 ) MANAGEMENT AND COST ACCOUNTING. p10, 7th Edition, China: GENGAGE Learning ) The assorted determinations are covered in cost and grosss, hard currency flow, assets and liabilities. In extra, the one-year budget likely to be sub-divided for describing periods, such as monthly budget studies, because the hazard can be reduced in the monthly budgets and it helps directors easy to happen the jobs during the operation.
In organisations, “ budgeting is frequently in the custodies of a budgeting commission ” ( M.W.E.Glautier and B.Underdown. ( 1997 ) Accounting Theory and Practice, p533, 6th Edition, Great Britain: PITMAN PUBLISHING ) , so the members of the budget commission is really of import. For illustration, in the gross revenues budgeting procedure, selling section may be intentionally underestimated hereafter gross revenues, therefore lending to their public presentation rating. However, underestimate the measure of gross revenues will ensue in a corresponding decrease in production, which means the production will non be able to accomplish the most efficient province. Another illustration, some section may embroider the disbursals in order to acquire more budget financess, ensuing in a waste of money. Therefore, the budget commission should dwell of the assorted of import section directors, and some high-ranking executives be the leader. Furthermore, it normally has an comptroller to be the budget officer in the budget commission, “ the function of the budget officer is to organize the single budgets into a budget for the whole organisation, so that the budget commission and the budgetee can see the impact of an single budget on the organisation as a whole. ” ( Colin Drury. ( 2008 ) MANAGEMENT AND COST ACCOUNTING. p357, 7th Edition, China: GENGAGE Learning ) .
The budgeting intents and types of budget scene
There are six utile intents of budgeting, which are be aftering, organizing, pass oning, actuating, commanding and measuring. Therefore, the budget will assist directors through the planned activities to find the mark of the administration and allowed directors to see all possible state of affairss. nevertheless it non merely to reflect projected gross and outgo budget as of the sum of fiscal figures, the budget is a sort of resource allotment, input and end product of the plan content, measure, and the input-output timing inside informations. Through the budget, so that concern directors can hold clear aims. In add-on, “ the budget serves as a vehicle through which the actions of the different parts of an organisation can be brought together and reconciled into a common program. ” ( Colin Drury. ( 2008 ) MANAGEMENT AND COST ACCOUNTING. P355, 7th Edition, China: GENGAGE Learning ) and it is an effectual manner of the communicating in the organisation. Directors and staff can be motivated by the budget because of it can assist to heighten the predictability and avoid blind behaviour and thereby to actuate they to finish the aims. The Budget is based on quantitative manner to demo direction criterions, it can therefore be judged harmonizing to the budget execution effectivity of the work and analyze differences improve their work.
Two types of the budget scene are top down and bottom up. The tabular array of illustration as following
In the top down manner, it typically start with overall budget so interrupt down into functional budgets and so into departmental. If budget scene is top down, it can be straight link to the organisation aims and reflected to the authorization and mandatary of budget. However, it may be limited of the information from lower degrees therefore that separated from world and may cut down the consequence of budget in planning, coordination and control. On the other manus, in the underside up manner, it typically start with departmental budgets so construct up into functional budgets and so into overall budget. Similarly, if budget scene is bottom up, although it can work out the deficiency of the information from lower degrees, but the exchange of information in each section may be non plenty therefore programs of one section is conflict with others, therefore the deficiency of coordination will originate.
To work out those jobs, the budget scene should be repeated between persons and the budget commission. First, the aims proposed by the budget commission, such as the measure of gross revenues, production costs and aim net incomes. Next, use those indexs to discourse with the assorted sections in order to make an understanding, and so the budget commission will based on the understanding to find the maestro budget and give to the sections. After this, the assorted sections based on the maestro budget to put out departmental budgets and construct up into functional budgets. Finally, the budget commission use those persons budget to put out the concluding maestro budget and gives to each section.
The benefits and restrictions
The budget has some benefits to the organisation, and it will demo in the figure as follow:
Supply a footing for a system of control
Supply a system of mandate
Help organize the assorted subdivisions of the concern
Motivate directors to better public presentation
Promote forward thought and designation of short-run
( Perter Atrill. & A ; Eddie McLaney. ( 2008 ) Accounting and Finance for Non- specializers. P312. 6th edition. Essex: Prentice Hall Europe. )
However, the budget has besides been found a figure of restrictions, such as the clip slowdown in the system, which means the consequences of last month may non be reported in clip and be delayed to following month or subsequently. Furthermore, there will ever be some alterations in the organisation during the budget period ; such as the deficit of financess, labor and stuffs, and the budget may be impacted therefore the aim of organisation can non accomplish the optimum province.
To be successful budgeting
As we have discussed in this paper, there are some restrictions of the budget, and those restrictions may take to it difficult to implement and dissatisfaction may show sing how budgeting operates in pattern. The followers is some manner to work out those jobs and do the budgeting more successful.
First, the budget should be ever concerned to accomplish the aims of organisation, and need to avoid to merely concentrate on its ain mark, the grounds of the budget may merely concentrate on its ain mark and bury the aims is that it may non properly reflect the demands of objectives.. In order to forestall the replacing of the budget mark, it should enable the budget to more reflect with the organisation ‘s aims.
Second, the budgeting should be flexibleness, it because of that concern conditions are ever altering. Although we have planned the concern conditions for the state of affairs may happen in the hereafter and do appropriate action to cover with alterations, but on the one manus the budget scene can non cover everything, and on the other manus the state of affairss are ever altering that some jobs can non be foresee. Therefore, “ it is necessary to see the budgeting procedure as a usher to future action, instead than a stiff program which must be followed irrespective of altering fortunes. “ ( M.W.E.Glautier and B.Underdown. ( 1997 ) Accounting Theory and Practice, p532, 6th Edition, Great Britain: PITMAN PUBLISHING )
In decision, budgeting is an of import tool for direction planning and control, and it has some utile maps for concerns and organisations, but it besides has great restrictions. The cardinal point in the budgeting is make the benefits of it to be maximal, and cut down the restrictions and work out jobs during the period, thereby the budgeting can be achieved the most effectual degree.
Colin Drury. ( 2008 ) MANAGEMENT AND COST ACCOUNTING. 7th Edition, China: GENGAGE Learning
M.W.E.Glautier and B.Underdown. ( 1997 ) Accounting Theory and Practice. 6th Edition, Great Britain: Pitman Publication
Perter Atrill. & A ; Eddie McLaney. ( 2008 ) Accounting and Finance for Non- specializers. 6th edition. Essex: Prentice Hall Europe.
Stephen C. Hansen, Wim A. Van der Stede. ( 2004 ) The electronic diary: Management Accounting Research, Multiple aspects of budgeting: an explorative analysis. P415-439. ScienceDirect [ online ] i?Z
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