The Impact Of Budgetary Control On The Managerial Accounting Essay

A survey was carried out to look into the impact of budgetary control on the managerial public presentation of the Islamic Organizations in Malaysia. This chapter presents the background to the survey, job statement, research aims and research inquiries, significance of survey, restriction and organisation of the thesis.


Management accounting and fiscal accounting information differs in term of its users and utilizations. Management accounting information are used by directors and employees within the organisation meanwhile fiscal accounting information being intended for usage by stockholders, creditors and public regulators ( Garrison & A ; Noreen, 1999 ) . In add-on, direction accounting information is confidential used by directors to be after and command concern operations. This provides directors with footing to do informed concern determinations and act as tool to assist them execute their direction and control maps.

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Managerial accounting information includes information on costs of an organisation ‘s merchandises and services. For illustration, directors can utilize merchandise costs to steer the scene of selling monetary values. Furthermore, these merchandise costs are used for stock list rating and income finding ( Horngren & A ; Foster, 2005 ) . Additionally, managerial accounting information are besides obtained through readying of budget and public presentation studies. The studies frequently consist of comparings between existent and planned or current and past public presentation. This is managerial accounting map and the function are performed by direction comptroller.

The Institute of Management Accountants ( IMA ) define managerial accounting as “ direction accounting is a profession that involves partnering in direction determination devising, inventing planning and public presentation direction systems, and supplying expertness in fiscal coverage and control to help direction in the preparation and execution of an organisation ‘s scheme ( Accountant, 2008 ) .

Certified Management Accountants ( ICMA ) states “ a direction comptroller applies his or her professional cognition and accomplishment in the readying and presentation of fiscal and other determination oriented information in such a manner as to help direction in the preparation of policies and in the planning and control of the operation of the project ” ( Accountants, 2006 ) .

Business has become more competitory. To keep competitory advantages, many organisations are motivated to increase their efficiency and effectivity ( Hung & A ; Chen, 2010 ) through budgetary patterns ( Fruitticher, Stroud, Laster, & A ; Yakhou, 2005 ) . There are many definitions given by research workers on budgetary patterns. Budget is a direction instrument used by an entity, to guarantee the dimension of the aims, grosss, disbursals and consequences at the direction centres degree. Then, the direction evaluated the efficiency through comparing the consequences with the budgeted figures ( Nicolae & A ; Anca, 2010 ) and evaluated the effectivity through the accomplishment of aims ( Staub & A ; Hatziolos, 2004 ) .

Budgets are used by different industries at different grades and for assorted intents. Some industries use budgeting as a tool for planning, medium of communicating or public presentation measuring, and outgo control mechanism ( Fruitticher et al. , 2005 ) . Budgeting is a major direction tool to ease direction undertakings and taking concern towards accomplishing their ends ( Hung & A ; Chen, 2010 ) . Management will utilize budget as an instrument for pull offing and commanding their operations, organizing the allotment of resources, and public presentation rating ( Fisher, Frederickson, & A ; Peffer, 2002 ; Stede, 2000 ) .

Budget can be recognised as sum-up of estimated outgos for a given period. The sum of estimated outgo can be adjusted based on old old ages ‘ public presentation. Budget can besides be an lineation for an organisation ‘s fiscal and operational ends. So, be aftering a budget will assist an organisation to apportion their resources, to measure their public presentation and explicate their programs ( Ward, 2012 ) .

A good budgeting procedure employs those who were capable to make the budget and align with the organisation ‘s aims every bit good as responsible for adhere the budget ( Foley, 2009 ) . Usually finance commission and senior staffs will be take parting in budget readying. Timeline is established go forthing equal clip for research, reappraisal, feedback, alterations before the budget is ready to be presented at board meeting ( Foley, 2009 ) .

A budget covers both fiscal and non fiscal facets of planning. Cash flow, income, return on investing ( ROI ) , return on equity ( ROE ) and return on assets ( ROA ) can be points for fiscal planning ( Lee, Lin, & A ; Shin, 2012 ) . Result of merchandise development, quality, bringing of services, client satisfaction and absenteeism can be points for non fiscal planning ( Abdel-Maksoud, Cerbioni, Ricceri, & A ; Velayutham, 2010 ) . Most organisations, budgets are prepared for short term, average term and long term planning. Harmonizing to Joshi and Abdulla ( 1996 ) , budgets for short term be aftering normally cover a period of one twelvemonth meanwhile long term planning screen for 3 old ages and more for planning and commanding intents. Directors will compare existent consequences and budgeted figures. The divergences between existent consequences and budgeted figures are called discrepancies ( Horngren & A ; Foster, 2005 ) .

Budgets are used as planning and controlling intents for most organisations including the Islamic Organizations. In add-on, Government of Malaysia used budget as their mechanism in measuring public presentation. Modified Budgeting System was adopted by Malayan public sector in order to promote more engagement from employees ( Noor & A ; Othman, 2012 ) . Noor & A ; Othman ( 2012 ) have focuses on decentalisation to better public presentation and engagement by employees in doing the determination. Since Islamic Organizations are portion of authorities bureaus, so, they do follow the guidelines provided by Government.

In Malaysia, there are two chief Islamic Organizations ; the State Islamic Religious Councils ( SIRCs ) and Islamic Religious Affairs Departments ( IRADs ) . The aim of SIRCs is to assist advancing the socio- economic of Muslims in Malaysia. Therefore, it has to be managed expeditiously and efficaciously as they are accountable to the stakeholders whom are Muslims populace at big. There are entire of 14 SIRCs, one for the federal district and 13 for other provinces. Meanwhile, IRADs focuses on implementing and supply administrative leading. Besides that, IRADs are responsible in supplying plans, strategies or undertakings, issue of guidelines and policies executing to spiritual personal businesss. Because of these duties, IRADs needs to be after decently in their activities.

Problem Statement

The impact of budget engagement and public presentation has a long history in the managerial accounting literature ( Brownell, 1983 ; Cherrington & A ; Owen Cherrington, 1974 ; Dunk, 1990 ; Mia, 1988 ) still capable to uninterrupted argument ( Chong, Eggleton, & A ; Leong, 2005 ; Leach-Lopez, Stammerjohan, & A ; Lee, 2009 ; Leung & A ; Chan, 2001 ; Yahya, Ahmad, & A ; Fatima, 2008 ) . Engagement and public presentation have positive relationship and it had been supported by both study and experimental surveies ( Leach-Lopez et al. , 2009 ) . Noor and Othman ( 2012 ) claims that better apprehension of the effects of budgetary engagement allows the organisations improved their public presentation. So, the organisations should promote their employees to take part in budgetary procedure.

The issue rise in this survey is to analyze the importance of budgetary pattern in managerial public presentation for Islamic Organizations. Prior surveies have discussed on the issue of the budgets in actuating the employees. For illustration, most of the organisations use budgets to actuate employees, allocate resources and measure public presentation ( Walker & A ; Johnson, 1999 ) . The direction used budgetary public presentation consequences to actuate the employees by giving fillips, increase their wages and publicities, meanwhile for bad budgetary public presentation ; it gave bad impact to the employees including penalty or loses the occupation ( Merchant & A ; Manzoni, 1989 ; Stede, 2000 ) .

Thomson ( 1967 ) challenged research workers to analyze budgetary behavior in public sector organisations ( cited in Williams, Macintosh, and Moore, 1990 ) . Budgetary behavior may be different in public sector organisations compared to the behavior in profit-making and less bureaucratic organisations. A survey on budgetary engagement and public presentation ( BPP ) conducted in Malayan Ministry of Defence ( MINDEF ) by Yahya et Al. in 2008 claim that Ministry of Defence is a big composite, mechanistic organisation with a bureaucratic administrative construction. In the survey, Yahya et Al. ( 2008 ) revealed that budgetary engagement may better managerial public presentation when the direction involved in budgetary procedure. The consequence consistent with the survey that has been done by Noor and Othman ( 2012 ) which is take the challenge to analyze in Ministry of Home Affairs.

Most surveies conducted on budgetary in Malaysia dressed ores on assorted countries including the impact of the Modified Budgeting System ( MBS ) on public presentation measuring in authorities organisations ( Karbhari & A ; Mohamad, 2007 ) , usefulness of budget ( Ahmad, Sulaiman, & A ; Alwi, 2003 ) , and budget engagement ( Noor & A ; Othman, 2012 ; Yahya et al. , 2008 ) . Meanwhile for Islamic Organizations, research workers normally focus on zakat in Malaysia dressed ores on accounting and guidelines ( Adnan & A ; Bakar, 2009 ) , efficiency and productiveness ( Norazlina Abd. Wahab & A ; Rahman, 2012 ) , efficiency and administration ( Norazlina Abd Wahab & A ; Rahman, 2011 ) , jobs and issues ( Rahman, Alias, & A ; Omar, 2012 ) , perceptual experience of zakat receivers and amil ( Wahid & A ; Kader, 2010 ) . However, the issue of the importance of budgetary control for managerial public presentation has non much been discussed and have been given small attending from research workers. Since budget is a mechanism for be aftering and control, Islamic Organization must utilize this direction accounting tool extensively to guarantee that they meet their aims. In position of the fact, that budget normally used as direction accounting tool in net income organisations, therefore budget can supply similar impact for authorities bureaus.

Furthermore, Islamic Organizations in Malaysia drama important functions in Muslim society and accountable to them. This survey was done due to restriction of the range, since it has small attending and Islamic Organizations are a portion of authorities bureaus. . This paper studied on the relationship between budgetary control and managerial public presentation in Islamic Organizations and besides to mensurate the impact of budget on managerial public presentation.

Aims of the Study

The aim of this survey is to look into the relationship between budgetary control and managerial public presentation of Islamic Organizations. The intent of holding this survey is to carry through the following specific aims:

To look into the relationship between short term versus long term public presentation and managerial public presentation

To analyze the relationship between budgetary slack and managerial public presentation

To analyse the relationship between influence of budget public presentation and managerial public presentation

To look into the relationship between budget discrepancies on managerial public presentation

To find difference between corporate organisation structures ; by and large centralized and by and large decentralized and managerial public presentation

Research Questions

From the above treatment, the intent of holding this survey is to carry through the undermentioned research inquiries:

Does short term versus long term public presentation heightening managerial public presentation?

Does budgetary slack heightening managerial public presentation?

Does influence of budget public presentation heightening managerial public presentation?

Do utilizations of budget discrepancies heightening managerial public presentation?

Is there any important difference between corporate organisation structures ; by and large centralized and by and large decentralized and managerial public presentation?

Significance of Study

From the determination of the research, it can be concluded that the findings of the present survey could supply good parts to the staffs of Islamic Organizations in Malaysia. First, the staffs from the Islamic Organizations can utilize budget to measure their managerial public presentation. Second, we can clarify the extent of budget apprehension among staffs from Islamic Organizations, whether they able to utilize budget as a tool for planning and commanding. When the staffs understand the budget as a direction tool, they will execute better in their plants ; in bend the Islamic Organizations can accomplish their ends.

From an academic position, this survey will supply empirical grounds sing the budgetary control and managerial public presentation in Islamic Organizations. It is exciting to analyze the impact of budgetary control on managerial public presentation of Islamic Organizations because less attending being given by research workers on Islamic Organization. This is an chance to carry on the research on budgetary pattern in Islamic Organizations. The survey will supply grounds on the relationship and importance of budgetary pattern for the Islamic Organizations and promotes more research to be conducted in this context.

Restriction of the survey

The range of this survey is restricted to managerial public presentation of Islamic Organizations in Malaysia which measured merely budgetary pattern. Other measurings on managerial public presentation should be included in this questionnaire. Hence, the figure analyzed would be more accurate. The analysis based on the provinces was unable to exhibit as the figure of respondents is non reasonably distributed.

In add-on, the figure of respondents was impacting the consequence of the survey. In this survey, the respondents were little figure which is 37 respondents. It is because in one organisation, there are merely few staffs that involve in budgetary readying.

Organization of the survey

Overall, this paper is organized into five chief chapters. It begins with an debut in Chapter One that highlights an overview of Islamic Organizations and debut of a budgetary pattern. Besides that, the chapter besides discusses on job statement, aims of the survey, every bit good as the research inquiry, the significance in prosecuting this country of survey and the restriction of the survey.

The balance of the current chapter is organized as follows: Chapter Two is the literature reappraisal that explains the relevancy of this survey with the past surveies conducted on budgetary pattern. Besides, the chapter discussed on Modified Budgeting System which has been used by Malayan public sector. This chapter besides discusses the definition of Islamic Organizations and managerial public presentation. Research model provides a thorough account used in this survey. This followed by the development of the hypothesis.

Following, Chapter Three discussed in item the research method comprises of sample, measuring of variables, dependability of points, the consequence and analysis of informations that will be used in this survey. Several statistical techniques such as correlativity analysis, independent t-test and arrested development analysis were applied in analysing the information.

Following this, Chapter Four presents the information analysis and findings. This chapter begins with the dependability of points. Following, it will show the analysis of informations on demographic and personal features of the respondents, followed by trial of normalcy. Correlation analysis, independent t- trial and arrested development analysis besides will be discussed in this chapter. Discussion on the findings of the five aims of the survey and the consequence of hypothesis are discussed.

Finally, this will be followed by Chapter Five which concludes the survey. This chapter summarizes the cardinal findings in this survey and provides deduction of the research findings. Besides that, this chapter besides provides the restriction faced by the current survey and suggest hereafter research on this subject country.


This chapter provided the background of the survey which justified the of import of analyzing the relationship between budgetary pattern and managerial public presentation in Islamic Organizations, Malaysia. Then, it followed by statement of jobs and the aims of the survey. Next, the part of the survey to the literature will be discussed ; and the organisation of the thesis was presented in the concluding subdivision of this chapter.


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