INDEPENDENT STUDY RESEARCH ON THE PURPOSE AND IMPORTANCE OF BUDGETTING Paper

INDEPENDENT STUDY ON THE PURPOSE AND IMPORTANCE OF BUDGETTING TO AN ORGANISATION - Research Paper Example 22 4 Study Methodology 22 5 Analysis & Findings 23 6 Conclusions, limitations of the study and recommendations for further study 24 7 Bibliography 27 List of Table S.NO Heading Page No 1 Capital Expenditure Spent by Various Companies 15 2 Alternatives to Traditional Budgeting 18 2.0 PROBLEM STATEMENT A lot of effort has been made in the theoretical area of budgeting and its concept but little has been done to show the applicability and the importance of the budgeting process to organisations. It is no wonder the truth that many students in the field of finance, accounting, strategic management and other related fields have a lot of theory and little practicability about the theories. This study was aimed at linking theory with practical applications of the theory of management accounting. This was done by looking at how organisations apply the various theoretical aspects of strategic managerial accounting. 2.1 IMPORTANCE OF THE STUDY This study is important since it was carried out t o reinforce the theory of budgeting and its application in real life situations. The study also gives advice on how businesses can go about budgeting and this will go a long way to provide information on the same to organisations. 2.2 OBJECTIVES OF THE STUDY The objectives of the study were: To appreciate the managerial accounting theory. Appraise the importance of budgeting to the success of an organisation and discuss the available budgeting methods. Discuss the budgeting process. Analyse the assumptions of budgeting. To link managerial accounting theory with practical application. 2.3 Learning outcomes Appreciate the purpose of traditional budgets Appraise the conventional process of budgeting, including variance analysis Critically assess alternative methods of budgeting, including ‘beyond budgeting’ Analyse budget assumptions and critically review budget outputs To under the significance of capital budgeting To comprehend about the purpose and the nature of a marke ting budget. To know whether the company is functioning within its means. To help both management and employees to strive hard on common goals. Though a budget is a useful tool, it may not always drive the financial activity of a business organisation. To illustrate how budgets can be employed and amended for control and planning.(Open University 2006 :10) 3.0 LITERATURE REVIEW Management accounting is a specialisation of accounting that deals with provision of information to managers for use in planning, decision making and control functions (Bragg 2009). It involves collection, analysis and interpretation of accounting information for managers of an organisation to help the managers to make plans, make decisions and control to ensure that the organisation goals are being achieved. Management accounting extends to cover strategic management, performance management and risk management which are key issues in management. The tools used in management accounting are costing techniques, budgets and control charts among other tools (Waygandt, Kimmel and Kieso 2009). According to UK