INDEPENDENT STUDY RESEARCH ON THE PURPOSE AND IMPORTANCE OF BUDGETTING Essay

INDEPENDENT STUDY RESEARCH ON THE PURPOSE AND IMPORTANCE OF BUDGETTING TO AN ORGANISATION - Essay Example Analysis and findings 6.0. Conclusions and limitations of the study 7.0. Bibliography 8.0. Appendices 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. Many students in the field of finance, accounting, strategic management and other related fields have more theory and little practicability about the theories. However, 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. IMPORTANCE OF THE STUDY This study is important since it was carried out to 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. OBJECTIVES OF THE STUDY The study objectives 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. ... REVIEW Management accounting is specialization of accounting that provides for information to the managers to help them plan, make decisions, 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 to exercise 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). Budgeting is a critical function in management accounting and it is a key to the success of an organisation. When the resources are scarce, an organisation must determine the optimal way to allocate resources among the organisational processes to achieve the set goals. A budget is thus a coor dinated plan of the operations and the resources available to an organisation represented monetarily for a specific period of time (Shim and Siegel 2008). A budget is a very important to an organisation since it provides a clear and measurable statement of expectations, improves communication and coordination in an organisation and provides a basis on which evaluation is done and control is exercised. Typically the objectives of budgeting can be stated as following: 1. Budgeting report provides information to help to determine the adequacy of current-year revenues pay for current-year services. 2. Budgeting report illustrates whether resources were obtained and used in accordance with the budget. 3. Budgeting report exhibits its adherence to other finance-related legal or contractual