Describe about the Management Accounting for Encompasses Planning.
The article on “An exploratory study of operational reasons to budget” critically evaluates the significance of 10 probable operational reason to prepare budgets in organizations that encompasses planning, control as well as analysis of the efficacy of operations. The objective of the present article is also to examine whether the rolling forecasts might augment the overall outcomes that can be extracted from the budgetary planning, control as well as analysis (Adelina and Roxana, 2016).
Through proper examination and scrutiny of the two rationales, the current article helps in gaining deep insights into the continued use of the financial budgets in organizations keeping aside the criticisms (Sivabalan et al., 2009). The literature review presents the empirical evidences and the prior academic literature that helps in development of the proposition of the current study. The current article critically analyses the present a body of academic literature on focus of evaluation, operational budget reasons that includes the evaluation reasons, planning reasons and control reasons (Clinton & White, 2012). In addition to this, the section on literature review also comprises of the core themes of the analysis associated budget criticisms that leads to the proposition that “P1: Planning and control budget reasons are more important than evaluation budget reasons.” Furthermore, the review of the literature on rolling forecasts leads to the propositions “P2: Planning and control budget reasons are regarded as more important for rolling forecasts than for annual budgets”, “P3: Evaluation budget reasons are regarded as more important for annual budgets than for rolling forecasts” and “P4: Rolling forecasts complement the annual budget”.
The current study uses the research methodology of a cross sectional mailed survey process of CPA qualified management accountants (Sivabalan et al., 2009). The present study also randomly selects 2400 respondents from the targeted population of 110000 CPA members. In entirety, 424 research respondents responded to the survey, indicating a unrefined response rate of around 17.7 per cent. The current study makes use of descriptive statistics that uses mean (maximum and minimum), median, skewness and standard deviation for evaluation of the significance of the budget reasons in both annual as well as rolling forecasts. Again, the study makes use of the independent sample t-test of variances in the mean significance scores of planning as well as control budget reasons in addition to staff evaluation, along with business unit evaluation reasons for “all firms”, “large and small firms”, listed and unlisted firms” and ”manufacturing as well as service sector” (Sivabalan et al., 2009). The study also uses statistical methods for understanding the one the more statistically more significant one among the controlling reasons and the budget reason for business evaluation for both annual and budget reason using the t statistic (DRURY, 2013). The outcomes of the independent sample t-test are essentially presented in the table 4 of the study.
Thorough evaluation and interpretation of the data reveals the fact that the high means for practically the 10 budget causes specifies that there are wide range of uses to which different respondents employ budgets (Ezzamel et al., 2012). There are enough statistically significant variations between the staff evaluation cause and the four different planning and control causes and the present finding also shows consistent results across three different firms. The pattern of finding reflects strong support for the proposition 1 where the budgeting for planning as well as controlling causes have the greatest significance rather than the staff analysis cause. Based on the results, it can be ascertained that there are inadequate evidences for acceptance of the Proposition 2. Taken as a whole, the model mentions that there exist no significant differences between the planning as well as control budget causes for rolling forecasts and the corresponding annual budgets (Fullerton et al., 2014). As per Proposition 3 the evaluation budget causes can be of greater important for the particular annual budgets than the respective rolling forecasts (Groot & Selto, 2013). Proposition 3 is rejected based on the results, since no association was discovered for the entire sample or even for five out of the six selected subsamples. Proposition 4 that examines whether rolling forecasts go together and harmonizes the annual budget can be supported. The examination using the frequency of rolling forecast users among different subsamples reveals the fact that there exists profuse use of the both the annual as well as rolling forecasts among respondents for the entire sample and across three different firms.
Conclusion
Critical analysis of the present article reveals the fact that there are 10 different operational budget causes that are assembled for the examination. However, there is a wide array of other limitations of the present study. Nevertheless, there might possibly be other reasons for the operational budget. Again, the variations in different budgetary controls that can arise out of the two different frameworks are not taken into consideration (Hope & Fraser, 2013). In addition to this, the present study presupposes strong correlation between the significance of budget cause and its use in reality. However, the organizations that do not consider association between the variable might find the results of the present study inappropriate. Again, there exist many limitations related to the survey method that can be related to the interpretations of the questions of the survey by the targeted respondents of the study. The present study also employed outcomes from the specific independent sample t-tests that do not suppose equal variances to permit for the likelihood that data distribution might probably not be symmetrical.
Review
The rationale of the present article on “Is the annual budget really dead?” is to make an attempt to examine the overall legitimacy of the existing criticism that is currently labelled at the traditional annual budget by dealing with different chief financial officers along with controllers in large corporations (Ekholm & Wallin, 2000). The current article uses an exploratory design for research and proposes five research questions that are investigated in the current segment.
However, the initial research question deals with the overall position of the annual budget currently as indicated by the frequency of reactions to every item provided on the scale (Hopper & Bui, 2016). Again, the second research question concentrates on the probable association between the extent of conservatism that is between the conservative organizations as against the radical corporations and sheds light on the financial circumstances of the corporation. Consequently, the third research question deals with the application of the yearly budget or else the substitute system engaged by the respondent organization. Thereafter the fourth Research question deals with the degree to which respondents can agree or else differ with the fundamental claims that the critics have put forward. However, the fifth research question focuses on the behaviours as well as attitudes towards the rolling forecast. Again, the sub-division of this particular question deals with the probable association between the extent of conservatism as well as behaviours and attitudes towards the budget-rolling forecast (Ekholm & Wallin 2000).
The analysis of the research methodology reveals the fact that the present research article uses a postal survey questionnaire that comprises of 33 questions along with judgements as well as behavioural attitudes enumerated on the five point Likert scale. The questionnaire was distributed to 650 different Finnish companies recording a turnover of more than FIM100 million (Ekholm & Wallin 2000). Overall, 168 questionnaires were returned registering a response rate of 25.8%. The present study has made use of different mathematical that is percentage and ratio and statistical techniques such as the Mann-Whitney U- Test for evaluation of the proposed research questions of the study. The study evaluates the mean ratings for both the conservative as well as the radical companies and thereafter the Mann-Whitney p values for different purposes (Ekholm & Wallin 2000).
Based on the results of the study, it can be hereby ascertained that the response to the question “Is the annual budget really dead?” is essentially negative (Ekholm & Wallin 2000). The results of the Mann-Whitney Test reflect the fact that there exists significant variation between the responses of the two groups regarding the present status of the annual budget.
Conclusion
Largely, it conclusion it can be said that the annual budget have not yet become obsolete (Horngren et al., 2013). Nevertheless, the management of resources was the central part of management actions. The historical segment that is the traditional budget has lost many of its useful application. Due to this, the management of resources, adjustment of the budget cannot be very useful when it comes to managing mounting peripheral demands (Ekholm & Wallin 2000).
Review
The current article on “New Ways of Setting Rewards: The Beyond Budgeting Model” intends to investigate certain principles that can facilitate leaders in averting different stipulations stated under the contract for rewarding and moving to a more lean as well as adaptive and at the same time ethical corporation (Hopper & Bui, 2016). The current study presents the academic debate on various concepts of the rewarding system. The empirical evidences also illustrate the reason behind the failure of the traditional systems (“New Ways of Setting Rewards: The Beyond Budgeting Model”, 2016).
The academic evidences represent that there are different devices that comprises of the financial incentives that can be employed to get the members of the staff to do something that they might probably not perform otherwise. This can be considered very different from making individuals willing to do something (Hope & Fraser, 2013). The academic literature also mentions that majority of the incentive schemes distorts the behaviour of the management that in turn reflects a negative impact on the overall performance of the business (“New Ways of Setting Rewards: The Beyond Budgeting Model”, 2016). Thereafter, the current segment also presents academic literature and evidences on “Beyond Budgeting Model” that suggests twelve different principles that can be derived from the prior experience of more than the twenty five corporations that in one way or the other can replace the particular traditional budgeting with a more flexible technique (Hope & Fraser, 2013). In addition to this, there are different sub-principles that can offer a structure for enumerating a specific reward strategy that upholds the particular “Beyond Budget Model”. The sub principles include the grounding rewards on fixed performance agreements, evaluation and reward performance that is relative to the different peers, yardsticks as well as earlier periods (Ezzamel et al., 2012).
Conclusion
Therefore, it can be hereby ascertained that the sub principles also comprises of the policy to employ simple, clear and at the same time transparent process of enumeration, alignment of different rewards with the strategic organizational objectives as well as goals of the corporation (Fullerton et al., 2014). This process also includes rewarding the performance of the entire team, alignment of the rewards with different interdependent groups, motivation of the employees and making rewards that are both fair as well as inclusive (“New Ways of Setting Rewards: The Beyond Budgeting Model”, 2016).
Review
The objective of the present article is to critically evaluate the overall counterproductive influences related to the utilization of the budgets or else the targets in the process of performance enumeration as well as compensation procedures in a particular corporation. The primary rationale of the study is to elucidate the process how and the way managers in a corporation can avert the overall counter-productive cycle. Furthermore, the strategy of making payments to people based on the performance associates to a budget or else the target that compels individuals to game the overall system (Horngren et al., 2013). However, in doing so, the members of the staff of the organization, both the managers as well as the subordinates formulate the budgets by distorting facts and create the budgeting process of the fundamental unbiased information that is necessary to coordinate the actions of disparate sections of the corporation (Kaplan & Atkinson, 2015). The members of the staff of the organization also game the apprehension of the budgets or else the targets and in the process, they destroy the overall value of the corporation (Khalifeh & Sivabalan, 2014). The present article makes use of empirical evidences and a body of academic literature for the analysis of the concepts of tampering the budget reports.
The present study also carries out detailed analysis of the concept of tampering the budget or else the targets that directs the payment structure of the organization based on the evaluation of different case studies and thematic analysis. The empirical evidences provide a deep insight into the process of budgeting system, gaming the process of realisation of targets, gaming the process of setting the targets (Nasseri et al., 2016). In addition to this, the current segment also presents the procedures of averting and getting rid of the vicious cycle and restoration of the integrity by using the evaluation of the basic sources of the incentives used to game the entire process (Weimer & Vining, 2015). In addition to this, the present section also presents the analysis of the root cause of the gaming problem, process of resolving the budget gaming problems, the costs of the entire budget gaming actions along with the significance of the stretching the objectives as well as the role of the top level managers in the process of inspiring the lies.
Conclusion
Therefore, in conclusion, it can be hereby ascertained that the association between the pay and the performance needs to be a straight line and there need not be any kinks or non-linear association between the pay and the target performance of the members of the staff (managers) of the organization (Van der Stede, 2015). In case, if there exists no discontinuities between the association between the pay and the performance, the bonus does not depend on the target in any way (Webster, 2016). Therefore, the members of the staff of the organization might not have any monetary incentive to lie or conceal information. Furthermore, the academic literature also explains that different measures of the enumeration of the performance and the difficulties of handling without goals. In addition to this, the process also involves the process of restoration of the reality and the restoring integrity (Ward, 2012).
Review
The present article reflects the fact that the budgets have historically played an important role in the process of controlling the management and this has currently been severely criticized. The current paper hereby explains in detail the outcomes of two different surveys that are conducted for mid to large sized North American corporations. This study is conducted for purpose of updating the literature on budgeting practice of North America and collecting different empirical evidences to analyze the criticisms and identifying strong inclinations or else patterns in the overall practice of budgeting (Libby & Lindsay, 2010).
The present study uses a web based process of survey of different managers who are holding a senor position in organizations (medium to large in size). The target sample for the study comprises of 2583 CMA Canada members as well as 13712 IMA members (Libby & Lindsay, 2010). However, the rate of response was 13.6%. The present study also employs the descriptive statistics (frequency, percentages, mean and median and many others) for evaluation of the responses of the survey respondents. Again, the study also makes analyses the use of the budgets for control. The analysis of the responses reveals the fact that the results mention that the traditional system of budgeting for controlling cannot be eliminated (Clinton & White, 2012). Again, the analysis of the responses towards the value addition of the budgets replicates the fact that the majority of the corporations in the available sample are finding ways to acquire significant value from the process of budgeting (Adelina et al., 2016). However, there are several criticisms of the system of budgeting that can be analysed from the academic literature as well as practitioner literature. The primary criticisms of the process of budgeting are also analysed using different statistical as well as mathematical models. Therefore, the present article uses the process of correlation to analyse the association between the budgets and time for taken. The criticisms of budgeting include the time taken for the preparation of the budget, inadequate adaptability, and disconnection from the strategy of the firm, application of the budgets as fixed performance agreements (Libby & Lindsay, 2010). In addition to this, the current study also evaluates different criticisms that are essentially tagged against the budgeting procedure the disadvantages of the same.
Conclusion
In conclusion, it can be said that the application of the fixed performance agreement is comparatively less prevalent that what is mentioned by BBRT or else the RAPM. In addition to this, different subjective considerations or else the allowances for diverse controllable incidence are frequently monitored in different organizations applying budget for the evaluation of the performance. The total time dedicated in the mean sampled North American corporation is significantly less than what other critics mention. Again, the majority of the selected sample organizations do not necessarily function in the uncertain environments. In the surveyed corporations, the entire process of budget is associated to the policy functioning (Libby & Lindsay, 2010). Finally, the budgetary gaming behaviours are a problem in the sample corporations in both the nations even though the problems seems to be a lot more in the sampled business.
References
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Clinton, B. D., & White, L. R. (2012). Roles and practices in management accounting. Management Accounting, 94(5), 37-43.
DRURY, C. M. (2013). Management and cost accounting. Springer.
Ekholm, B. & Wallin, J. (2000). Is the annual budget really dead?. European Accounting Review, 9(4), 519-539. https://dx.doi.org/10.1080/09638180020024007
Ezzamel, M., Robson, K., & Stapleton, P. (2012). The logics of budgeting: Theorization and practice variation in the educational field. Accounting, organizations and society, 37(5), 281-303.
Fullerton, R. R., Kennedy, F. A., & Widener, S. K. (2014). Lean manufacturing and firm performance: The incremental contribution of lean management accounting practices. Journal of Operations Management,32(7), 414-428.
Groot, T., & Selto, F. (2013). Advanced management accounting. Pearson Higher Ed.
Hope, J., & Fraser, R. (2013). Beyond budgeting: how managers can break free from the annual performance trap. Harvard Business Press.
Hopper, T., & Bui, B. (2016). Has management accounting research been critical?. Management Accounting Research, 31, 10-30.
Horngren, C. T., Sundem, G. L., Schatzberg, J. O., & Burgstahler, D. (2013).Introduction to management accounting. Pearson Higher Ed.
Jensen, M. (2003) Paying People to Lie: The Truth About the Budgeting Process. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.267651
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Khalifeh, C. J., & Sivabalan, P. (2014). An Experimental Study on the Effect of Budget Information on Balanced Scorecard Preparer Individual Learning.Australian Accounting Review, 24(1), 39-52.
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Nasseri, A., Yazdifar, H., & Askarany, D. (2016). Management accounting education for the 21st Century firms. International Journal of Finance and Managerial Accounting, 1(1), 75-77.
New Ways of Setting Rewards: THE BEYOND BUDGETING MODEL. (2016).Connection.ebscohost.com. Retrieved 19 September 2016, from https://connection.ebscohost.com/c/articles/10899572/new-ways-setting-rewards-beyond-budgeting-model
Sivabalan, P., Booth, P., Malmi, T., & Brown, D. (2009). An exploratory study of operational reasons to budget. Accounting & Finance, 49(4), 849-871. https://dx.doi.org/10.1111/j.1467-629x.2009.00305.x
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