This paper is mainly purposed for giving a discussion and explanation on the findings of two studies on budgeting which are based on real life organizations. Regarding this, budgeting has been explained with much detail in this paper in one of the sections below. Additionally, this paper has given a detailed discussion on what the two studies have been purposed, as well as the research questions regarding budgeting which have been set to be explored. Furthermore, the paper provides a summary of the various differences and similarities in the outcomes of the research articles. Besides, four lessons or outcomes that are specific for use by management accountants operating in Australian companies have been discussed in this paper (Gapenski and Reiter 2008, pp. 102).
Budgeting can be explained as the process through which a plan for spending or using one’s income or money is developed. The spending plan is what is referred to a budget. Through establishing or developing a budget, an individual or an organization is able to determine if the funds available are adequate for performing the set objectives or tasks which have been scheduled for execution (Guney 2009, pp. 65). Due to the scarcity of economic resources, budgeting is considered a very useful and essential planning tool for setting priorities of spending and helping the organization or the individual in concentrating much focus on accomplishing tasks or projects which are considered most essential. Budgeting also allows an individual to establish a spending plan, which in turn assists him or her in in ensuring that there is adequate funds for carrying out the set objectives as prioritized by significance. By adhering to the prepared budget, one is able to keep himself or herself out of debts, and also helps him or her in paying off current liabilities or debts through establishment of an adequate payment plan (Gray 2013, pp. 459).
A budget gives a forecast of expected income and costs or expenditures over a particular time period. It is possible to develop budgets for families, individuals, an organization or even a group of persons and a country as well (Nandan 2010, pp. 22). The basis for establishment of a budget is the aspect of use of funds for particular set purposes or objectives. Budgeting for companies is used as a major tool for establishing internal strategies or plans which are essential for the company’s top management although the company is not required by any law or regulation to disclose their budgets to any external parties or stakeholders. Despite the fact that preparation of budgets is not mandatory, it is a critical determining factor of an organization’s financial performance as well as success (Needles, Powers and Crosson 2013, pp. 25). Developing a budget is very simple and easy, and it is important for every individual and organization with or without limited or scarce economic resources with regard to funds. The practices and process of budgeting helps organizations and persons who have all sizes of expenditures and spending habits as well as revenues to make rational financial or economic decisions with regard to their priorities in income allocation. Budgeting also assists individuals to make rational savings in order to achieve various objectives including retirement plans, asset purchase, education and emergencies as well as other purposes that an individual or an organization may see fit (Guilding 2014, pp. 12).
The process of budget development and establishment begins with establishing or setting assumptions with regard to the upcoming forecasting or budgeting period. The axioms must be often based on the expected sales or revenue trends as well as the expenses trends forecasts and the entire nature of the industry or market in which the firm operates (Matherly and Burney 2013, pp. 562). There are various factors which must be taken into account while making a forecast of expenses since they have significant impacts. These factors must be identified and addressed as necessary. In the budgeting process, the sales budget is normally and often prepared preliminarily prior to any other budget because it provides a basis for forecasting the associated expenses or costs after the future cash flows have been adequately ascertained. A company prepares budgets for each and every department or branch. In cases of manufacturing organizations, separate budgets are often prepared for direct materials and direct labor as well as overheads (Walther and Skousen 2010, pp. 41).
Budgets are categorized in to two main classes, that is, fixed and flexible budgets. A fixed budget, also known as a static budget, is that which does not change or vary during the whole budgeting period or duration as its amounts remain the same despite any changes or alterations that may occur. However, a flexible budget has values or amounts which relate significantly to certain variables. The figures in this type of budgets can be altered depending on changes in sales levels, production levels or any other factor that may have impacts on the budget. There are also personal budgets that are mainly prepared by individuals and families as opposed to fixed and flexible budgets that are often developed by companies (Pertsemlidis 2012, pp. 23).
According to the above discussion, it can be concluded that the practice of budgeting is very essential in managing personal as well as organizational finances. It is used by organizations and individuals as a financial planning tool which assists them in achieving various objectives such as buying fixed assets, making retirement benefits, entrepreneurship and many others (Palmrose 2009, pp. 283).
The Purpose of the Two Research Studies and Research Questions Explored About Budgeting
Research Article “Budgetary Practices and Accountability Habitus (A Grounded Theory)”
This study provides a detailed discussion on how governance and accountability of the UK local governments relate. The research uses the grounded theory methodology in establishing how the participants to the study perceived this relationship regarding four organizations within the UK Local government (McCrary 2009, pp. 102). According to the findings of the research studies, the budgeting system is considered an important process in organizations which helps them in enhancing their accountability. This article focuses primarily on how accountability perceptions relate with budgeting practices. This study explored four cases and established that budgeting practices and accountability were perceived in quite different ways. The study has also developed a grounded theory with regard to the case studies in order to provide an explanation of the identified differences or variations (Moore 2009, pp. 333).
This study mainly focusses on the basic relationship or link between accountability perceptions and budgeting practices. Therefore, the research study gives an exploration of the question regarding the relationships among the four cases studies that were being studied. It was established by the findings of the study that there was a direct link or relationship among the four cases. This study also explores the differences or variations which are identified in every case, regarding the relationships between budgeting practices and accountability perceptions (Lewis 2012, pp. 78).
Regarding accountability, this study provides a detailed discussion on the perceptions of accountability by organizational members and managers, with consideration of the duties and roles of every party and how accountable they are with regard to their roles and responsibilities. Additionally, the study provides a summary of the differences in the perceptions of roles of several parties or individuals within an organization. With regard to this, the study focused on exploring if interactions and accountability relationships among the several parties resulted from heavy impacts of trust that existed among them, and the powers that each party held (Hsu 2008, pp. 1318).
Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)”
This study is mainly focused on providing an explanation of the drawbacks of traditional budgeting practices. Regarding this, the research study established two methodologies that were meant to address the identified limitations. For example, the study recommends a methodology that seeks to improve the budgeting process and focusses primarily on the challenges faced when evaluating performance of the budgets. Therefore, the study is mainly purposed for providing perspectives and an overview of the two methodologies for improving the budgeting processes. The study mainly sought exploring and discussing on the challenges faced by most practitioners in the budgeting processes and why they find them to be dissatisfactory (Jaelani 2016, pp. 47).
The study also gives an explanation on the two methodologies for improvement while simplifying the budgeting processes for use by practitioners and using their views in making necessary developments as seen fit. In addition to this, the study gives an overview of how the current budgeting practices have been criticized against. With regard to this, the study puts much focus on discussing how the practices of modern budgeting can be improved in order to increase the benefits obtained by organizations and the practitioners involved. Two main approaches have been suggested by this study which include adoption of activity based budgeting approach and the beyond budgeting approach (Fomina 2015, pp. 392).
Similarities
In these two studies, the budgeting practices concept has been discussed in the findings of the studies. For example, in the article “Budgetary Practices and Accountability Habitus (A Grounded Theory)”, the budgeting cycle was recognized and viewed as an important accounting practice for achieving accountability in almost every case. The budgeting plans of many organizations are based on system of control and implementation which are developed rigorously. The system of budgeting is necessary for achievement of organizational and structural accountability by implicitly determining objectives and plans as well as organizational policies. In a similar way, the article “Practice Developments in Budgeting (An Overview and Research Perspective)” considers the budgeting practice as a the foundation or cornerstone of the management control process in every organization. In this study, various concerns were alarmed by several practitioners and managers regarding efficiency of budgeting practices and processes while making plans and evaluating organizational performance. Most of the practitioners complained that allocation of organizational resources was done appropriately, thus enabling them to make viable economic and financial decisions in their organizations (Fields 2016, pp. 99).
Furthermore, the outcomes of these studies focus on explaining various perspectives concerning budgeting practices and processes. For example, the Study “Practice Developments in Budgeting (An Overview and Research Perspective)” provides a discussion on how budgets are perceived as well as the drawbacks associated with budgeting practices. Various practitioners in many organizations complained that the assumptions on which budgets were developed were not up to date and this led to deterioration of the benefits obtained from such practices and processes. Similarly, the findings of the Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)” provides the results of several interviews which were conducted in order to acquire an understanding of the budgetary and accounting practices in organizations. As per the outcomes of the study article, budgeting practices and accountability have been perceived by many people as distinctive in different firms or organizations (Epstein, Nach and Bragg 2009, pp. 50).
The findings of these two studies have exhibited various differences or variations. For example, the results of the Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)” mainly concentrates on explaining and discussing the importance of budgeting and its practices as well as how it is linked to accountability. The results of these studies also provides a discussion on theoretical variations that are established in most of the practices and perceptions of budgeting and accountability as well. On the other hand, the outcomes of the Study “Practice Developments in Budgeting (An Overview and Research Perspective)” attempts to discuss and explain challenges that are faced by practitioners in the modern budgeting practices. The outcomes of the study demonstrates the usefulness and reliability of the two methodologies which improve the current practices of budgeting and helps practitioners to overcome the various drawbacks and challenges faced in their routine budgeting processes in their respective organizations (Du 2011, pp. 8).
In addition to this, the results of the Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)” provides that the various perceptions of trust, power and accountability are significantly impacted by several conditions and factors as well as actions and interactions which have certain consequences. These outcomes also sought to describe the accountability perceptions as well as how they vary significantly with practices of budgeting (Droms and Wright 2010, pp. 32). It has been established by this study that various accountability relationships did exist in the four cases which were being studied. The outcomes of the study “Practice Developments in Budgeting (An Overview and Research Perspective)” on the other hand, are very different. For example, the outcomes discuss mainly the drawbacks that are associated with the modern budgeting practices. Practitioners perceived these budgets as very hard to establish, and were also considered as barriers which prevented organizational change from being implemented. The outcomes of this study also highlights that there are two improvements which can be made on the budgeting practices such as the ABB and BB approaches. In accordance with this study, ABB approach helps in developing improvements that are moderate to the modern budgeting practices. The BB approach, on the other hand, is a more complex improvement which involves complete abandonment of the budget as a whole. Furthermore, this study gives an explanation on how budgets, operations and strategies are linked and related (Demski et al. 2009, pp. 133).
Four Specific Lessons Learned from the Outcomes of the Two Studies Which are Useful to Management Accountants
Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)”
Study “Practice Developments in Budgeting (An Overview and Research Perspective)”
Conclusion
According to the above discussion, the two studies give outcomes which have several differences and similarities. For example, one study describes how accountability perceptions and budgeting practices are linked or related, while the second study provides a discussion on the drawbacks associated with the modern budgeting practices and processes as well as approaches for making necessary improvements.
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