MANAGERIAL ACCOUNTING

Executive Summary

Focusing on two articles – “Implementing beyond budgeting: Unlocking the performance potential” by Bjarte Bogsnes and “Traditional Budgeting Versus Beyond Budgeting: A Literature Review” by Cardoş Ildikó Réka, Pete Ştefan and Cardoş Vasile Daniel, this study has pointed out that one of the important component of each business is budgeting. Budgeting approaches have numerous sides that are both negative and positive aspects. There are mainly two types of budgeting approach, which are traditional approach of budgeting and contemporary approach of budgeting.

Introduction

Proper planning is the key to be more successful in a business. The management department can recognize and comprehend the real requirements of a business during developing plans. As a result, this helps the management to develop improved strategies, for business puposes (Popesko & Socova, 2016). The procedure required to develop plans in terms of numbers is called “budgeting”. The most important component of a business is budgeting as the successfulness of a business relies extremely on the efficiency of the plan developed by the management. In the present scenario, developing successful budgets is being focused on by the organisations as a result of highly competitive external environment that directly influences the business.

The focus relating to this study will be on budgeting. The significance of budgeting will also be recognized in this study considering the existing organisational environment by focusing on two journal articles – “Implementing beyond budgeting: Unlocking the performance potential” by Bjarte Bogsnes and “Traditional Budgeting Versus Beyond Budgeting: A Literature Review” by Cardoş Ildikó Réka, Pete Ştefan and Cardoş Vasile Daniel. Budgeting is the main subject of discussion in both the articles.

Managerial AccountingExplaining the selected topic of management accounting

As identified in the introduction, budgeting is the selected subject of managerial accounting for this report, since it is an significance part of any business. As mentioned above, each business requires to develop a financial plan known as budgeting that helps to guarantee the long-term existence of the business. Managing the earnings and expenditure of a business in a systematic way can also be the definition of budgeting. The most significant component of a business is budgeting since it provides support in properly allocating the organisational resources.

Budgeting is not only a tool used for planning, but it can be regarded as a tool efficient enough to control business activities. (Gitman et al., 2015) Companies can analyse their existing capacities while developing budgets in order to compete in the open market. This helps the organisations to be aware of the existing financial as well as non-financial status of the business. The organizations follow budgeting in order to raise the standard of control system of the business management. It can also be mentioned at the same time, that the method of communicating the scenarios of business to the individuals who are connected with the business, is through budgets.

The next focus is on budgeting with the concentration on the efficiency of traditional approach of budgeting in the context to contemporary organisations (Elias& Etim, 2017). According to the authors of the article, traditional procedure of budgeting is still prevalent in an extensive range of organisations all over the world. A business can be managed in an improved manner by planning properly and controlling the business activities effectively with the help of the traditional budgeting methods, which are considered to be the basic management method. According to the journals and articles, budgeting is an extremely vital activity that is to be carried out by each business organisation for improved planning and better management of the finance related activities. Simultaneously, it can also be said that there are many loopholes present in the traditional technique or approach of budgeting.

Thus, from all the points included in the discussion made in this study, it can be said that budgeting is a part of each business at present that cannot be separated. It is important to consider in this context, that budgets are prepared individually in the territory an organization for organizational activities that are different. For instance, a separate budget called purchase budget is made for purchases. Likewise, a sales budget is prepared separately while planning the volume of sales and the value of sales within the business.

Thus, it can be said that to develop a master budget, accurate budgets of every department is required. Budgets can also be classified based on the type of the approach of budgeting. There are various types of budgeting approaches, which are accessible in the market. These approaches can be useful while developing proficient budgets. For instance, there are budgeting based on activities and budgeting that are zero-based. These two approaches of budgeting are developed while preparing the budgets in a way that is most proficient. These are the contemporary methods of developing budgets.

Explaining the purposes and research questions of the two selected studies

The discussion made in the last part has pointed out about the two different approaches of budgeting. The idea and significance of budgeting has been mentioned as well through the views of the writers of the regarding articles. In context to this, it is vital to recognize and explain about the research questions and purposes of the two articles that were selected. In this study, the research questions and purposes of the two articles are as follows:

The research questions and purposes of – Implementing beyond budgeting: Unlocking the performance potential –

This study has chiefly focused on the contemporary budgeting approach, which can be termed as beyond budgeting. The contemporary system of budgeting has improved the range of budgeting in the existing complicated age of business (Bogsnes, 2016). Nevertheless, the major purpose of this article was evaluating and analysing whether the approach or technique called beyond budgeting in context of the existing organisations is sufficient, or the companies require adopting improved approaches to develop effective business budgeting. The chief questions of the article are mentioned below:

  • Are the budgets not essential?
  • Is budgeting naturally faulty?
  • Are the budgets increasing the worth of the businesses? (Bogsnes, 2016)

It can be said that the author of the article have analysed critically the approaches or techniques of budgeting for understanding their organisational importance, after considering the above mentioned purposes and questions of the article. The usage of budgeting has been analysed from dissimilar points of views by the author of the article. He has tried focusing on the efficiency of the contemporary budgeting approaches in context to the existing businesses.

The questions in the article evidently pointed out that the author has tried analysing budgeting from a perspective, which was impartial (Bogsnes, 2016).

The research questions and purposes of – Traditional Budgeting Versus Beyond Budgeting: A Literature Review

The chief purpose of this article was analysing whether the traditional approach of budgeting is still efficient in the contemporary business (Réka, Ştefan, & Daniel, 2014). For accomplishing this specific purpose, the authors have come up with a few research questions, which are listed below:

  • Is the traditional approach of budgeting is still efficient in context to contemporary organisations?
  • Why do several organizations adopt budgeting approaches that are more sophisticated?
  • What are the faults in the traditional approach of budgeting? (Réka, Ştefan, & Daniel, 2014)

With the above mentioned research questions and purposes in consideration, that this specific article has chosen, it can be said that the writers have chiefly focused on the analysis of the traditional approach budgeting (Réka, Ştefan, & Daniel, 2014). It has been tried by the authors to recognize the causes behind the organisations preferring the contemporary approaches of budgeting to the traditional approaches of budgeting. It is also indicated by the research questions that the authors have been focusing on both the aspects of traditional approach of budgeting (Réka, Ştefan, & Daniel, 2014).

Thus, it can be said that the writers of both the articles focused on the different approaches of budgeting from different viewpoints, considering all of the research questions and purposes. Nevertheless, since the focus of both the articles was on budgeting, there has to be a number of similarities in between the two. The dissimilarities and similarities between the two articles have been discussed in the sections below. 

A discussion on the similarities and dissimilarities between the two studies

On comparing and reviewing critically both the above mentioned articles with one another, it can be said that some similarities can be found in both. The similarities are as follows:

Similarities found between the two articles:

  • The authors of both the articles have mentioned in their contents that budgeting is necessary for a business. The authors have also mentioned evidently that in the existing scenario of market competitiveness, the organisations can be helped by budgeting in controlling the level of cost and allocating the resource of the business in an improved way. The authors of both the articles have pointed out budgeting as not only a tool that will help with planning, but also as a tool that can be used for controlling purposese.
  • Apart from the similarity in between the context of both the articles, that is mentioned above, another similarity is there that pointed out the traditional approach or technique of budgeting has some faults that have supported the organisations to adopt the contemporary budgeting approaches.

In the traditional approach of budgeting, there are some parts, which create barricades at the time of developing a proficient budget in context to the existing organisation.

  • One other similarity that is mention worthy, regarding this is that the authors of both the articles have conducted analysis on budgeting and its significance from various angles. The contents of both the articles are evidently stating that the writers have conducted an investigation that was impartial and practical.

Although there is presence of some similarities in both the articles, some dissimilarities have been found between the two as well. The dissimilarities are as follows:

Chief dissimilarities between the contents of both the articles are the type of approach of budgeting chosen by the authors of the articles. From the content of the first article, it can be stated evidently that the focus was on the contemporary approach of budgeting. Meanwhile, the content of the second journal evidently stated that it was focused on the traditional approach of budgeting. Therefore, it can be said that a fundamental difference was there between the viewpoints of both the journals.

Another dissimilarity that was found between the contents of both the article is that the article that was discussed at first has recognized the faults in the contemporary approach of budgeting. In this specific article, the writers have analysed critically whether any other approach of budgeting exists that is enhanced than contemporary approach of budgeting. Then again, on considering the next article, the writers have stated that although several loopholes are present in the traditional approach of budgeting, this approach is in use in several organisations at present. Therefore, it can be said that the former article has investigated on the availability of improved budgeting approaches in the existing market situation. Meanwhile the next article has elaborated the attractiveness of the traditional approach of budgeting.

Providing four specific lessons that have been learned from the two studies

With the chief content of the two articles mentioned above in consideration, it can be understood that to operate a business successful, development a proficient budget is extremely vital for an organisation. Other than this prime knowledge, there are a number of other points that have been considered from the content of both the articles. These considerations are as follows:

Knowledge acquired from the article – Implementing beyond budgeting: Unlocking the performance potential

  • The content of this specific article have stated that contemporary approach of budgeting is a highly developed system of budgeting that is admired extremely at present in the international and national market. With the content in consideration, it can be understood that applying the contemporary approach of budgeting can develop the control of budgeting over the activities related to business (Bogsnes, 2016).
  • These budgets are helpful for allocating the organizational resources in a better way. The content of the article have also stated that the contemporary approach of budgeting is better than the traditional approach of budgeting (Bogsnes, 2016). This specific contemporary approach of budgeting has widened the range of budgeting for every business organisation.
  • Other than the lesson above, the specific study has also given the knowledge about the loopholes or negative aspects in the contemporary approach of budgeting. The content states that some loopholes are present in the contemporary approach of budgeting, which from time to time dispirit the companies from adopting the contemporary approach of budgeting. This procedure of budgeting is extremely critical, making the application hard for the purpose of businesses (Bogsnes, 2016).

From the above discussion, the differences between the contemporary and traditional approaches of budgeting are identified. The traditional approach of budgeting is easier to comprehend and apply. Meanwhile, the modern approach of budgeting is complicated and is difficult to apply. Nevertheless, the content of the articles shows that although the contemporary approach of budgeting is complicated and difficult to apply, it can give result, which is improvised to the organisations. The contemporary approach of budgeting can be helpful for the organisations to develop accurate and practical business budgets. Nevertheless, the articles have also shown the loopholes in the contemporary approach of budgeting. This study has given a lot of knowledge about the idea and significance of budgeting in context to the existing businesses.

References

Asogwa, I. E., & Etim, O. E. (2017). Traditional Budgeting in Today’s Business Environment. Journal of Applied Finance and Banking7(3), 111..

Bogsnes, B. (2016). Implementing beyond budgeting: Unlocking the performance potential. John Wiley & Sons.

Boylan, D. H. (2016). The Role of Finance in Quality Principles.

Carbaugh, R. (2016). Contemporary economics: an applications approach. Routledge.

Cokins, G., & Dybvig, A. (2018). NEXT GENERATION BUDGETING: If you want more accurate results from your budgeting process, it may be time to switch from traditional budgeting to operational budgeting. Strategic Finance99(10), 38-46.

Dagenais, M., & Maver, I. (2016). Municipal Services and Employees in the Modern City: New Historic Approaches. Routledge.

Elias, I., & Etim, O. (2017). Traditional Budgeting in Today’ s Business Environment. Journal of Applied Finance & Banking7(3), 1-7.

Gitman, L. J., Juchau, R., & Flanagan, J. (2015). Principles of managerial finance. Pearson Higher Education AU.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Miller, G. (2018). Performance based budgeting. Routledge.

Popesko, B., & Socova, V. (2016). Current trends in budgeting and planning: Czech survey initial results. International Advances in Economic Research22(1), 99.

Popesko, B., 2018. Transformations in Budgeting Practices: Evidence from the Czech Republic. International Advances in Economic Research24(2), p.203.

Popesko, B., Dokulil, J., & Hrabec, D. (2017). How Czech firms deal with operational budgets? Survey results. Journal of International Studies10(2), 138-147.

Réka, C. I., Ştefan, P., & Daniel, C. V. (2014). TRADITIONAL BUDGETING VERSUS BEYOND BUDGETING: A LITERATURE REVIEW. Annals of the University of Oradea, Economic Science Series23(1).

Sandalgaard, N., & Nikolaj Bukh, P. (2014). Beyond Budgeting and change: a case study. Journal of Accounting & Organizational

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