Management accounting and control Essay Example | Topics and Well Written Essays - 2500 words

Management accounting and control - Essay Example It acts as a plan developed by experts from within the organization or belonging to external agencies, private or governmental. These professionals make forecasts based on assumptions related to the prices of goods produced, costs of production, wages of labour, level of demand in the market and several other variables. These assumptions are then distributed in the form of a budget to the various departments from the head office. The employees in these departments then infer the status of their respective departments and figure out the ways of action depending on their level of knowledge about the market. Therefore in effect the budget comes true only to the extent up to which the specific departments make accurate assumptions regarding their own operations and also the condition of the market. The moral of this entire process lies in the advice lent out to the different departments that they must try and act in a little more efficient way and that they should be selling more amounts of the products in the coming years (Wallander, 1999). This context is good enough to prove redundancy of the intricate system of budgeting in organizations. The management can also do it without taking refuge under complicated assumptions but rather check at regular intervals that the departments are following the advice. In this paper we shall look into the issue that the process of budgeting is no longer a relevant system for running an organization successfully and that it has been termed by a most well known Swedish author as â€Å"an unnecessary evil† (Chapman, Hopwood and Shields, 2009). Considerable amount of debate has arisen regarding the necessity of budgets in business organizations. The process of preparing an annual budget embodies a lengthy process incurring huge expenses. Thus as Hope and Fraser calls it, the system of budgeting is quite cumbersome and is