AYB225 Management Accounting

Introduction:

The given statement of Terry explains that budgeting process is not worth to conduct on their business as it is not possible to predict the future of a growing company like T&K through the budgeting process. No matter how much the analyst tries, it is always impossible to get the effect result about the future performance of the business.

Overview:

Terry and Kerry are two partners of an accounting firm of T&K which offers various accounting services such as taxation, book keeping and business advisory to their customers. The performance of the company is improving at a great extent along with the higher expenses of the business.

Budgeting analysis:

De Azevedo et al, (2012) explains that one your business is operational in the industry and the market; it becomes crucial for the business to plan and manage the financial performance of the business through creating a budget process which is quite effective in order to manage the financial performance on a track. No matter how much the performance of the business is fluctuated, an assumption about the improvement of the business could be done on the basis of the historical changes and the market position of the business.

The statement made by Terry is not at all acceptable as the budgeting process is always crucial to meet the demand of the business and maintain the financial performance of the business. The budgeting process planning makes it easier for the business to anticipate the future problems of the business and make strategies on time to resolve the issues of the business. It offers the sound financial information of the business on the basis of which better decision could be made by the management of the company (Hope and Fraser, 2013). It improves the clarity and focus on the budgeting statement of the business. As well, a great confidence could be developed by the management in order to make the decision on the basis of the budgeting reports.

In case of T&K, it has been found that the budgeting reports made it very clear to the business that how the budgeting reports make it easier for the business to make the decisions. Such as, the flexible budget on the taxation services of the business explains that the profit of the business would be $ 2,18,927 and the actual budget of the business is $ 2,30,598. It explains that even though, the improvements of the company are not constant but a great budgeting process makes it easier for the business to identify the budgeted revenues, expenses and the profitability level of the business so that the company could allocate the resources on the basis of that and could improve the overall performance of the company.

Through, the budgeting evaluation, it has been found that the management has made the required changes into the business at initial stage on the basis of the budgeting reports, such as changes into the PPE, improvement in the staff position etc so that the performance and the sudden demand of the company could be met by the business and the overall level of the business could be improved by the business (Shastri & Stout, 2008).

On the basis of the statement of Terry and the evaluation on the articles and calculations of budgeting, it has been found that the budgeting is a crucial process which must be applied by each business in order to manage and improve the position of the business.

Conclusion:

To conclude, the budgeting is a managerial process which makes it easier for the business to identify the future changes into the business and makes the financial strategies on the basis of that. In case of T&K, the budgeting process is very much important for the business to identify the changes and improve the financial performance of the company on the basis of that.

References:

De Azevedo, R. C., de Oliveira Lacerda, R. T., Ensslin, L., Jungles, A. E., & Ensslin, S. R. (2012). Performance measurement to aid decision making in the budgeting process for apartment-building construction: case study using MCDA-C. Journal of Construction Engineering and Management, 139(2), 225-235.

Hope, J., & Fraser, R. (2013). the Budget. Budgetierung im Umbruch?, 1 (5), 71.

Shastri, K., & Stout, D. E. (2008). Budgeting: Perspectives from the real world. Management Accounting Quarterly, 10(1), 18.