Answers:
Introduction:
Budgeting is a process which is used by every organization before the financial year. It is a kind of estimation of revenue and expenditure in a period of future. It is reevaluated on a periodic basis. A profitable budget shows that the profits are predictable whereas balanced budget means that the revenues and expenditure would be same. Deficit budget depict that expenses in future would be more than the income (Bromwich and Bhimani, 2005).
Budgeting as a non technical process:
Budgeting is a non technical process as while processing a budget the techniques are not at all required. Budget preparer prepares the budget only according to the last year data and some future estimation. This is not preparing with the help of some scientific techniques. The budgetary process is quite old technique and it used by every individual, organization, nations to estimate the future expenses and revenue earlier so that a proper planning could be done. Following are some points to explain that why the budgeting is a non-technical process:
Satisficing:
Budgeting process is taken place according to the Satisficing process. Satisficing is a strategy used for making the decisions. While preparing the budget all the estimation has taken according to the Satisficing process as this process help the preparer to understand the suffice and satisfy of the organization and further help the preparer to take the decisions accordingly (Hoque, 2002). This process helps the company to get the accurate result rather than the optimal result.
Budgeting as a political process:
Budgets are prepared by the accountant and cost manager of the company after analyzing the political situation of the country. The political situation of the company makes a large impact over the budgetary of the company. The decisions and actions of lobbyists and politicians are influenced by the political consideration. Budgetary process is crucial point of budget politics (Davies and Crawford, 2011). This depict that the budget must be prepared according to the consideration of politics of the country.
Budgeting as budget ploys:
Budget ploys are the technique which is used by the budget preparer to design a plan and take the benefits of that plan by implementing that plan in action. Budget ploys help the budget preparer to understand the market well and work accordingly (Hansen, Mowen and Guan, 2007). This technique is done on the basis of estimation and study over the last budgets of the company.
Conclusion:
Thus it could be concluded by the above study, that budgeting is not a scientific technique. The budgeting is done by a person on the basis of many other factors which influences the nature of budget and is the reasons behind the variances between actual and budgeted amount. It has been observed through the above study that the budgeting process depends upon the decision making, budget ploys, political consideration, internal environment of the company and competition. Hence, It could be concluded that budgeting is non-technique process.
References:
Bromwich, M. and Bhimani, A., (2005). Management accounting: Pathways to progress. Cima publishing.
Davies, T. and Crawford, I., (2011). Business accounting and finance. Pearson.
Hansen, D., Mowen, M. and Guan, L., (2007). Cost management: accounting and control. Cengage Learning.
Hoque, Z., (2002). Strategic management accounting. Spiro Press.
