Budgeting is regarded as the cornerstone of the management control process and is one of the most extensively researched topics in management accounting. In fact, the management accounting literature identifies multiple uses for budgets in organizations, such as performance management and evaluation, strategy implementation, and strategy formation, Despite the fact that budgeting is so widely used, practitioners express concerns about the entire budgeting process, arguing that budgets may hinder the allocation of organizational resources to their best uses and encourage myopic decision making and other dysfunctional budget games. It is important to note that the primary objective of budgeting is to create a detailed financial plan that guides managers in the acquisition and use of an organization’s resources in the pursuit of business strategy. But many within organizations feel that the detailed plans are worthless, if not actually harmful, to the achievement of the proposed business strategy.

Argyris'(1952) study in one company showed that budgets were viewed differently by budget people, factory supervisors, and front-line foremen and workers. To the budget people, who perceived themselves as the" answer-men" of the organization, the budget served the extremely important function of being "the eyes and ears of the plant." As they saw it, one part of their job involved a continuous uncovering of errors and weaknesses, as well as the examination and analysis of plant operations with an eye to increased efficiency. Nevertheless one of the ways to reduce the problems associated with the setting of a budget was to have participatory budgeting as it is one of the mechanisms that organizations use to empower employees and promote cross-functional interaction. Organizations adopt participatory budgeting programs to empower employees by allowing the workforce to set performance targets and allocate resources.

Evaluate any TWO (2) stages of the budgeting process in organisations. (Please use relevant books/ journals/ professional websites to support your answer).

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Two stages of budgeting process in organisation are 1 Preparation of Budget The first step of the budget process is to create it Done right this proce... View the full answer