BUFAN, Ioana-Diana
July 2013
Cross-Cultural Management Journal;2013, Vol. 15 Issue 1, p16
Academic Journal
This paper is a literature review on management accounting and it examines the necessity and the role of budgeting and budget controlling in the management process. Budgets are necessary to highlight the financial implications of plans, to define the resources required to achieve these plans and to provide a means of measuring, viewing and controlling the obtained results, in comparison with the plans. Many managers, especially those familiar with accounting, criticize budgets saying that this implies additional consumption of effort and waste of time, claiming that there are too many estimates in the budget and that these estimations are unreliable, for it to be useful. And yet, any large company prepares budgets. Why? Because it forces managers to foresee, to study trends and develop necessary strategies. Also, the budget can prevent imminent issues. Budgets are excellent communication tools, pointing out the operational and financial objectives of the period. Budgets communicate to the upper and middle management which are the top-management's expectations, and also communicate the management's priorities to the lower levels. In some cases, it can give a manager the authority to dispose of certain funds, but being limited by the budget. Furthermore, the budget sets the prices for internal services and is the basis for performance evaluation. The controlling function confirms or not the compliance or noncompliance of the results with the predetermined objectives, highlighting occurred deviations and the causes that produced them. Budget controlling compares costs, revenues and actual performance with the budget so that, if necessary, it can be reviewed and corrective measures can be applied. This paper also includes a case study in a Romanian company and the collected data will be valued and interpreted in detail. Not all managers in our country understand the importance of budgeting. The aim of this study is to demonstrate the necessity of budgets in planning and controlling of a company's activity.


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