MANAGEMENT ACCOUNTING

Evaluate the effectiveness of a budgetary control system in a UK

Evaluate the effectiveness of a budgetary control system in a UK

Introduction

The study is related to the effectiveness of a budgetary control system in a UK. The budget of a company is very similar to a large family. All budgets have done since the age in which we received the first money from our parents and we had to adjust these minimum resources to our own money for candy and cards.

The budgets of companies are more complex and contained in financial terms and almost unknown to the ordinary citizen, but his conclusions are not so different from those of the housewife. The budgets of the companies are also used for proper control and this will base the study of this topic.

Traditional accounting systems are still used by managers of companies to develop standards and administer the departments and functions of which they are responsible.

Since the company's economic activity is measured in monetary terms, the ultimate test of the effectiveness of the manager will be the profit margin obtained depending on the resources entrusted to it.

Benefit levels reasonably expected of management depend on many economic factors, functional characteristics of the scenarios in which the company is operating. After defining the benefits to be obtained, the manager must translate into economic terms in a comprehensive report, which should provide a reasoned the business objectives for a given fiscal year.

The annual budget should be done through a detailed plan of its realization will require consideration and commitment of those responsible for each cost center budget.

Literature review

One of the most useful elements of budgetary control is the opportunity it offers to perform an evaluation or critical synthesis of performance and profitability of each functional area of ??the company. The daily pressures that are applied to the manager of a company allows you to consistently monitor the progress of the budget. For this reason it is necessary to increase the participation of all managers to ensure proper monitoring and supervision of the budgetary policy of the company.

The principle of delegating the responsibility for controlling costs, allows management to a greater understanding of the way in which available resources are used. If each department head is aware of their involvement and responsibility in the budget, will be the best way to know the balance of the investment policy and company profits.

From all this we can deduce that budgetary control has four specific purposes:

1) It is a planning tool for managers.

2) Determine what resources are required to have and invest to achieve the best results.

3) It is an approach that integrates the efforts of the components of each cost center budget.

4) The directors of companies can tailor their plans regarding the results and alternatives to introduce corrective factor for obtaining it.

The figures in the budget shall be established by the respective functional managers (Sales, Production and Administration). When setting sales budgets should be prepared simultaneously production ...