APC 309 Strategic Management Accounting

3568 words 15 pages
Module Title: Strategic Management Accounting Module Code: APC309

Individual assignment


Date: 16/04/2011

As Gowthope (2005, p.148) said that: “A budget is a plan, expressed in financial and/or more general quantitative terms, which extends forward for a period into the future. Budgets are widely used in organisations of all types and sizes.” –Budgeting actually refers to the process that, after the strategic plan of the business has been made, companies made a short term plan (usually one year) to meet the strategic purpose. Traditional budgeting has offered a lot of contributions in so many years‟ practice; no one has a better summary of all advantage of traditional budget as (Umapathy, 1987,
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So for such company using the TBA (Traditional Budgeting Approach) will be perfect and will work well because first, sugar is a necessary good so the market demand is steady i.e. the buying behavior of sugar does not change much, it is a food basic that people consume on a daily basis, the market demand in this case is predicted and quite unchanged, so „A‟ can constantly base its expenditures and estimated revenues on those of previous year and that makes it suitable for our company here to be using an annual budget based on historical data, thus, will make it easier to compare actual results with budgets and monitor organizational functions. Second, senior managers won‟t be forced to spend an amount of time reviewing budgets. Again, focusing on the benefits of TBA we can say that this approach enhance controlling and is easy to prepare and understand, administratively unambiguous and simple to operate, so this method is cheap. It is probably the simplest method that ensures a quick and low preparation costs, however, I would insist on the point that for any business it‟s good to provide and introduce change gradually, therefore, the only major weakness that would limit our company „A‟ is the fact that senior managers will never be able to have a general and overall picture of the performance, and also some people will be offended when it comes to supervision, humans tend

to work at their lowest possible standards especially when there is lack