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Introduction

The primary purpose of this paper is to discuss two research articles mentioned above, which relate to budgeting. With regard to this, the paper provides a detailed explanation of budgeting. The paper also gives a discussion on the purpose of the two research articles as well as what questions of research are set to be answered or explored about budgeting. In addition to this, the similarities and differences in the findings of the two studies have been discussed. Furthermore, the paper seeks to provide a discussion on four specific outcomes or lessons which are learned from the research findings of the two study articles, which are considered useful for strategic management accountants of companies in Australia to learn from.

Explanation of Budgeting

Budgeting is the process of developing a plan for spending money or income. The plan for spending is what is called a budget. Development of a budget assists an individual in determining in advance whether or not there is sufficient funds or money for doing things that have been planned for. Since like any other economic resource money is scarce, budgeting is used as a tool for planning which enables an individual in making spending priorities and focusing on things which are of most significance and importance at the time (Ward 2012, pp. 47). By allowing one to develop a plan for spending, budgeting is important since it makes sure that an individual has sufficient money for doing things which are needed and those which are of much importance or significance. Adherence to the budget would help a person in keeping out of debt, as well as working his way out of debt if he or she is currently in a debt (Hillier, Grinblatt and Titman 2011, pp. 54).

A budget provides an estimate of revenues as well as expenses over a certain or specified period of time. It is important to be noted that budgeting is done on a basis of periods. Budgets can be developed for a family, person, and a group of individuals as well as a country or even a company, as long as there is involvement is spending of money or funds. For organizations and companies budgeting is a tool used for making internal plans by the management and it is not a requirement to be disclosed to parties outside the firm (Hillier, Grinblatt and Titman 2011, pp. 54). Although budgeting is absolutely optional, it is considered a critical determinant of financial success and wellbeing. It is very easy to develop a budget, and it is not meant for those individuals who have limited resources in terms of money (Otley 2016, 62). Budgeting assists individuals with all magnitudes of expenses and revenue or income in making conscious decisions regarding their preferences in allocation of their income. It also helps people in making savings for various purposes such as retirement, purchase of assets, education fees and emergencies, among others (Langfield-Smith 2008, 204).

The process of developing a budget starts by making assumptions or axioms for the budget period which is upcoming. These assumptions are often in relation to the forecasted trends of sales and trends of costs as well as the overall economic outlook of the industry, market and the sector (Slack, Chambers and Johnston 2009, pp. 112). Certain factors which affect the potential expenses are then addressed and monitored as well. The budget is then published using a packet which provides an outline of the various procedures and standards used in its development, with inclusion of the key assumptions with regard to main relationships with supplier, markets, as well as calculations on how particular calculations were arrived at (Garrison, Noreen, Brewer and McGowan 2010, 793).

During budgeting, sales budget is usually developed first, since it is not possible to establish subsequent expenses without ascertaining cash flows in future. An organization develops budgets for all its departments, divisions or subsidiaries. If the organization is a manufacturing firm, then it seeks to prepare and develop separate budgets for its direct labor, direct materials and overheads as well.

There are two main kinds of budgets, which are flexible budgets and static or fixed budgets. A static or fixed budget is not changed over the entire budget period or life. Irrespective of any changes that may take place during the period of the budget, all figures and accounts in a static budget remain unchanged. A flexible budget, on the other hand, is that which has a values which are relational to specific variables. The amounts that are listed in a flexible budget can be changed based upon the levels of sales, levels of production, or any other external factor in the economy. Apart from fixed and flexible budgets which are mainly prepared by organizations, there are also personal budgets which are spending plans developed at a personal or family level (Hillier, Grinblatt and Titman 2011, pp. 55).

As discussed above, budgeting is considered an essential an important tool for management of personal as well as organizational finances, but it is often thought by many individuals to be not meant for them. However, the key truth is that it helps a person or an organization in keeping track of personal finances and those of the organization as well. It is also a key tool for planning for long term financial goals such as commencement of a business, purchase of key assets, retirement savings as well as making an investment, among other purposes.

The Purpose of the Two Studies and What Research Question(s) They Set Out To Explore About Budgeting

Research Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)”

This paper discusses the relationship between accountability, governance as well as accountability of the local government in the United kingdoms. The methodology of a grounded theory was used in discovering perceptions of the participants in these phenomena with regard to the four organizations in of the Local government in United Kingdom. As per the research findings, the system of budget was discovered to be among the most significant organizational process with regard to accountability (Abraham, Glynn and Murphy 2008, pp. 87). The primary focus of this research article is on the core relationship that was discovered between perceptions of accountability and practices of budgeting. The article researched the four cases and it was found out that the manner in which budgetary practices and accountability were perceived were much different. This paper also develops a grounded theory of these case studies with a view to explaining the differences (Baldvinsdottir, Mitchell and Nørreklit 2010, pp. 79).

This research article focusses and concentrates mainly on the core relationship which is found in the study between perceptions of accountability and practices of budgeting. As such, the study article seeks to explore the question as to whether or not there is a link between the four cases studies which were subjected to research. It was found out that there was an inextricable link among these four studies. This article also seeks to explore the variations between and within every organization, with regard to how the perceptions of accountability and budgetary practices were precisely related (Abraham, Glynn and Murphy 2008, pp. 85).

With regard to accountability, the research article explores how accountability is perceived by managers and members of an organization, in terms of the responsibilities of each party as well as how they gave or rendered an account with respect to their duties. In addition to this, the variance in the perceived responsibilities of various parties was studied in this research article. This sought to explore whether or not the relationships of accountability as well as interactions among the various parties was impacted heavily by trust existing among the parties as well as the relative powers and authority held by each of them (Abraham, Glynn and Murphy 2008, pp. 86).

Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)”

The main purpose of this research study is to provide a detailed discussion on the limitations or shortcomings of traditional practices of budgeting. With regard to this, the study has proposed and developed two approaches of addressing the shortcomings. For instance, this research study proposes an approach which advocates improvement of the process of budgeting as well as primarily focusing on various problems of evaluation of performance in relation to budgeting (Watson and Head 2010, pp. 13). The main purpose of this study is therefore to give an overview and perspectives of research on these two developments which are regarded the most recent. The research article seeks to explore the question as to the reasons why practitioners have often experienced significant dissatisfaction with the budgets. The research article also provides a description of the two different approaches, and places them in a context of research suggesting insights which may be used to help the practitioners, as well as using the perspectives of the practitioners in identifying research areas that are considered fruitful (Bhimani and Horngren 2008, pp. 154).

Furthermore, this research article seeks to provide a review of some of the criticisms against the currently practiced budgets. Regarding these criticisms, the paper focuses on exploring possible developments or improvements which can be made to the current budgeting practices and models with a view to increasing the value gained by the practitioners and the whole organization as well. For instance, this research article proposes various improvements such as use of activity based approach of budgeting and the beyond approach of budgeting (Gitman, Juchau and Flanagan 2015, pp. 33).

Similarities and Differences in the Findings of the Two Studies

Similarities

In both articles, the concept of practices of budgeting is brought in the research findings. For instance, in the Research Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)”, the cycle of annual budgeting was reported as a prominent and essential practice of accounting for achievement of accountability in all the four cases which were studied (Cadez and Guilding 2008, pp. 863). The annual plans of the various organizations were embodied in an implementation and control system that was well developed and rigorous. The budgeting system was used as a main mechanism of achieving structural as well as organizational accountability through an implicit determination of the plans, objectives and policies of the organization (Bhimani and Horngren 2008, pp. 154). Similarly, in the Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)”, the practice of budgeting was considered a cornerstone of the process of management control in almost all organizations. In this research article, there were concerns raised by various practitioners with regard to use of budgets for planning and evaluation of performance. It was argued by most of them that budgets impeded how resources of an organization were allocated to their most appropriate uses thus encouraging myopic decision making (Gitman, Juchau and Flanagan 2015, pp. 32).

In addition to this, the findings of the two research articles seek to give an explanation on various perspectives regarding budgeting and its practices. For instance, in the Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)”, the perceptions of budgets with regard to limitations and shortcomings are discussed (Bhimani and Horngren 2008, pp. 154). The practitioners argued that the underlying assumptions of the budgets were often outdated and typically reduced the value gained from the process of budgeting. Similarly, in the Research Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)”, the findings of the research explained the various outcomes of the interviews that were carried out with a view to gaining an understanding of accounting and budgetary practices as well as other organizational practices. According to the findings of this research, accountability and budgetary practices were perceived by participants to have fundamental distinctions in the various organizational case studies (Collier 2015, pp. 34).

Differences

There are a few differences in the research findings of the two study articles. For instance, the findings of the Research Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)” focus on giving an explanation on significance of budgeting and how it relates to accountability. The findings also explain theoretically the differences which are found in the various perceptions and practices of budgeting and accountability. On the other hand, the research findings of the Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)” try to give an explanation on problems that face the budgeting approach which is currently in practice. The research findings also seek to develop two main approaches which can be used in overcoming these challenges and shortcomings in the current practices of budgeting (Bierman and Smidt 2012, pp. 108).

Additionally, the research findings of the Research Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)” highlight that perceptions of accountability, power, trust and practices of accounting are influenced significantly by various causal conditions and interactions or actions have specific consequences or outcomes. These findings also explained how the phenomena of perceptions of accountability vary significantly with budgetary practices. It is found out in this research study that there were six relationships of accountability which were observed in all the four case studies. These are member-manager, professional, structural, organizational, public and political. This research also found out that there were variations in the perceived responsibilities and duties of every party within the organizations over time (DRURY 2013, pp. 54).

On the other hand, the findings of the Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)” are quite different. For instance, the findings tell us more about the shortcomings of the budgets that were being practiced at the time. For instance, the budgets were perceived as time consuming to develop, they also acted as change barriers due to their constrain responsiveness and they had infrequent developments and updates, among other limitations. The findings of this research also provided a detailed discussion on developments in the practice of budgeting such as Activity Based Budgeting (ABB) approach and Beyond Budgeting (BB) approach. According to this research study, ABB approach explains moderate improvements which can be made to the budget, while the BB approach is drastic approach of abandoning the budget. This article also provides a discussion on the relationship between strategies, operations and budgets, and how they can be appropriately linked (Gopal 2009, pp. 103).

Specific Lessons Learned from the Two Studies’ Research Findings That are Useful for Management Accountants in Australian Companies to Learn From Research Study “Budgetary Practices and Accountability Habitus (A Grounded Theory)”

There are two lessons which management accountants in Australian companies can learn from the results or outcomes of this research article. These are discussed below.

For instance, management accountants can use this research study’s findings to gain an understanding on the ability of power to influence practices of their organizations as a function of both group power and individual power (Gopal 2009, pp. 102). This research finds out that the perceptions of accountability as well as existence of distrust among members did not lead to significant changes and alterations to practice of accounting provided that the groups or organizations lacked the power or an access to it. Management accountants also get to know that power is distributed unevenly between managers and members and the departments and centers of a corporation (Hilton and Platt 2013, pp. 104).

Furthermore, management accountants also learn that enormous tension with regard to responsibility on accountability can result into a significant level of distrust amongst organizational managers at various levels as well as weaknesses in accountability of the organization and the high level of dissatisfaction and tension. In addition to this, management accountants learn that marginalization can lead to exacerbation of practices of budgeting of services that have been contracted out (Horngren 2009, pp. 32).

Research Study “Practice Developments in Budgeting (An Overview and Research Perspective)”

There are two lessons which management accountants in Australian companies can learn from the results or outcomes of this research article (Kuppapally 2008, pp. 98). These are discussed below.

Management accountants get to understand the two developments and improvements in the current practices of budgeting which they can use in their routine roles with regard to budgeting and control (Abdel-Kader and Luther 2008, pp. 26). For instance, the discussion of the research study on the ABB Approach helps the in understanding how they can generate or develop a budget from their organizations’ activity based models (Kuppapally 2008, pp. 96). The ABB approach also helps them in creating a balance between operational requirements and helping them avoid calculations involving the impacts of infeasible plans which are considered unnecessary. Furthermore, the BB approach helps managers by helping them in avoiding the label of the trap of annual performance, with regard to budgeting. This approach assists management accountants in setting targets of budgets using performance benchmarks either internal or external. Finally, the BB approach gives recommendations to management accountants to make evaluations of performance based upon several non-financial measures which are in alignment with the firm’s strategic goals and objectives (Macintosh and Quattrone 2010, pp. 55).

Additionally, management accountants learn that there are key differences between management control and two complementary processes of control, which are strategic and operational planning. With regard to this, strategic planning is viewed as an irregular activity which occurs at the higher levels of an organization, but seeks to offer guiding objectives and goals for the process of management control. Although strategic planning is regarded an activity which is irregular, it is an important process which is often viewed as a separate study field (Weygandt, Kimmel and Kieso 2015, 23).

Conclusion

As discussed above, the two research articles provide research findings which has several similarities as well as some key differences. For instance, one of the articles discusses the relationship between perspectives of accountability and practices of budgeting, while the other discusses on the shortcomings of the budgeting in practice and also seeks to explain the improvements which have been developed on the budgeting systems. The results of these two research articles are considered very useful for management accountants in Australian companies since they can draw a number of significant lessons from them. It can therefore be concluded that the two research studies are essential in reshaping the understanding of management accountants with regard to budgeting and control (Zimmerman and Yahya-Zadeh 2011, pp. 258).

References

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