The Role of Participation in Budgeting Essay -- essays research papers

The Role of Participation in Budgeting Introduction Although participation in budgeting may enforce the managerial performance, it has constrains and can cause some problems as well. This article analyses the possible advantages and limitations of the role of participation in budget setting. In the next section, the possible merits of budgetary participation are demonstrated. This is followed by a section that explains the equivocation existing in the relationship between budgetary participation and performance. Then, in the following section, some negative effects on the application of participation in budgeting progress are illustrated. The final section is the conclusion of the study. The Possible Advantages of Budgetary Participation According to the definition of budgeting, it is the  ¡Ã‚ ®estimation of all income and expenses for an accounting period or financial forecasting, planning, and controlling ¡Ã‚ ¯. (http://www.yourwebassistant.net/glossary/b11.htm#budgeting) Comparing the budget with the real achievement of the company, it is possible to improve the decision-making process for the future development of the enterprise. So budgeting takes a crucial role in management accounting. Therefore, studying how to make budget setting more effective is important for the benefit of the enterprise. Participation in budgeting is one of the useful approaches. It bears some possible advantages, which may enhance manager ¡Ã‚ ¯s commitment to budget objectives. The following discussion (adapted from Lecture notes by Professor S. G. Ogden, 2004) bears the assumption that there is positive relationship between participation and performance. The contradictions will be discussed later in the following sections. First of all, participation in budget setting can inspire the enthusiasm of the managers. Then they will intend to input more energy and time into the work to meet the budget targets. Because if they are involved in the process of budget setting, they will link it with their own knowledge, experience, and so on to make the judgment. This linkage renders the target of the company to be the participator ¡Ã‚ ¯s personal target. Secondly, participation may encourage the creation of the participators. Creation is the characteristic of human beings. However, not everybody at any time has the motivation to create. When the budget is settled, and what the managers and employ... ...nteraction of budget characteristics and personality variables with budget response attitudes ¡Ã‚ ¯. The Accounting Review. Vol. 53. pp. 324-335. Dunk, A. S. (1989).  ¡Ã‚ ®Budget emphasis, budgetary participation and managerial performance: A note ¡Ã‚ ¯. Accounting, Organizations and Society. Vol. 14. pp. 321-324 Dunk, A. S. (1993).  ¡Ã‚ ®The effects of job-related tension on managerial performance in participative budgetary settings ¡Ã‚ ®. Accounting, Organizations and Society. Vol. 18. pp. 575-585. Hartmann, F. G. H. (2000).  ¡Ã‚ ®The appropriateness of RAPM: toward the further development of theory ¡Ã‚ ¯. Accounting, Organizations and Society. Vol. 25. pp. 451-482. Lau, M. C. (2001).  ¡Ã‚ ®Budget emphasis, participation, task difficulty and performance: the effect of diversity within culture ¡Ã‚ ¯. Accounting and Business Research. Vol. 31. pp. 37. Abstract. Merchant, K. A. (1981).  ¡Ã‚ ®The Design of the Corporate Budgeting System: Influences on Managerial Behavior and Performance ¡Ã‚ ¯. The Accounting Review. Vol. 56. pp. 813-829. Milani, K. (1975).  ¡Ã‚ ®The relationship of participation in budget setting to industrial supervisor performance and attitudes: a field study ¡Ã‚ ¯. The Accounting Review. Vol. 50. pp. 274-284.