January 10th, 2018
Discuss the importance of the budgeting process and the affect that management has on the overall process.
Cost accounting also provides important input to the budgeting process. Having well formulated budgets can help to identify whether an organization is underperforming or not. Budgets serve as an important tool that an entity can use to control the use of its resources. Since entities face the challenge of scarcity of resources, budgets help to ensure that the resources are not wasted but rather put into the most productive activities. One of the uses of budget is that to ensure effective control by assessing how actual results vary from budgeted results. Through such variance analysis, management can identify the specific performance of a cost or responsibility center and thus determine whether the personnel in charge of such centers have performed adequately.
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