CHINHOYI UNIVESITY OF TECHNOLOGY

GROUP PRESENTATION PERFOMANCE MANAGEMENT ACCOUNTING

BSCAC LEVEL 4.1

LIBERTY CHIWASHIRA C20142605T

PANASHE MTIZWA C20141987C

MUNASHE ZIMBUDZANA C20141698E

ALDRIN MUGWANIRA C20142198R

WIFRED MUSHANGWE C20143263H

CHIEDZA P MUGWAGWA C20143305H

HAZEL KAZINGACHILE C20143089L

PETRONELLA MUSHAYIKWA C20142736X

LOVENESS KANYANDURA C20141143B

TARISAI MUGURASAVE C20143293D

QUESTION 22

a) Identify and explain six objectives of a budgetary control system?

Budgetary control system

It refers to a set of processes and procedures that help organizations to plan, monitor and
control their financial activities by comparing actual results with planned budgets (RN
Anthony, “Planning and Control Systems”, 1965)

Objective 1: Planning and goal setting

Budgeting makes sure that managers plans for the future, producing detailed plans and
goal setting in order to ensure the implementation of the long term plan. Budgeting
makes managers look at the year ahead and consider the changes in conditions that might
take place and how to respond to those changes in conditions. The budgeting process
helps in establishing clear objectives and provides a roadmap of achieving them.

Objective 2: Coordination and communication

Budgeting control systems promote coordination and communication within the
organization. The budget serves as a common plan for different departments and helps in
aligning their activities towards common goals. It encourages collaboration and facilitates
effective communication among managers, enabling them to work together to achieve the
organization’s objective.

Objective 3: Performance evaluation

A budgeting control system helps in evaluating and monitoring performance. By
comparing actual results against budgeted targets, management can identify variances
and take corrective actions if necessary. It provides a basis for assessing the performance
of individuals or departments of the organization for instance, managers and employees
will be awarded bonuses based on achieving budgeted results.

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 Objective 4: Establishing a system of control
Budgetary control system establish mechanisms for control. Expenditure within the
organization needs to be controlled and budget facilitates that. Actual results are
compared to expected results and the reasons for any significant or unexpected
differences are investigated. By setting budgetary limits and monitoring actual
performance, management can exercise control over expenditures and ensure that
resources are used in accordance with the organization’s plans.

Objective 5: Motivation and incentives

Budgets can serve as motivational tools by providing targets and incentives for
employees. When employees have clear objectives and are aware of the financial
implications of their actions, they can be motivated to perform better and contribute to
the organization’s success. Budgets can be used to establish performance based
incentives such as bonuses or rewards which can drive employee engagement and
productivity.

Objective 6: Resource Allocation

Budgeting control system aim to allocate resources effectively and efficiently. Through
the budgeting process, management can determine how much funding should be allocated
to each department or activity based on their priorities and expected outcomes. It enables
the organization to make informed decisions about resource allocation to maximize
productivity and profitability.

b) Discuss the concept of participative style of budgeting in terms of the six objectives
identified in the past (a)?

Participative budgeting
It refers to a budgeting process where there is some level of involvement from
subordinates within the organization, rather than budgets being set by the top level
management as discussed by John Dearden,”Management Control Systems.”

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 Planning and goal setting
Participative budgeting will compel planning. Although participation can take many
forms, often it will take the form of bottom up budgeting, whereby the participation starts
at the lowest level of management and goes all the way up to the top. If this is the case,
then planning is taking place at many levels, and should be more accurate than if it
simply takes place at a high level, by individuals who are not familiar with the day to day
needs of the business.

Coordinating and communicating activities.

Coordination of activities may become more time consuming if a participative style of
budget is used. This is because, coordination must not only be between departments but
also be between different levels of management within each department.
Communication will be particularly effective with participative budgeting, although
effectiveness depends on the extent of participation. If all levels of management are
involved from the bottom up then all levels of management know what the plan is.

Performance evaluation
Managers will be appraised by comparing the results that they have achieved to the
budgeted results, management can identify variances and take corrective actions if
necessary. It provides a basis for assessing the performance of individuals, departments
and the organization as a whole, enabling timely adjustments to achieve financial and
operational objectives.

Establishing a system of control

Participative budgeting can enhance control and accountability within an organization.
When managers are involved in the budgeting process, they have a better understanding
of the budget constraints and the need for control. They are more likely to monitor their
own performance and take corrective actions when necessary. The participative approach
also promotes a culture of accountability, as managers have a stake in the budget
outcomes they helped shape.

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 Motivation and incentive
Participative budgeting can increase employee motivation and engagement. When
managers are involved in the budgeting process, they feel a sense of ownership and
responsibility for the outcomes. This can lead to increased motivation to achieve
budgeted targets as managers have played a role in setting those targets themselves.
Additionally the participative approach allows for the inclusion of performance based
incentives that align the budget goals.

Resource allocation
In a participative budgeting process, managers have the opportunity to provide input on
resource allocation. They can advocate for the resources they need to achieve their
objectives and justify their requests based on their understanding of the operational
requirements. This can lead to fairer and more informed resource allocation decisions.

REFERENCES

(RN Anthony, “Planning and Control Systems”, 1965),

John Dearden,”Management Control Systems.”

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