M.Accounting Indivindual Assignment 1

MN2041K Managerial Accounting
INDIVIDUAL ASSIGNMENT
1
College Number
(Bottom Left of College
Card)
100859089
Year: 1
Course Code MN2041K
Course Tutor: Dr John Ahwere-Bafo & Dr Leonardo Rinaldi
Assignment No.: 1
Degree Title: Bachelor of Science (Honours) in
Management
Question No. & Title: Budgetary ControlEvaluation
Word Count 2930

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Budgetary C ont r olEvaluation
“Budgetary control is part of overall organisation control and
is concerned primarily with the control of performance. The use of
budgetary control in performance management has of late taken on greater
importance especially as a more integrative control mechanism for the
organisation”. Critically evaluate this claim, supporting your discussion with
both theoretical arguments and practical examples.”
(Assignment 1)
Student Names: Koh Shen Rui (Lawrence)
Lecturer: Dr John Ahwere-Bafo
Dr Leonardo Rinaldi
Subject: Managerial Accounting (MN2041K)
Course: Bachelor of Science (Honours) in Management
Due Date: 04th August 2016
Word Count: 2930
Choice of example / company:

3
Contents Page
Abstract 4
Introduction 5
Traditional Budget Control 6/7/8/9
Participative Budgetary Control 9/10
Progressive Budgetary Strategies 10
Activity Based Budgeting 10/11
Zero Based Budgeting 11/12
Balance Scorecard 12/13/14
Beyond Budgeting 14/15
Conclusion 15
Reference List 16/17/18

4
Abstract
This analysis focuses on the perceptive of impact of how environment changes,
technology evolve, organization green growth and management ideology.
However this assessment will require background to study, the presentation of
problem, purpose of the study, objective, outlook and momentous of the study
has on business alignment as for budgetary control and conduct/achievement
are matter.
The business organizations in the contemporary society are currently
witnessing a highly dynamic, sophisticated, and intensely competitive
international trade arena. Besides, the business organizations such as DB
SCHENKER are witnessing tough economic times, high inflation, and
currency volatility rates. The tough economic times have led to the massive
increase of production costs in modern firms. Consequently, business managers
are continuously formulating effective cost-cutting strategies such as budgetary
control to monitor expenditure. Ideally, budget control revolves around
analyzing the effective use of the available resources in relation to fulfilling a
company’s strategic plan. Therefore, budget control is a crucial metric that
helps in comprehensively evaluating the performance of an organization such
as DB SCHENKER. The subsequent discussion seeks to analyze the use of
budget control as an integrative control mechanism within organizations.
Besides, the discussion uses theoretical foundations and examples to analyze
the importance of budget control as a metric for performance management.

5
Budget Control
Introduction
So far, organization managers are formulating metrics to enhance their firms’
competitive edge in the highly dynamic and intricate international trade arena.
The business managers are formulating metrics such as the use of budget
control to measure the performance of their organizations (Barksdale & Lund
2016, p.8). A budget is a comprehensive financial planning of the allocation of
an organization’s available resource to particular vote heads (Houghton, 2009).
Ideally, a budget facilitates the accurate allocation of the available resources to
particular vote heads over a specific financial year. Moreover, business
analysts indicate that a budget is among the significant tools that facilitate the
effective and timely implementation of projects within an organization
(Reeves, Haanaes & Sinha, 2015). Besides, a budget is a critical
communication tool within an organization. Ideally, the budget postulates an
organization’s mission and strategic plan over a specific duration. Besides, the
contemporary society is witnessing a rise in corruption. Therefore, a budget is
among the significant tools that enhance the accountability of resources (In
Caprio, In Arner, In Beck, In Calomiris, In Neal & In Véron 2013, p.56).
Ideally, budget control revolves around the use of an organization’s budget as
an effective control mechanism to measure the performance. Therefore, a
control exercise focuses on using a budget as a tool for planning and
controlling various activities such as procurement, production, and marketing
within an organization (Babunakis 2011, p.89). Besides, the use of the
available budget for control enables organization managers to coordinate and

6
organize the relevant systems within an organization to work towards the
achievement of the set strategic plans (In Caprio, In Arner, In Beck, In
Calomiris, In Neal & In Véron 2013, p.56). Besides, the budget control enables
the organization managers to communicate the organization’s strategic plan in
an orderly and systematic manner (Black 2012, p.34). Business analysts also
indicate that the use of budgets as a control metric enhances the development
of an organization’s profitability, productivity, and competitive advantage in
the global market arena (Nelson, Nelson, & Public Library Association 2012).
Therefore, the analysis of the different arguments that support the use of a
budgetary control as a metric for financial performance will equip modern
investors in companies such as DB SCHENKER with knowledge of the
strategies that enhance a firm’s competitive edge.
Traditional Budget Control
Scholars in the contemporary society argue that budgets are significant
components that enhance the integration of activities within an organization.
The effective use of budgetary control facilitates the coordination and planning
of all activities within an organization (Blue & White 2014, p.8).
Consequently, the suitable integration of activities within an organization
enables the managers to monitor the performance of the relevant stakeholders
within an organization. Besides, budgetary control is a crucial tool that
enhances the effective allocation and utilization of the available organizational
resources in facilitating the attainment of particular goals (Cohen, Eimicke &
Heikkila 2013, p.87). Business analysts in the contemporary society also
indicate that the effective utilization of the human and capital resources within

7
organizations such as DB SCHENKER has led to an increase in the firm’s
productivity, profitability, and competitive advantage. Besides, a large portion
of business analysts indicates that the formulation of challenging budgets
within an organization help in boosting the employees’ morale in working
towards the achievement of the organization’s strategic plan (Daniels 2016,
p.34). Moreover, organizations such as DB SCHENKER use budgets as reward
metrics. The management at the German Logistics company DB SCHENKER
formulates the employees’ rewards system in relation to the accomplishment of
the organization’s budget. Therefore, the budget control acts as a crucial factor
that helps in the effective integration of activities within the logistic firm.
Besides, the budget control strategy facilitates the motivation of the employees
in attaining the organization’s objectives within a particular fiscal year to reap
high rewards (Dressler 2014, p.87).
However, various scholars and financial experts critique the effectiveness of
the traditional budget control approach in enhancing the integration of control
mechanisms within an organization. The scholars highly criticize the
incremental approach managers apply in the traditional budget control strategy.
Ideally, the incremental approach revolves around the up and down adjustment
the budget of the subsequent year from the previous fiscal year (Harvard
Business Review Press 2013, p.56). Financial experts postulate that the
incremental approach encourages the managers in modern firms to spend the
entire budgetary allocation of the previous year. In most instances, the
incremental approach leads to the embezzlement and the wastage of an
organization’s resources in buying unnecessary items. For instance, a manager

8
case in a government office in Hong Kong, Wong Ming, postulates how the
incremental approach can lead to the wastage of organization resources (Hitt,
Ireland & Hoskisson 2014, p.67). For instance, Wong used the surplus
budgetary allocation to issue free travel allowances to the government office’s
employees. Wong also used the surplus expenditure to make impulse
procurement of unnecessary office equipment. Wong’s case postulates the
wastage and inefficiency that incremental budgeting encourages among
managers in the contemporary society. Besides, the traditional control
approach lays much emphasis on achieving the integration of the control
mechanism within an organization through the budget implementation
(Houghton 2009, p.90). However, financial experts indicate that inadequate
integration of an organization’s systems through the budget can be a result of
behavior problems among the employees. For instance, the management team
in organization such as DB SCHENKER should facilitate the motivation of the
employees in working towards the successful implementation of the set budget.
Besides, logistics firms such as DB SCHENKER should formulate measurable
and achievable budgets that facilitate the inculcation of high motivation among
the employees. Ideally, high motivation among the employees enhances the
development of harmony in working towards the achievement of an
organization strategic plan (In Caprio, In Arner, In Beck, In Calomiris, In Neal
& In Véron 2013, p.56). Therefore, managers in logistic firms such as DB
SCHENEKER should understand that budget control is among the significant
components that enhance the integration of various systems within an
organization. Consequently, the managers should also analyze the

9
psychological and behavior implications of a particular budget among the
employees. For instance, a measurable and realistic budget enables the
employees to work harmoniously towards the achievement of the set
organization goals. Subsequently, a budget that lacks a clear scope facilitates
the decline of the employees’ morale leading to a massive downfall in a firm’s
productivity, profitability and competitive advantage (Nelson, Nelson, &
Public Library Association 2012).
Participative Budgetary Control
The participative control revolves around the coordination of an organization’s
managers and employees in formulating a budget. The managers involve the
employees in determining and allocating the available resources towards the
attainment of diverse organizational objectives. Financial experts postulate that
the participative budget control is among the effective strategies that enhance
the integration of the relevant control mechanisms within an organization (In
Caprio, In Arner, In Beck, In Calomiris, In Neal & In Véron 2013, p.5). The
involvement of the employees in the formulation of the budget inculcates high
morale in working towards the achievements of the set objectives. Besides, the
involvement of the employees leads to the maximum utilization a company’s
resources in fulfilling the set organizational goals. Besides, the involvement of
the managers in the formulation of the budget boosts their ego and morale
towards coordination and organization the relevant systems within an
organization in achieving the set organizational goals. Therefore, logistic firms
such as DB SCHENKER should focus on involving the managers and
employees in the formulation of the budget for each fiscal year. The

10
involvement of the relevant stakeholders in the formulation of the budget for
the logistics firm will enhance the firm’s performance, productivity,
profitability, and competitive advantage (Reeves. Haanaes & Sinha 2015,
p.89).
Progressive Budgetary Strategies
However, scholars and researchers have formulated progressive budget
strategies to address the criticisms against the traditional budgetary methods.
The progressive budgetary strategies have helped to improve the integration of
the control systems within an organization (In Caprio, In Arner, In Beck, In
Calomiris, In Neal & In Véron 2013, p.89). Besides, financial experts postulate
that the progressive approaches have enhanced the effectiveness of budgets as
important tools that enhance the success of modern organizations such as DB
SCHENKER. The progressive budgetary strategies include Activity based and
zero-based budgeting. Besides, the progressive budgetary strategies also
include the balanced scorecard and beyond budgeting model.
Activity Based Budgeting
Modern scholars and financial experts also refer to the ABB strategy as the
Activity Cost Management. The ABB revolves around an activity framework
that uses the available financial data on cost drivers in the formulation of a
budget (In Caprio, In Arner, In Beck, In Calomiris, In Neal & In Véron 2013,
p.56). The ABB differs from the traditional budgetary approach in various
ways. For instance, the ABB focuses on the activities within an organization
that facilitate the achievement of various organizational objectives. Besides,
the ABB postulates that there exist a number of cost drivers unlike the

11
traditional approach where managers believe that the volume of the end
product is the single cost driver within an organization. According to (In
Caprio, In Arner, In Beck, In Calomiris, In Neal & In Véron 2013, p.9)
managers who use the ABB help in integrating the planning process of the firm
with other activities leading to the achievement of the firm’s strategic plan,
profitability and competitive advantage. Besides, the ABB strategy enables
managers in logistic firms such as DB SCHENKER to enhance the effective
allocation and utilization of the available resources.
However, financial experts claim that the ABB system is costly and difficult to
implement. McCullough (2011, p.9) points out that ABB strategy is often
misinterpreted during the decision-making process. For instance, a slight
reduction in a firm’s production costs may mislead the managers to think that
the firm is maximally utilizing the available resources towards the achievement
of the set organizational goals. Besides, the ABB system requires numerous
calculations in order to determine the pricing of an organization’s products and
services (Tulsian, Tulsian & Pandey 2008, p.87).
Zero Based Budgeting
The ZBB strategy aims at providing an efficient and integrative mechanism
within an organization such as ZB SCHENKER through the reduction of the
limitations that result from the adoption of the traditional budget approach.
Besides, the ZBB aims at addressing the drawbacks of the incremental
approach to facilitate the maximum utilization of an organization’s resources
towards the set vote heads (Levenson 2015, p.7). Ideally, the ZBB gained
significant prominence when U.S President Carter advised all the state

12
governments to adopt the budgetary approach in order to reduce the
misappropriation of funds. In most instances, the ZBB approach revolves
around evaluating a company financial performance from a zero base. The
evaluation of the company’s financial performance from a zero base enables
the firm to respond to the emerging issues and trends in the highly competitive
international trade arena. In most instances, vote heads that facilitate the
wastage of the available resources are removed from the budgetary allocations
(Wheelen & Hunger 2008, p.9). Besides, the strategy enables logistics firms
such as DB SCHENKER to maintain the efficiency of the diverse cost drives.
However, critiques argue that the strategy is not suitable for large firms. For
instance, the process of determining and justifying each vote head in a budget
is expensive and time-consuming. However, the ZBB strategy is among the
most effective methods of integrating the control mechanism within an
organization leading to a firm’s efficiency and productivity (In Caprio, In
Arner, In Beck, In Calomiris, In Neal & In Véron 2013, p.89).
Balanced Scorecard
The (BSC) clearly stipulates a formidable framework for organizations in the
contemporary society to translate their strategies into achievable objectives and
effective performance evaluation metrics. The constructs of the BSC postulate
that the budgeting process positively correlates with a firm’s short-term and
long-term goals. Therefore, the BSC strategy forms a crucial reference point
for the integration of an organization’s control mechanism in working towards
the achievement of the set objectives. The approach also postulates that
organization should lay equal emphasis on the non-monetary and monetary

13
measures. The non-financial measures include the requirements of the
consumers and the internal business processes (Johnson 2013, p.9). Besides,
the non-financial measures include the formulation of methods to enhance a
business organization’s long-term sustainability. The Balanced Scorecard
indicates that firms in the contemporary society should continuously formulate
policies that enable them to remain relevant and responsive to the dynamic and
highly evolving changes in the consumers’ tastes and preferences. DB
SCHENKER is among the organizations that make effective use of the
balanced scorecard to enhance the integration of diverse mechanisms within
the organization. For instance, the logistic firm’s management uses the
balanced scorecard to direct, inspire, and motivate the employees in working
towards the attainment of the company’s goals and objectives. The logistics
company CEO uses the perspectives in the scorecard as a crucial metric of
evaluating the managers and the employees’ performance (In Caprio, In Arner,
In Beck, In Calomiris, In Neal & In Véron 2013, p.89). The feedback enables
the CEO to integrate the relevant systems within the logistic company to
enhance the firm’s competitive edge, productivity, and profitability in the
intricate international trade arena.
However, critiques indicate that the effective use of a balanced scorecard
depends on other budget strategies. Besides, the lack of integration between a
company’s management and employees may lead to the failure of the balanced
scorecard (La 2011, p.9). Consequently, the formulation of an effective
balanced scorecard is expensive and time-consuming. However, the effective
use of the balanced scorecard facilitates the effective integration of the relevant

14
systems in working towards the attainment of various set objectives (In Caprio,
In Arner, In Beck, In Calomiris, In Neal & In Véron 2013, p.89).
Beyond Budgeting
The Beyond Budgeting is a radical model that stipulates that companies should
abandon the traditional budgeting systems. The Beyond Budgeting strategy
lays the foundation of its argument on twelve dynamic principles (In Caprio, In
Arner, In Beck, In Calomiris, In Neal & In Véron 2013, p.89). The principles
indicate that managers should adopt an empowered control system that
facilitates the effective integration of the control systems within an
organization. Financial experts indicate that logistics companies such as DB
SCHENKER should adopt the Beyond Budgeting strategy in order to respond
to the emerging issues and trends in the international trade arena. Besides, the
Beyond Budgeting helps in the development of the employees’ morale in
working towards the achievement of the set organizational goals and
objectives. Financial experts also indicate that some companies such as the
Swedish bank Svenka Handelsbanken have stopped using the traditional
budgets and adopted the beyond budgeting as a key tool of enhancing the
integration of systems in working towards the achievement of the banks
objectives (In Caprio, In Arner, In Beck, In Calomiris, In Neal & In Véron
2013, p.56). The financial reviews indicate that the bank is currently outdoing
its competitors who are still using the traditional budgets as a control tool for
coordination and integration various organizational systems. For instance, the
Swedish bank ranked first in stockholder’s equity returns and revenues from
the financial year of 2016 (In Caprio, In Arner, In Beck, In Calomiris, In Neal

15
& In Véron 2013, p.89). Besides, the bank managers indicate that the adoption
of the beyond budgeting inculcates a positive working morale among the
employees leading to the financial firm’s profitability, expansion, productivity,
and competitive edge. However, critiques still argue that it is difficult operating
without a clear budget plan. For instance, the lack of a budget would hinder the
effective record of sales and procurement plans. Besides, businesses that act
without a budget appear unfavorable to creditors hence hindering their quest
for expansion (In Ray & In Chakraborty 2014, p.76).
Conclusion
Empirical evidence affirms that the use of budgetary control strategies
enhances a firm’s competitive advantage in the highly competitive
international trade arena. For instance, the budget provides a crucial metric of
evaluating a firm’s financial performance in relation to the budget allocations
on various vote heads. Besides, a budget enables an organization’s managers to
organize and coordinate the activities within an organization in a systematic
and orderly manner. Besides, a participative approach in the formulation of a
budget helps in developing the employees’ morale to work towards the
achievement of the organizational objectives. Therefore, a budget is a crucial
component that enhances the success of organizations in the contemporary
society. The budget also helps in analyzing the performance of a particular
organization. Besides, budgetary controls are effective strategies of facilitating
the integration of the control mechanisms within an organization.

16
List of References
Barksdale, S.& Lund, T.(2016).“10 steps to successful strategic planning”
Alexandria, Va: ASTD Press. [ access on July 28th, 2016 ]
Babunakis, M.(2011).”Budgets: An analytical and procedural handbook for
government and non-profit organizations”. Westport, Conn: Greenwood Press.
Black, K.(2012).“Business statistics: For contemporary decision making”.
Hoboken, NJ: Wiley. [ access on July 28th, 2016 ]
Blue, R. & White, J.(2014). “The new master your money: A step-by-step plan
for gaining and enjoying financial freedom”. Chicago: Moody Publishers,
Cohen, S. Eimicke, W. B. & Heikkila, T. (2013). “The effective public
manager: Achieving success in government organizations”. San Francisco:
Jossey-Bass. [ access on July 28th, 2016 ]
Daniels, L.(2016). “Fiscal decentralization and budget control”. Cheltenham,
UK; Northampton, MA: Edward Elgar Publishing, [ access on July 29th, 2016 ]
Dressler, S.(2014). “Strategy organization and performance management”.
Boca Raton (Fla: Universal Publishers). [ access on July 29th, 2016 ]
Harvard Business Review Press. (2013). “HBR's guide to project management.
Boston”. : Harvard Business Review Press, 2013. [ access on July 29th, 2016 ]
Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. (2014). “Strategic management:
Competitiveness and globalization; [concepts and classes]”. Mason, Ohio
[u.a.: Thomson South-Western. [ access on July 29th, 2016 ]
Houghton, G. (2009). “Creating a budget”. New York: PowerKids Press.
[ access on July 29th, 2016 ]

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In Caprio, G., In Arner, D. W., In Beck, T., In Calomiris, C. W., In Neal, L., &
In Véron, N.(2013). “Handbook of key global financial markets, institutions
and infrastructure”. Hershey: Business Science Reference
In Ray, N., & In Chakraborty, K. (2014). “Handbook of research on strategic
business infrastructure development and contemporary issues in finance”.
Boston : Elsevier [ access on July 30th, 2016 ]
Johnson, J. (2013). “Getting to grips with budgets”. Manchester: Financial
Times Management. [ access on July 30th, 2016 ]
La, P. D. (2011). “The nonprofit strategy revolution”. St. Paul, Minn:
Fieldstone Alliance. [ access on July 30th, 2016 ]
Levenson, A. R. (2015). “Strategic analytics: Advancing strategy execution
and organizational effectiveness”. Oakland, CA : Berrett-Koehler Publishers,
McCullough, B. R. (2011). “Bonnie's household budget book: The essential
guide for getting control of your money”. New York: St. Martin's Griffin.
[ access on Aug 1st, 2016 ]
Nelson, S. S., Nelson, S. S., & Public Library Association. (2012). “Strategic
planning for results". Chicago : American Library Association.
[ access on Aug 1st, 2016 ]
Reeves, M., Haanaes, K., & Sinha, J. K. (2015). “Your strategy needs a
strategy: How to choose and execute the right approach”.Boston,
Massachusetts:Harvard Business School. [ access on Aug 2nd, 2016 ]

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Tulsian, P. C., Tulsian, P. C., & Pandey, V. (2008). “Business organisation and
management”. Pearson Education. [ access on Aug 4th, 2016 ]
Wheelen, T. & Hunger, J. (2008). “Concepts in strategic management and
business policy,eleventh edition”.[University of Phoenix Custom Edition e-
text]. Upper Saddle River, NJ: Pearson Education.
[ access on Aug 4th, 2016 ]

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