The Role Of Participation In Budgeting

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  ¡®estimation  of all income and expenses for an accounting period or financial forecasting, planning, and controlling¡¯. (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¡¯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 ...
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