Managing Finance Essay Example | Topics and Well Written Essays - 1000 words - 1

Managing Finance - Essay Example Budgetary control and costing processes have been combined to compute variance between budgetary standards and the actual performances. The basic idea is to make adjustments, rectifications, and additions to budgetary control process to attain the set standards and objectivities. â€Å"Variance analysis fulfills this role within organizations. In combined standard costing and budgetary control system, variances can be calculated on either an absorption costing basis or marginal costing basis.†(Michael Broadbent and others, page 151) . Variance analysis is the most important feature of budgetary control, and it is this process that establishes the creditability of the budgeting system. Technically speaking, budgeting plays the role of internal controls that have been made compulsory to install and evaluate under statutes like Sarbanes Oxley Act in the US in the aftermath of accounting scandals like Enron. Therefore, budgetary controls are not only strategically important for an organization, but also socially and morally important for safeguarding the interests of stakeholders.Budgets motivate the organizational system to achieve the laid down objectives. Budgetary control is a constructive exercise to create motivation in the organization. In fact â€Å"the motivation of a budgetee (a manager working in a budget system) is split into two components: the relevance of budget standards to the budgeter's task, and the attitude of the budgetee towards the system.†(G.H.Hofstede, page 3)