Accounting Synoptic Essay Example | Topics and Well Written Essays - 3000 words

Accounting Synoptic - Essay Example The criticisms of traditional budgets as identified are- Traditional budgets are often contradictory and rarely strategically focused. Traditional budgets are costly and time consuming. Traditional Budgets lack flexibility and responsiveness. As compared to the time taken to prepare a traditional budget, it adds little value. Traditional Budget concentrates on cost reduction and not on value creation. Traditional Budget often acts as a barrier to change. Traditional Budgets seem to strengthen vertical control and command. Traditional Budgets do not reflect the emerging network structures that organizations are adopting. Traditional Budgets encourage perverse behaviors and gamming. Traditional Budgets are based on guesswork and assumptions that are unsupported. Traditional Budgets make customers feel undervalued. Traditional Budgets are updated and developed too infrequently, usually annually. Traditional Budgets bring about departmental barriers inspite of encouraging knowledge shari ng. The criticisms laid by Beyond Budgeting Round Table are more applicable to non-profit organizations than profit organizations. It is said so because the objectives of non-profit organizations are not specific and often link to multiple activities which necessitates trade off. Non-profit organizations are dominated by professionals and thus are less accessible to control systems and measures. Non-profit organizations incur a huge amount of discretionary fixed cost and the relationship between outputs and inputs are difficult to specify which raises difficulty in ascertaining profit. Non-profit organizations with their rigid rules and guidelines face problems in adapting to the changing policies, regulations and measures.... The criticisms laid by Beyond Budgeting Round Table are more applicable to non-profit organizations than profit organizations. It is said so because the objectives of non-profit organizations are not specific and often link to multiple activities which necessitates trade off. Non-profit organizations are dominated by professionals and thus are less accessible to control systems and measures. Non-profit organizations incur a huge amount of discretionary fixed cost and the relationship between outputs and inputs are difficult to specify which raises difficulty in ascertaining profit. Non-profit organizations with their rigid rules and guidelines face problems in adapting to the changing policies, regulations and measures. Non-profit organizations use the concepts of traditional budgets to ascertain cost and reduction of cost of activities, but the members are very little concerned to the developments, improvements and benefits which the activities are pursuing or shall pursue. The stri ct governance under which non-profit organizations operate has made it static, inflexible, not responsive to the changing environment, not focused on the formulation of procedural strategic plans, has lead to increase in discretionary fixed cost and lacks vertical control and supervision. Thus the shortcomings of traditional budget have decreased the value of non-profit organization in the current scenario inspite of creation of value, which have in turn lead to decrease in its significance.