What is budgetary slack essay

Document Type:Essay

Subject Area:Accounting

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The paper concludes by summarizing the major section of the research based on information gathered on budgetary slack. Question one Why is a budget important, especially in the general success or failure of a business? A budget is described as a tool that is helpful in effective planning and controlling of financial resources based on the organization’s objectives, priorities, and goals. It offers a guideline for future actions and financial security, especially in this current unsettled economy when applied effectively. However, managers might introduce budgetary slack in an organization with an intention of making numbers to retain their ranks by focusing more on their compensation systems instead of taking the organization performance to the next level. What is a budgetary slack? What are some of the major reasons for the introduction of a budgetary slack? This study aims to critically explore budgetary slack in an attempt to understand what it entails and the reason for its introduction. Further, this research will evaluate the consequences of budgetary slack, especially in relation to organizational factors. The idea of budgetary slack came out of the bargaining process. According to Dunk and Perera (1997), March and Schiff discovered that a company can readily attain its intended sales goals through the application of the slack method. Thus, the slack was created as a result of evidence obtained from sales forecasting included in an organizational budget during its year planning. However, budgetary slack is effective based on the manner in which it is applied and this case it can exist as either intentional or unintentional depending on the needs of an organization (Dunk and Perera, 1997).

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Intentional budgetary are as a result of a manager’s pressure, either due to failure to reach previous expectations of an organization or a fall in income, thus forcing the introduction of a budgetary slack to fill in these gaps. On the other hand, unintentional budgetary slack might occur as a result of insufficient information to reach well-informed decisions. What are some of the major reasons for the introduction of a budgetary slack? Despite the fact the future business management might look good, the truth of the matter remains that the budget might fail to clearly demonstrate an original forecast for implementing major decisions. In most cases, an organization depends heavily on its budget for its growth and development. Thus, budget fulfillment might be considered among the major reasons for the introduction of budget slack.

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It is through power distance that superiors take advantage of budgetary slacks upon realizing that the subordinate cannot express any sign of resistance as they prefer autocratic governance than challenging the perspectives of the superior. Also, superiors influence the creation of a budget through the application of low management involved in suggesting some of the inputs be included in a budget. Thus, the fact that the superiors have the final word on the budget suggested, contributed to the introduction of budgetary slacks through the authority of superiors (Ngo, Doan and Huynh, 2017). Superiors in most cases make most of the final decisions in an organization regardless of attaining a firm's budget expectations. It is thus, through this pressure that a number of managers turn to budgetary slack to help them meet organization budget expectations when they realize the limitation of other possible options.

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How does information asymmetry impact budgetary slack? This organizational factor depends on other factors such as budget emphasis and increased budget participation. Thus, it impacts the introduction of budgetary slack when managers make a decision meant to secure their interest. As a result, employees are caught up in the mix of supporting slack directly due to their degree of participation. Managers might also use the information they have to their advantage to support budgetary slack when they realize that their actions cannot be traced (Stede, 2010). Thus, it is through information asymmetry that managers within an organization become motivated to support budgetary slack since they are aware of the fewer chances of being spotted. Reference Page Alan S. Dunk Hector Perera, (1997), "The incidence of budgetary slack: a field study exploration", Accounting, Auditing & Accountability Journal, Vol.

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Iss 5 pp. Available: https://sci-hub. tw/10. Rohman, A. Participative Budgeting, Budgetary Slack And Job Satisfaction In The Public Sector. The Journal of Applied Research, Vol. Available: https://www. researchgate. pdf Sundari, S. Habbe, A. H. Mediaty, (2016). The Relation among Budgetary Participation and Budgetary Slack with Organizational Commitment and Leadership Style as a Moderating Variable. Available: http://www. virtusinterpress. org/IMG/pdf/cocv12i2c6p5. pdf.

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