Management and Accounting Theory

Management and Accounting Theory
Budget in many senses is interpreted as a quantitative statement. This can be seen among others in the definition of the budget put forward by George Foster and Hongren in his book Cost Accounting, (2017: 146), as follows budget is a quantitative statement about what plans or actions and tools and tools for coordination and implementation.
In this case the budget is formulated for the organization as a whole or sub-units, where the budget is a procedure called the budgeting system.
Planning with a budget by identifying with management regarding (According from Klan Education):
1. The amount of profit determined to be achieved by the company
2. Sources of funds needed in recording profits
Cost control, which compares the actual results with the budget that will help management to evaluate the performance of individuals, departmental divisions or the overall organization of the company.
Communication and coordination, that is, the budget is able to communicate and coordinate all levels within the department, because the budget is an integral part of these goals, department divisions and company organizations.
Furthermore, the definition of a budget that contains the same understanding carried out by Ray H. Garisson (1995: 297), states that a budget is a detailed plan outlining acquaintance and use of financial and other resources some gives time period.
In addition to including forecasts or planning regarding revenue and expenditure receipts and costs to simplify the planning process itself, all operational activities of the company that compiles the budget must be converted into a unified value of money.
This is so that these activities can be measured in the same unit.
Understanding the budget that contains the understanding as mentioned above, was found by, Teguh Pajo Mulyono (2000: 287) which states that the budget is a plan of operation expessed in monetary terms. It consequently includes a forecast a forecast of income and expenditure and receipts and costs for a specific period.
Every company is primarily a company with a large organization, will not be separated from control activities. Control (control) can provide a decision that the resources obtained have been used effectively and efficiently in accordance with the objectives to be achieved. For this purpose, budgeting is one of the techniques available.
Budgeting is a detailed plan of activities determined as an implementation guideline and as a basis for evaluating the work performance of managers.
If we look at the definition of the proposed budget, the time dimension is also included as a budget constraint, because it can cause all total costs to be variable or all costs cannot be distinguished between controllable costs and uncontrollable costs ).
In companies that have been so stable, it is normal to make predictions for several years, or in other words in the long run. But for companies that face a lot of uncertainty, it is only possible to make forecasting short periods of time, so the time period that is sufficient by the budget, also depends on the nature of a company itself, but the budget arranged according to the monthly timeframe is the best because the activity plan appears.
Besides that, the monthly budget strongly supports the implementation of controls that occur immediately can be known.
The budgeting process has several objectives:
1. The budget presents financial planning that allows the company to be able to coordinate all its activities. By using the budget managers can project results and adjust the strategies needed before the company’s operations can begin, so as to avoid mistakes that harm the company.
2. The budgeting process encourages managers to retest their achievements and allows them to change and correct operational methods that lack outdated efficiency.
3. The budget allows managers to implement the planning and supervision functions.
Based on the above understanding Calvin Engler (2019: 305), argues that, A budget is a financial plan that sets forth resources to carry out financial activities and meet financial goals for a future period time.
In order for the budget to function as a tool for coordination and contracting, each manager must have a clear year of authority and responsibility. This is so that overlapping does not occur which may cause complexity and confusion regarding the respective tasks that have been charged. Likewise, the budget can function as a motivational tool if every manager and section head are included in the preparation of the budget plan. This means that there is a need for delegation of authority to each manager, for this reason, compiling the operating budget.
Thus each manager will feel responsible so that participation arises to achieve the targets set in the budget.
From the various meanings expressed all show the same nature, namely that the budget is a written plan of activities regarding what is done by an organization which includes forecasting revenues and expenses receipts and expenses during a certain period that is converted in a unitary value or monetary.
According to D. Hartanto in his book Accounting for Businessmen (2003: 131) there are 4 (four) types of budget as follows:
1. Appropriation budget
2. Performance budget
3. Fixed budget
4. Flexible budget.
ad 1. Appropriation budget is to provide limits on expenditures that can be done. The limit is the maximun amount that can be issued for one particular thing. In this kind of budget it is generally used in government. But for companies for certain things is very limited desire like, just for research and advertising alone.
ad 2. Performance budget is a budget based on the function of activities and projects. In this budget attention is paid to the valuation or costs incurred for a particular thing. Thus the efficiency and effectiveness of operations can be known. In the company budget that is commonly used is the formance budget.
ad 3. Fixed budget is a budget made for one level of activity during a certain period of time, where the level of this activity can be expressed in terms of the percentage and capacity of the number of products produced during a certain period of time on the Foxed budget only if it is known with certainty that the real volume that will be achieved not much different from the originally planned volume.
ad 4. Flexible budget is that for each level of activity there are norms or provisions between the costs required.
The norm is a benchmark of expenditure that is entirely carried out at each level of the activity.
In preparing a company’s budget, it is necessary to have several conditions, such as that carried out by Gunawan Adisaputra and Marwan Asri in his book Corporate Budget (2000: 7) stating that in preparing a company’s budget, it is necessary to require several conditions that the budget must be realistic, flexible and continuous.