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HI5017 Managerial accounting Sample Holmes

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Executive Summary

The primary focus of the paper is to reveal the different aspects of implementation and utilization of the various types of the budgeting techniques. The paper will analyze the review of the literatures put forward by various researchers in order to bring out more detailed facts regarding the use of budgeting techniques. Proper implementation of the budgeting techniques are considered as to be vital for the evaluation of the business processes of the concerned firm. This paper will analyze two different articles in the context of budgeting and will help in facilitating the ways of using this techniques for the execution of the business processes of the concerned firm.  Moreover, it will reflect the differences along with the similarities concerning the budgeting techniques that are found on the two of the selected journals.

Table of Contents

Introduction. 3

Summary of Budgeting. 3

Literature review.. 4

Findings. 10

Similarities besides Differences. 10

4 Precise outcomes. 12

Conclusion. 14

References. 15

Introduction

Budgeting is considered as to be vital for the evaluation of the business procedures for any of the firms concerned. The paper will help in bringing more data concerning the use and adaptation of the budgeting techniques in order to execute the business procedures. On the other hand, there are few of the similarities as well as differences between the two selected journals on budgeting and it will be analyzed throughout the context of this paper.  The proper adaptation of the budgeting techniques helps in managing the desired effectiveness throughout the financial statements and financial data of the concerned organization.

Summary of Budgeting

Budgeting is the method of planning a strategy to invest the money and investment strategy is known as a budget. Planning an investment strategy permits the individuals to decide in advance, whether the person would have sufficient funds to do the desired works the person need to do or will like to do (Ahrens and Ferry, 2015). If the person does not have sufficient money to do everything he or she wanted to do, then the person could utilize this investment strategy to plan their investment and concentrates on cash to do those works that are more vital for the person.  The methods are just balancing the expenditures with the income. If the person does not adjust and spend more than the rent, then the person would face issues. Most of the peoples do not understand that they are spending more money than their income and gradually sinks into debt.

Zero-based budgeting (ZBB) was first introduced in the 1970’s by Pete Pyhrr, and in this process, everything which needs to be budgeted is required to be sanctioned (Almazan et al., 2017). As this method needs approval for budgeting, it means that the budgets are introduced from the beginning that is from zero, with a new decision on each and everything created each year. ZBB is a process of budgeting where all expenditures are justified for each year. This process begins from zero base and all the operation in the companies is examined for its requirements and expenses. The budgets are then made for the coming year, irrespective of higher or lower budgets than the last year. This budgeting procedure permits the organizations to implement more top strategies in the systems by trying them to particular operational areas of the companies.

Participatory budgeting (PB) is the method of independent voting and decisions, where the general public decides the distribution of municipal or public budget.  It was first introduced in the 1980’s by the Worker’s Party of Brazil, with the belief that voting success is not the end but the beginning of participatory forms of independence (Baiocchi and Ganuza, 2014). The first full-fledged PB was applied in the year 1989, in Porto Alegre in Brazil, a busy area of industrial, financial and service sectors, with a population of about 1.5 million at that time.

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Literature review

Unilever is a Dutch-British based multinational organization with its head offices in Unilever House, London, UK and Rotterdam, Netherlands. The products of the company consist of beverages, food, personal care goods, and cleaning products. According to Cabannes (2015), it is the largest organization of consumer products in the world regarding its profits in the year 2012 and seventh most valuable firm in Europe. This firm is one of the oldest multinational firms with its goods available in almost 200 nations. Unilever was established by merging two companies, Dutch-based margarine manufacturer, Margarine Unie and British soap company Lever Brothers, on 2nd September in the year 1929. The firm had increasingly differentiated from the manufacturer of oils and fats and extended its operation all over the world, during the second half of 20th century. The company had around 400 products with a profit of 53 billion euros in the year 2016 and 54 billion euros along with 15 brands of approximately 1 billion euros in the year 2017. The total number of 170,000 staffs works for Unilever.

Unilever is a double-listed organization including Unilever PLC in London and Unilever N.V in Rotterdam with its global head office in Rotterdam. The two organizations act as one company with the joint Board of Directors.  The organization is divided into four sections – Foods, Beverages, Home Care and Personal Care. Unilever has research and improvement services in the UK, Netherlands, India, China, and the USA. Unilever PLC is registered on the London Stock Exchange and the FTSE 100 Index. The firm is also listed on the Euro Stoxx 50 stock market index. In the year 2015, under the current CEO of the company, Paul Polman, Unilever has begun, and so the food products are facing slow development.

The consumer products company Unilever had adopted a zero-based budgeting (ZBB) approach. The British-Dutch organization plans to expand its utilization of ZBB to decrease its marketing investments and logistics departments. In ZBB, the finance managers make budgets of each year as if they beginning from scratch instead of the existing process of adjusting the investments of the last year. This method forces them to rationalize the costs and examine the profits every 12 months. This process has been supported by companies like 3G Capital and Kraft Heinz. As per Ebdon and Franklin (2015), Unilever is planning to save almost $7billion every year by the using the age-old financial technique that is again coming into use. The company utilizes a budgeting process introduced in the 1970’s to decrease the investment. At present, the advanced technology, more information and artificial-intelligence methods are helping to improve the technique, as it is allowing the finance managers to observe the investment more smoothly.

In the year 2016, Unilever had attained the 5% sales development and overall growth of 4.5%, but it was still preparing to utilize ZBB on marketers to get more marketing competence. The CEO Paul Polman had said that the company would create more changes in products and marketing competence with the help of the ZBB.  The firm had introduced ZBB in Thailand in the year 2015, decreasing the total investment in all the sections by almost 5% as a sales share. In 2016, the marketing investment of the company had increased by about 0.3% from 2016 to 16% of sales or almost $8.8% billion.  The total marketing expenses had risen nearly 15% from 2015.  In reducing the costs, Unilever will utilize new procedures to decrease the costs of internal marketing and other recruitments, better joining the expenditures of the staffs with the revenue generation of Unilever. The budgeting and employment had jointly saved Unilever, with more than $60 billion in sales and more than $1 billion yearly.

The new process of reducing the marketing employees was introduced in the year 2013, and an attempt to decrease the agency charges and other creative expenditures had been cut the expenses to nearly 25% of the company’s marketing investment in 2014 from more than almost 35% in the year 2011. The company had continued to extend their care sales, specifically the $500 million business received by the company in 2015, which had helped them to improve their business. The finance managers of Unilever had observed that the implementation of budgeting had brought success to the company.

Another study was based on the Inter-American Development Bank (IDB), the most significant financial source in Latin America and the Caribbean areas. It was founded in 1959 with the aim of developing the financial growth, social improvement, and regional development through government and government organizations consisting of State organizations also. IDB has four official languages, and they are English, Portuguese, Spanish and French. The concept of creating an institution for Latin America was first recommended at the first Pan-American Conference in the year 1890 for developing an inter-American structure. The bank came into existence by the initiative of former Brazilian President Juescelino Kubitshek.  The Organization of American States formed the Article of Agreement and subsequently, the bank was established on 8th April in the year 1959. The bank has its head offices in 1300 New York Avenue, NW Washington, D.C. in the USA. The bank has 48 nations as its investors and members and 26 borrowing nations. The total number of 2000 staffs works in the bank. As stated by Gonçalves (2014), the bank gives loans to the governments of their borrowing nations at average interest rates and has favored creditor position, which means that the borrowing nations would repay the loans to the bank before repaying to other lenders like the other banks. The developing nations which borrow from the bank are the legal stockholders and thus, manages the most of the decisions of IDB. The voting right of each of its members is considered by the stockholding. The USA has almost 30% shares, and the Latin American, and the Caribbean nations have 50% shares in the bank along with the 20% veto powers of European nations.

Participatory budgeting (PB) is adopted by IDB that is developing the curiosity of the municipalities of the Latin and the Caribbean nations. The public programs of improvement for IDB’s financing consider the utilization of PB to distribute the resources. The government executives and employees of IDB are given the data related to benefits and issues of such methods. The primary aim of PB is to develop the active and independent allocation of resources and engagement of citizens in the strategies and controlling their societies. Through PB, the citizens could recognize, discuss and values the public investment ventures, and provides them the power to take the right decisions related to the investment. Executives and the leaders consider the influence of PB in promoting a better knowledge about the role and operations of the government. It involves the knowledge about the budgeting and the effects of expenses, specifically salaries and funds for investment ventures.

The participants of PB in IDB are the representatives of the general public, however, in numerous ways, they involve the leadership that forms popular view drives the joint program and assembles the societies. Thus, the significant practical aspect of the PB is encouraging the framework of partnership rather than the convenient democratic approach. The bank is functioning under the restrictions of the very tight budget. In the opinion of Hayward et al., (2017), the money which the bank assigns to capital investment hardly exceeds 20% of the budget. The PB consistently involves a comparatively huge share for programs and ventures, fulfilling the necessities of underdeveloped regions of Latin America. But, unfortunately, these areas are unfortunately where most of the population of Brazil still resides. The developed regions like the towns and cities have less than 25% of the population. So, it is a big challenge to solve the native development without solving their necessities.

  Article 1 Article 2
Title Public sector budgeting: a European review of accounting and public management journals” Participatory budgeting at a community level in Porto Alegre: a Bourdieusian interpretation
Author Anessi-Pessina, E., Barbera, C., Sicilia, M. & Steccolini, I. 2016, Baiocchi, G. and Ganuza, E., 2014
Study Background The determination of the learning of “Public sector budgeting: a European review of accounting and public management journals” is to analyze the methods of budgeting in public companies of Europe. From the point of the survey, budgeting is a very diverse and potential subject to research and improve.  The article had examined the current European literature on public budgeting and review its role and structures in accounting studies (Anessi-Pessina et al., 2016). It had also investigated the public supervision and contribution of accounting theories in budgeting and proposal separately and jointly influence the public companies in the future. The tenacity of the learning of “Participatory budgeting at a community level in Porto Alegre: a Bourdieusian interpretation” is to determine the methods of participatory budgeting in strengthening the factors of politics in Porto Alegre and change the traditional ways in this field.  It was followed by possibility of accountability in the elections of the election of the councilors, bring changes in the observation of the councilors and in the society but with a gap with the normal participants. The survey had been done by the methods of participatory budgeting in Porto Alegre of Brazil (Luis Emilio & Célérier, 2015).
Research Questions The research question is based on “How the implementation of budgeting does improves the performance of the European public companies?” The research question is based on “How do methods of participatory budgeting could be implemented in the Brazilian firm? Another question is grounded on “What are the issues that could arise while implementing the budgeting in the firm?”
Research Methodology The author had collected and evaluated all the documents of budgeting of the public companies in the context Europe. All these documents were published in every issues of almost 15 articles of accounting and management from the year 1980. The writers had researched the possibility of accountability performances through the Bourdieusian view. The survey had been done by a two month social and scientific research of the methods of participatory budgeting in Porto Alegre of Brazil. The research involved the observations of the performances of accountability and budgeting, carried out 18 interviews with the councilors and examined the research information collected from the participants of budgeting.   
Implications (if any) The study had presented that budgeting had played an important role in the management and accounting survey of the European organizations. Budgeting had connected various professions but had ignored the importance of the present European context. These connections might offer vital opportunities in future. The study has supported the theory of Shenkin and Coulson by determining that accountability when connected with democracy, could bring massive changes in the society. By examining the possibilities of accountability, the writers had challenged the assumptions of the critical survey of budgeting, that accounting does not provides similar power and unity, Moreover, they had also  searched for alternative ways of accounting. It would help to reconsider the potentiality of accountability and its implementation in different fields.

Findings

The findings clearly evaluates the fact that budgeting has been evidenced to be convenient for an association merely based on their system of budgeting management. The implementation of the various techniques of budgeting will help in reduction of the number of issues that occurs with the concerned business operations (Ter Bogt et al., 2015). The two of the papers selected, critically reflects the desired importance and the need of using the budgeting techniques as it facilitates the overall effectiveness throughout the business processes of the firm in industrial along with the financial sectors.

Similarities besides Differences

  Article 1 Article 2
  “Public sector budgeting: a European review of accounting and public management journals” “Participatory budgeting at a community level in Porto Alegre: a Bourdieusian interpretation”
Similarities With the application as well as implementation of the budgeting in the administrations, certain similarities have been found by the institute. The European firm Unilever adopts the implementation of Zero-based budgeting (ZBB) as the British-Dutch organization is planning to expand its utilization of ZBB to decrease its marketing investments and logistics departments. ZBB is resolute to be expressively helpful for the business to offer the corporation with precise information concerning the marketing speculation and the costs. ZBB develops the competitive status of the company as the managers can identify the issues and solve it immediately at a rapid speed In the same way, the implementation of Participatory Budgeting (PB) methods in Inter-American Development Bank (IDB) will help the bank to recognize the development of the active and independent allocation of resources and engagement of citizens in the strategies and to control their societies. The processes that could not occur owing to the absence of information can be done with the assistance of application of PB approaches as it collects all the data connected to the bank. This will help the management of the bank to know the real issues of the programs which were not known earlier.
Dissimilarities There are few of the dissimilarities among the administrations grounded on the application of the approaches of budgeting. It is found that the implementation of the budgeting has proved to be more beneficial for the consumer products industry as compared to the financial sector (Uthes and Matzdorf, 2016). The difference is because the methods of budgeting adopted by IDB consistently involves a comparatively massive share for programs and ventures, fulfilling the necessities of underdeveloped regions of Latin America. These areas are, unfortunately, where most of the population of Brazil still resides. Developed regions like the towns and cities have less than 25% of the population. So, it is a big challenge to solve the native development without solving their necessities. Whereas the method of budgeting adopted by Unilever involves the advanced technology, more information, and artificial intelligence methods, which are helping to improve the technique, as it is allowing the finance managers to observe the investment more smoothly. On the other hand, the Dutch-British corporation Unilever is considered as leading corporation of Europe which contain of additional number of employees as equated to IDB, where the number of employees is considerably less. This is the noteworthy dissimilarity among the administrations that put an influence on the application of the budgeting.

4 Precise outcomes

  Article 1 Article 2
Title “Public sector budgeting: a European review of accounting and public management journals” “Participatory budgeting at a community level in Porto Alegre: a Bourdieusian interpretation”
4 specific outcomes of each articles 1. The two studies are based on the utilization as well as the implementations of the budgeting in the organization. It can be observed that from the study of “Public sector budgeting: a European review of accounting and public management journals,” Zero-based budgeting (ZBB) will be beneficial for the Anglo-Dutch company as there are many such industrial sectors established in European nations. 2. For these type of industries, the ZBB approaches are proved to be supportive as delivers the suitable facts to the concerned managers for evolving the situation of the firm. The data is mainly grounded on the publicizing speculation as well as the expenditures of the goods. On the three-monthly base, the goods price may be reviewed with the assistance of ZBB. With the help of the ZBB method, the finance manager of the Anglo-Dutch company could recognize the investments and expenditures by merely viewing the balance sheet of budgeting. With the application of ZBB, the investment managers of the association could rapidly solve the administrative matters hastily. ZBB usually provisions the group in addition to marketing subdivision and the accounting section that is cooperative for the Anglo-Dutch corporation. The whole group must contrivance the ABC method for getting proper success 1. On the other side from the study of “Participatory budgeting at a community level in Porto Alegre: a Bourdieusian interpretation” monetary sectors can be advantageous if implemented methodically deprived of any technical or fiscal issues.  The utilization and implementation of the PB in the Latin American bank, IDB is essential as the primary aim of PB is to develop the active and independent allocation of resources and engagement of citizens in the strategies and to control their societies. 2. Through PB, the citizens could recognize, discuss and values the public investment ventures, and provides them the power to take the right decisions related to the investment. Executives and the leaders consider the influence of PB in promoting a better knowledge about the role and operations of the government (Van der Stede, 2015). It involves the knowledge about the budgeting, and the effects of expenses, specifically salaries and funds for investment ventures. Therefore, the management should occupy all the essential components for the development of the PB in the bank. Additionally it is evaluated over the learning is the inaccessibility of the mandatory resources that substantiate to be a blockade to effectively handle the various decisions.  

Conclusion

The approaches of budgeting are measured to be the dynamic supervision system within the accounting system. Various researchers has reflected the crucial importance and use of budgeting techniques throughout the industrial sectors as well as financial sectors. The study had revealed the application with the effective use of budgeting in various organizations. In this paper, the Unilever had adopted Zero-based budgeting (ZBB), and Inter-American Development Bank (IDB) had implemented the participatory budgeting (PB). Moreover, it can be estimated that the execution of the budgeting is valuable for the investment managers along with the firm as it delivers with all the pertinent facts grounded on expenses.

References  

Ahrens, T. and Ferry, L., 2015. Newcastle City Council and the grassroots: accountability and budgeting under austerity. Accounting, Auditing & Accountability Journal28(6), pp.909-933.

Almazan, A., Chen, Z. and Titman, S., 2017. Firm Investment and Stakeholder Choices: A Top‐Down Theory of Capital Budgeting. The Journal of Finance72(5), pp.2179-2228.

Anessi-Pessina, E., Barbera, C., Sicilia, M. & Steccolini, I. 2016, “Public sector budgeting: a European review of accounting and public management journals,” Accounting, Auditing & Accountability Journal, vol. 29, no. 3, pp. 491-519.

Baiocchi, G. and Ganuza, E., 2014. Participatory budgeting as if emancipation mattered. Politics & Society42(1), pp.29-50.

Cabannes, Y., 2015. The impact of participatory budgeting on essential services: local practices and evidence from the field. Environment and Urbanization27(1), pp.257-284.

Ebdon, C. and Franklin, A.L., 2015. Democracy, public participation, and budgeting: Mutually exclusive or just exhausting?. In Democracy and public administration (pp. 96-118). Routledge.

Gonçalves, S., 2014. The effects of participatory budgeting on public expenditures and infant mortality in Brazil. World Development53, pp.94-110.

Hayward, M., Caldwell, A., Steen, J., Gow, D., and Liesch, P., 2017. Entrepreneurs’ capital budgeting orientations and innovation outputs: Evidence from Australian biotechnology firms. Long Range Planning50(2), pp.121-133.

Luis Emilio, C.B. & Célérier, L. 2015, “Participatory budgeting at a community level in Porto Alegre: a Bourdieusian interpretation”, Accounting, Auditing & Accountability Journal, vol. 28, no. 5, pp. 739-772.

Ter Bogt, H.J., Van Helden, G.J. and Van Der Kolk, B., 2015. Challenging the NPM Ideas. About Performance Management: Selectivity and Differentiation in Outcome‐Oriented Performance Budgeting. Financial Accountability & Management31(3), pp.287-315.

Uthes, S. and Matzdorf, B., 2016. Budgeting for government-financed PES: Does ecosystem service demand equal ecosystem service supply? Ecosystem Services17, pp.255-264.

Van der Stede, W.A., 2015. Budgeting and management control. Wiley Encyclopedia of Management, pp.1-7.

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