Managerial accounting Essay Example | Topics and Well Written Essays - 2500 words

Managerial accounting - Essay Example The reasons that back the statement include the increasing pressure of capital market, rapidly changing business environment and an escalating competitive environment. In the context of that, the below presented paper has discussed the different aspect of traditional budgeting followed with the criticism over the traditional approach of budgeting. With that, the paper has discussed the recent external pressures from the capital market. Activity based budgets are the flexible budgets that are based on the different cost drivers. In activity based budgets, multiple cost drivers are used for the different activities of the business. The activity based budgeting is more precise as compared to the conventional budgeting. The incremental approach towards budgeting initiates with the previous budgeting period which are also term as the actual results. It adds and subtracts the incremental amount to overcome with the inflation and other obvious changes. Zero based budgeting is that approach for budgeting that necessitates each element of cost to be particularly justified, as the activities related with the budget are taken into the considerations for the first time. In zero based budgeting, the allowance for budget is zero without any prior approval (Kaplan Financial Limited, 2012). The traditional budget of an organization designates the amount and quantity of money the management of the company allocated for a predetermined period in order to meet the financial obligations of the company. These includes allocation of funds for the operations of the business, the liabilities and other expenses incurred by the organization. The aim of the budget is to facilitate the organization to spend the revenues and income generated by an organization in accordance with the plan. The traditional budget is based on reviewing the historical performance of the company