Question

Discuss the advantages and disadvantages of creating various budgets. Do you see any ethical issues that may arise in the preparation of the budgets?

Answer 1

Creating various budgets

Advantages:

• After taking into account all the possibilities creating various budgets helps in making decision.
• To do well managers will be more committed and motivated.
• When limited cash available various budgets helps the manager in deciding which asserts are worth investing in.
• By using this we can know company earnings.
• It helps to controll the company over expenditure.
• By creating various budgets managers built and see from a long term perspective. Identify the problems now and plan accordingly.
• One of the advantage is we can know the company financial position.
• It helps to analyze and detecting risks.
• Over the expenditures of te company A control is kept.

Disadvantages:

• To create various budgets lot of time consumed.
• Due to its complexity it might be difficult to understand by all the employees.
• If you want any changes in budges it might be difficult.
• With the overall organisational goal the budget may not be in line.
• The present budget assumptions might be wrong in future since future is not certain.
• From the company strategic goal managers may divert.
• On individual basis it might be difficult to locate different departments expenses.

Do you see any ethical issues that may arise in the preparation of the budgets:

• Yes. In the preparation of budget some ethical issues may araise.
• Companies not interested methods may used by employees to gain more.
• To achieve unrealistic targets or If budget is imposed on employees then employees will demotivate.
• To get more amount allocated to their department it may lead to rivalry among departments.
• budgets like greed or selfishness to earn more and more even by using wrongful methods be it legally or morally, conflict in the interests of the organization with that of its employees.