The controlling function confirms or not the compliance or noncompliance of the results with the predetermined objectives, highlighting occurred deviations and the causes that produced them. Furthermore, the budget sets the prices for internal services and is the basis for performance evaluation.

In some cases, it can give a manager the authority to dispose of certain funds, but being limited by the budget. Budgets communicate to the upper and middle management which are the top-management’s expectations, and also communicate the management’s priorities to the lower levels.

Budgets are excellent communication tools, pointing out the operational and financial objectives of the period. Also, the budget can prevent imminent issues. Why? Because it forces managers to foresee, to study trends and develop necessary strategies. And yet, any large company prepares budgets. Many managers, especially those familiar with accounting, criticize budgets saying that this implies additional consumption of effort and waste of time, claiming that there are too many estimates in the budget and that these estimations are unreliable, for it to be useful. This paper is a literature review on management accounting and it examines the necessity and the role of budgeting and budget controlling in the management process.Budgets are necessary to highlight the financial implications of plans, to define the resources required to achieve these plans and to provide a means of measuring, viewing and controlling the obtained results, in comparison with the plans.

Budgetary planning