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However, the effects of the winter improved sales figures for home improvement companies that sell shovels, rock salt, and snow-blowers. A retail company must anticipate sales orders and profits based on data from past years, but the organization may be faced with a warm winter after stocking the shelves with mittens or be faced with unexpectedly high sales figures if it unexpectedly manufactures the 'hot toy' of the upcoming Christmas season. Flexible budgeting takes into consideration such circumstances.
Ethics
While flexible budgeting can offer a more realistic portrayal of how an organization functions, it can also be problematic in the manner it offers opportunities for 'creative accounting.' The organization must make a good-faith effort to present an accurate portrait of market circumstances for all stakeholders, and not use the option of flexibility to make a more optimistic portrayal of...
This is why an ethical code is essential for all organizations and within the accounting profession in general.
Conclusion
Despite the additional headaches of the process, flexible budgeting can save a company time and money because it allows the organization to be more responsive to an increasingly competitive market environment. Alterations in planning from year to year, even small ones, can save the company money in the long-term and mean the difference between a business that thrives and grows and one that fails.
References
Flexible budget. (2010). Accounting Coach. eHow. Retrieved June 28, 2010 at http://blog.accountingcoach.com/flexible-budget/
Hewitt, John. (2010). About flex budgeting in accounting. eHow. Retrieved June 28, 2010 at http://www.ehow.com/about_4602275_flex-budgeting-accounting.html#ixzz0s6Yf7wVA
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