An Application of Activity‐Based‐Budgeting in Shared Service Departments and Its Perceived Benefits and Barriers under Low‐IT Environment Conditions

The implementation of modern managerial accounting systems has its benefits, but needs certain facilities to be made available. Activity Based Budgeting (ABB) is a system that could be useful in managing shared service departments by providing deeper insights to their capacity utilization and resource allocation than a traditional budgeting system. This paper studies the possibilities, benefits, and difficulties that may face the implementation of an ABB system in an environment that lacks sophisticated IT based accounting information system. This study used an application experiment to implement the ABB in two shared service departments (Accounts and Transportation) in two different companies. In addition, a simple survey of the two companies’ employees was adopted to acquire their reaction and feedback about the proposed budgeting system. Results show that benefits can be gained and difficulties resulting from lack of IT support can be overcome but with considerable human effort. When labor force is not a constraint, this provides the solution. However, measuring human labor’s capacity is a factor that needs more consideration from accounting researchers.