k.u.p.g.r.c.

jind

Presented by: prachii garg roll no.6

INTRODUCTION
Budgetary control is an important tool for the management to make optimum use of limited business resources and to maximise the profits of business. In order to maximise the profits of business, effective control on cost is must. In budgetary control plans are made in advance for various business activities like purchases, sales and production, etc.

Meaning of Budget
Budget is a financial and quantitative statement, prepared prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objective.

I.C.M.A.LONDON
A budget is an estimate of future needs arranged according to an orderly basis, covering some or all the activity of an enterprise for a definite period of time.

George R. Terry

Features of budget
The main features of budget are as follows:-

1. Budget is prepared for a definite period. 2. Budget is a statement expressed in monetary and quantitative units. 3. Budget is prepared in advance before the defined period of time. 4. Budget is an important tool to control the cost.

Meaning of Budgetary Control

Definition
Budgetary control is the planning in advance of the various functions of a business so that the business as a whole can be controlled.

WHELDON
THE TERM BUDGETARY CONTROL IS APPLIED

TO A SYSTEM OF MANAGEMENT ACCOUNTING CONTROL BY WHICH ALL OPERATIONS AND OUTPUT ARE FORECOST AHEAD AS FAR AS POSSIBLE AND THE ACTUAL RESULTES, WHEN KNOW, ARE COMPARED WITH THE BUDGET ESTIMATES.

W. W. Bigg

DIFFERENCE AMONG BUDGET,BUDGETING AND BUDGETARY CONTROL

Rowland and William have differentiated the two terms as:

1.

Budgets are the individual objectives of a department etc. whereas budgeting may be said the act of building budgets. Budgetary control embraces all and in addition includes the science of planning the budgets to effect an overall management tool for the business planning and control.
Budget is a financial or quantitative statement which is prepared in advance to achieve the definite objectives. Budgeting is a technique for formulating budgets. budgetary control is a system of controlling costs which includes the preparation of budgets .co-coordinating the department and establishing responsibilities and maximum profitability

2.

Objectives of budgetary control

1. 2. 3. 4. 5. 6. 7. 8. To help in policy making. To determine the capital requirement. To control the cost of various departments. To control research and development activities. To eliminate the wastage and increase in profitability. To anticipate capital expenditures in for future. To increase the efficiency of production. To help the management in administrative functions.

PRECAUTIONS IN BUDGETING
FOR THE SUCCESSFUL IMPLEMENTATION OF THE BUDGETARY CONTROL SYSTEM, THE FOLLOWING STEPS SHOULD BE CONSIDERED :-] Objectives and policy of business :The budget is prepared for the achievement of the business objectives. Therefore the objectives of the business should be clear.

1.

2.

Budget period :Budget period refers to the period of time for which the budget is prepared. the budget period depends on the various factors. Budget committee :Budget committee will have the the managers of various departments like production. Marketing ,sales, finance etc. the managers of each department prepare budgets for their own department and submit it to the committee.

3.

4.

Budget centers :It is a part of the organization which is selected for budgetary control such as sales department, purchase department, production department etc. each budget center prepares a separate budget Budget manual :Budget manual is a written document or booklets which covers the following matters: It states the functions of various officials connected with the formulation of budgets Duties, responsibilities of various officials connected with the preparation of budget Objectives and benefits of budgetary control system. Length of various budget periods.

5.

6.

Budget key factor :-

A factor which influences all other budgets is know as key factor or principal factor. There may be a limitation on the quantity of goods a concern may sell. in this case sales will be a key factor and all other budgets will be prepared by keeping in view the amount of goods the concern will be able to sell .the raw material supply may be limited ;so' production, sales and cash budget will be decided according to raw materials budget. In brief ,the key factors are as follows: 1. material 2. labour 3. management 4. plant 5. working capital

7. Organisation for budgetary control :

For the successful preparation of budgets, a proper organisation is a must . there must be cooperation among all the departments. Therefore, keeping in mind the cooperation and coordination, an organisation chart is prepared.

8. Budget officer :The chief executive appoints some person as budget officer. The budget officer work as a coordinator among different departments. he determines the deviations between actual performance and budgeted and takes necessary steps to rectify the deficiencies

Advantages of Budgetary Control

Definite objectives Reduction in cost of production Coordination Maximum profit Reduces uncertainty Determining weaknesses Economy Effective control Optimum use of resources

Limitations of Budgetary Control

To maximise the profit of the business and industry budgeting control is an important managerial technique but the technique of budgetary control has following limitations : Based on estimates :Budgets are based on estimates regarding an event the success of budget depends upon experience and estimates.

Co-operation :The success of the budgetary control system depends upon the co-operation and co-ordination among the various level of the management.

Time Effect :The world is changing everyday like change in price, demand, gov.policies, create problems in achieving the budgetary targets.

 Excessive cost of budgetary system :To apply and implement budgetary control system successfully needs heavy expenditure, which may not be possible small org. Internal Disputes :Each and every departmental head wants more and more financial outlay for their respective departments which becomes a cause of contention among the various departments of the organization.

Kinds of Budgets

According to Functions
Sales budget :- A sales budget is an estimate sales during budget period .it is the most important budget and it is called the backbone of the enterprise. The following factors should be taken into account while preparing a sales budget: Past sales figures and facts Availability of raw materials Plant capacity Competition in the market etc.

2. Production Budget :Production budget is a forecast of production and cost of production for a budget period. A production manager is made responsible for preparing production budget. A production budget is prepared on the basis of sales budget. The following factors should be preparing production budget: 1. plant capacity utilisation 2. key factors 3. quantity of different products 4. opening stock, closing stock

Materials budget :Material Budget is prepared for determining the requirement of raw material for production. This budget depends upon sales and production budget. the materials are purchased as per the requirements of production department.

Labour Budget :- The labour required for

manufacturing the products known as direct labour and the labour which cannot be specified with production is called indirect labour.

 Plant Budget :-

In enterprise where plants are valuable and most of the production is carried out with the help of machinery, preparation of plant budget become essential . Overheads budget is prepared for the estimation of indirect expenses related to production .

Overheads Budget :-