Budgetary control

Topics: Budget, Cost accounting, Cost Pages: 9 (2864 words) Published: April 21, 2014

Firstly we give thanks to God Almighty for the strength to work on this study. This work could not have materialized without the assistance of certain people who contributed to its success. Our special gratitude goes to our tutor Mst. Maksuda Begum for her direction during the programme and encourage us when we had difficulties, and also grateful to all the other members of our group for making available to us their wealth of experience and Knowledge.

Our thanks also go to all the students in the Entrepreneurship & Small Business Management.

Budgeting has come to be accepted as an efficient method of short-term planning and control. It is employed, no doubt, in large business houses, but even the small businesses are using it at least in some informal manner. Through the budgets, a business wants to know clearly as to what it proposes to do during an accounting period or a part thereof. The technique of budgeting is an important application of Management Accounting. Probably, the greatest aid to good management that has ever been devised is theuse of budgets and budgetary control. It is a versatile tool and has helped managers cope with manyproblems including inflation.

 A formal statement of the financial resources set aside for carrying out specific activities in a given period of time.  It helps to co-ordinate the activities of the organisation. An exa mple would be an advertising budget or sales force budget. Essentials of a Budget

An analysis of the above said definitions reveal the following essentials of a budget: (1) It is prepared for a definite future period.
(2) It is a statement prepared prior to a defined period of time. (3) The Budget is monetary and I or quantitative statement of policy. (4) The Budget is a predetermined statement and its purpose is to attain a given objective.

A budget, therefore, be taken as a document which is closely related to both the managerial as well asaccounting functions of an organization.

Types of Budgets

(A) Classification on the basis of Time:
1. Long-Term Budgets
2. Short-Term Budgets
3. Current Budgets
(B) Classification according to Functions:
1. Functional or Subsidiary Budgets
2. Master Budgets
(C) Classification on the basis of Capacity :
1. Fixed Budgets
2. Flexible Budgets
Budgetary control:
 A control technique whereby actual results are compared with budgets.  Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets. According to I.C.M.A. England Budgetary control is defined by Terminology as the establishment of budgets relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with the budgeted results, either to secure by individual actions the objectives of that policy or to provide a basis for its revision.

Objectives of Budgetary Control
Budgetary Control is planned to assist the management for policy formulation, planning, controlling and co-ordinating the general objectives of budgetary control and can be stated in the following ways: (1) Planning: A budget is a plan of action. Budgeting ensures a detailed plan of action for a business over a period of time.

(2) Co-ordination: Budgetary control co-ordinates the various activities of the entity or organization and secure co-operation of all concerned towards the common goal. (3) Control: Control is necessary to ensure that plans and objectives are being achieved. ControlFollows planning and co-ordination. No control performance is possible without predetermined standards. Thus, budgetary control makes control possible by continuous measures againstpredetermined targets. If there is any variation between the budgeted performance and theactual performance, the same is subject to analysis and corrective action. Scope and Techniques of Standard Costing and Budgetary Control...
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