budget and budgetary control pdf Sunday, December 13, 2020 7:22:31 AM

Budget And Budgetary Control Pdf

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Budgetary control is the process of determining various actual results with budgeted figures for the enterprise for the future period and standards set then comparing the budgeted figures with the actual performance for calculating variances, if any. First of all, budgets are prepared and then actual results are recorded.

Budget and Budgetary Control

Profit-planning or budgeting is a systematic approach for attaining effective management performance. A budget is a comprehensive and coordinated plan expressed in financial terms, for the operations and resources of an enterprise, for some specific period in future. To communicate expectations to all concerned. To help in making detailed plans. To provide a basis for measuring and controlling activities.

Establish budget centers and form a committee. Prepare budget manual budget manual is procedures to be followed and forms to be used. Form budget committee. Determine the limiting or the key factor. Select the budget period. Select the objectives to be achieved at the end of the budget period.

Prepare forecasts. From forecast prepare provisional budget. Review and prepare final budget. Compels management to plan for future. Coordinates integrates and balances the effort of various department. Forms a basis of evaluation and control.

Forms a basis of communication. Helps in optimum utilization of resources. Restricts creativity. Must be continuously adapted. Everybody must be involved as otherwise execution is difficult.

Estimates are basis for budgets which might not match results. Budgetary control involves the use of budgets and budgetary reports though out the period of budget to co-ordinate evaluate and control day to day operations in accordance with the goals specified by the budget. The objectives of budgetary control are:. To compel planning. This is the most important feature of budgetary control, because management is forced to look ahead, set targets, anticipate problems and give the organization purpose and direction,.

To communicate Ideas and Plans. To everyone affected by them. It is necessary to have a formal system to make sure that each person is aware of what he is supposed to be doing. To co-ordinate the activities. Of different department or sub-units of the organization, this concept of co-ordination implies, for example, that the purchasing department should base its budget on production requirements, and that the production budget should in turn be based on sales expectations.

To establish a system of control by having a plan against which actual results can be progressively compared. To motivate Employees to improve their performance. Key Factor. In each organization there is always some factor which governs the scale of its activity.

Production capacity:. Shortage of space :. Shortage of skilled labour:. Shortage of material:. Low market demand:. Lack of capital:.

Budgets may be classified into number of categories. This classification is based on some features, connected with the operational activities of a business. The classification along with the features that have led to the said classifications, are discussed hereunder:. Budget based on coverage: Budgets are often drawn encompassing the different areas of activities of a business undertaking.

That is to say, a budget is often drawn covering different functions of business unit. On the basis of the coverage, the budget is classified into two. Functional budget. Master budget. Budgets based on capacity: The operation of a business unit is characterized by level of activity. This level of activity is known as the capacity at which the business functions. This capacity depends on the extent of the demand of the product of the business entity.

Fixed budget. Flexible budget. Budgets based on the length of the period: Some budgets are drawn for a long period of time. This period may cover 5 years or so. Some budgets are to run for a short period of time, say for a day, a weal or a month as the case may be. The budget that covers a long period of time is known as a Long range budget or long term budget. When the budgets are drawn covering a short period of time, as stated above, are called short term budget or short range budget. Budgets drawn based on conditions: It is sometimes found that budgets are based on some conditions required to be taken into account for efficient management.

The budgets bases on conditions may be classified in to the following:. Basic budget. Current budget. Unit 6: Budgetary Control. Download: If you find some mistakes in the PDF, refer the notes on this page.

From forecast prepare provisional budget Review and prepare final budget. This is the most important feature of budgetary control, because management is forced to look ahead, set targets, anticipate problems and give the organization purpose and direction, To communicate Ideas and Plans. Functional budget B. Fixed budget B. Basic budget B.

Budgets and Budgetary Control

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The focus of this chapter is the cash budget. In this chapter we shall be examining: • the benefits of budgets and budgetary control. • the limitations of budgets.


Budgeting and Budgetary Control

Everything you need to know about objectives of budgetary control. The management of an organisation is primarily concerned with the realization of organisational objectives. In its efforts to achieve these objectives, it has to manage the enterprise efficiently by optimising the use of resources and eliminating or minimising the wastes, if any. Budgetary control is one of the important techniques which help the management in controlling business activities in a desired direction.

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A budget is a financial and a quantitative statement prepared prior to a defined period of time of the policy to be pursued for the purpose of attaining a given objective. Budget is a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain a given objective. Furthermore a budget is an attempt made at the beginning of each financial year to plan the profit and loss account for the year and to aim for a definite balance sheet.

The budget is a vital part of planning and control and it represents as significant mechanism for performance evaluation. The budget is a document designed to assess income and expenditure over a time period usually the previous year and altered to accommodate any predictable variations. In universal terms, a budget is an assessment of the income and expenses over a specified future period of time. Concept of budget: According to CIMA, London, budget is described as financial and quantitative statement prepared and approved prior to defined period of time, of the policy to be pursued during that period for the purpose of accomplishing a given objective. It may include income, expenditure and employment of capital.

Objectives of Budgetary Control

3 Comments

Taibepiccourt 18.12.2020 at 18:50

Budgeting is a management device used for short-term planning and control. It is not just accounting exercise. Meaning and Definition: Budget: According to CIMA​.

Navida 19.12.2020 at 02:21

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Reginald G. 20.12.2020 at 09:43

Budgetary Control is a means of control in which the actual results are compared with the budgeted results so that appropriate action may be taken about any deviations between the two.

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