![]() Only the persons working in different sections can make an established budget, a success. (ii) A budget may not work if the idea of budgeting is not sold properly to different sections of the business. it may need periodic revisions because estimates may not come out to be cent per cent true. (i) Since budget is based on estimates, i.e., estimated sales, estimated costs, estimated business conditions, etc. Actual departmental budgets are prepared and revised and they form the standards of performance for the budget period. In consultation with functional or departmental executives, the budget committee reduces general policies of the concern to department plans. The budget officer presents departmental budgets before the committee and transmits back to the departments the recommendations of acceptance or revision.įorecasts submitted by functional (i.e., production, sales, etc.) executives, current market and trade data and estimates of future sales in the territories enable the budget committee to formulate general policies and plans for the budget period. Budget should specify units to be produced, broken down into sizes and styles, as well as cost of production. ![]() The Objectives (Functions) of Budgets, Budgeting and Budgetary Control:ġ. The differences between the two (i.e., predetermined and actual) figures-the variances-are analysed and an action is taken quickly, at the right time and in the correct place to correct the actual performance – as per the predicted or predetermined plan or performance. Deviations from predicted plan or performance are noticed by comparing actual and budgeted performances and costs. Control follows the planning and co-ordination. Is corrective action needed should it be applied? Thus, budgetary control attempts to bring actual performance at par with the predicted performance by keeping a strict supervisory eye on the actual performance and by exercising a control, if necessary. The budgetary control when applied to a business as a whole or to different sections within the business-compares actual performance and the predicted performance and thus enables all levels of management and supervision to know how their sections (of business) are moving towards the achievements of budgeted targets. Budgetary control relates expenditure to a section or department who incurs the expenditure, so that the actual expenses can be compared with the budgeted ones, thus providing a convenient method of control.īudgetary control includes forecasts of income and expenditures (for the budgetary period) on equipment, machinery, manpower, materials, etc., necessary for the efficient production and distribution of estimated volume of sale. Budgetary control is the planning in advance of the various functions of a business so that the business can be controlled. Budgetary control attempts to show the plans in financial terms. ![]() Definition and Concept of Budgetary Control:īudgetary control makes use of budgets for planning and controlling all aspects of producing and/ or selling products or services. Thus budget acts as a coordinating device among the various functions of the business. A budget can be thought of as an overall plan for the operation of the business in terms of sales, production and expenditures. A budget represents the financial requirements of different sections of the business during a given period to achieve an estimated profit based upon a given volume of sales.Ī budget is based upon past statistical data and it predicts the estimated labour, sales, production and other management requirements for future, i.e., for a definite budgetary period (of time). A budget is used for cost control purposes and it is one of the most important overall control devices employed by management. The budget is a statement showing the way the person plans to spend Rs. It may include income, expenditure and employment of capital.īased upon this definition, a recreation budget of a person for one fine evening may look as: A budget may be defined as a financial and/or quantitative statement, prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective. Definition and Concept of Budget:Ī budget is an instrument of management used as an aid in the planning, programming and control of business activity. ![]() Operation (Working) of Budgetary Control. Budget as a Means of Planning, Control and Coordination 8. Advantages of Budget, Budgeting and Budgetary Control 5. The Objectives (Functions) of Budgets, Budgeting and Budgetary Control 4. Definition and Concept of Budgetary Control 3. After reading this article you will learn about:- 1.
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