Meaning Of Budgetary Control

The technique of managerial control by budget is known as budgetary control. It is applied in a firm to evaluate the performance in terms of budgeted goals

Definition Of Budgetary Control

“Budgetary control is a system which uses budget as a mean of planning and controlling all aspects of producing and selling commodities or services”

- J.Batty

Budgetary Control can be defined by the meaning of Budget:-

“Budget is an estimate of future needs arranged according to an orderly basis covering some or all of the activities of an enterprise for a definite period of time”

-George. R. Tesry

Characteristics Of Budgetary Control

Planning

Control

Co-ordination

Recording

Appraisal and Follow up.

Requisites For Successful Budgetary Control System

Clarifying Objectives

Delegation of Authority and Responsibility

Proper Communication System

Budget Education

Participation of all employees

Flexibility

Objectives Of Budgeting & Budgetary ControlTo pre-determine in capital expenditure of a business

To plan and control the income and expenditure of the firm.

To operate various divisions units, dept.,and cost centre efficiently and economically.

To smooth out seasonal variations in production by developing new product.

To obtain a more economical use of capital.

ORGANISATION CHART FOR BUDGETARY CONTROL

MANAGING DIRECTOR

BUDGET COMMITTEE

BUDGET OFFICER

SALES MANAGER

1. SALES BUDGET

2. ADVERTISI

NG BUDGET

3. SELLING AND

DISTRIBUTION

BUDGET

ACCOUNTS

MANAGER

1. COST BUDGET

PRODUCTI0N

MANAGER

1. PRODUCTI

ON BUDGET

2. R& D BUDGET

3. REPAIR & MAINTENA

NCE BUDGET

SECRETARY OF OFFICE MANAGER

1. ADM. EXP. BUDGET

2.CO-ORDINATIO

N

PURCHASE MANAGER

1. PURCHASE

BUDGET

2.

INVENTARYBUDGET

FINANCE MANAGER

1. CAPITAL BUDGET

2. CASH BUDGET

3. WORKING CAPITAL BUDGET

4. MASTER BUDGET

R & D MANAGER

1.R & D BUDGET

PERSONAL MANAGER

1. PERSONAL BUDGET

2. LABOUR WELFARE BUDGET

Advantages Of Budgetary Control

Profit Maximization

Clarity of Objectives

Delegation of authority and responsibility

Best Utilization of resources

Team spirit and co-operation

Intelligent consideration of future activities

Limitations Of Budgetary Control

Budgets are based on estimates

Budget is a not a substitute of management

Time effect

Budgeting is not an automatic process

Rigidity in control

Classification and Types Of BudgetsClassifications on the basis of Time

a. Long term budgets

b. Short term budgets

c. Current budgets

On the basis of Flexibility

a. Fixed budgets

b. Flexible budgets

On the basis of Function

a. Operating budgets

b. Financial budgets

c. Master budgets

Some Typical Budgets

Zero Based Budgeting

“Zero based budgeting means budgeting all the activities of the org. from zero disregarding trends”

IDENTIFICATION OF DECISION UNITS

ANALYSIS OF DECISION UNITS

FORMULATION OF DECISION PACKAGES

ALLOCATION OF ORGANIZATIONAL RESOURCES

PREPARATION OF DETAILED BUDGET

MEANING OF PERFORMANCE BUDGETING

Performance budgeting is an important tool ofmanagement to control the activities in various respect andto help specifically in the formulation of programmesobjectives and their accomplishment.A budget which is based on the performance is calledperformance budgeting. It is a particular technique bywhich operations of an enterprise are to be presented interms of function, programmes, activities and projects tobe followed in a fixed period.

SETTING OF OBJECTIVES AND

TARGETS

FORMULATION OF PROGRAMMES AND ACTIVITIES

EXECUTION OF THE BUDGET

EVALUATION AND APPRAISAL