Budgeting & Budgetary Control
Submitted by:
(MBA Ist SEM.)
• Chetna prasad• Shikha pathak• Chitra totwani• Shilpi Panchal
Contents
• Budgeting [characteristics]
• Budgetary control• Difference in budget, budgeting, budgetary
control
• Essentials in budgetary control
• Requisites for budgetary control system
• Merits & limitations
• Zero-based budgeting
• Difference in Traditional & Zero based budgeting.
Definition & Meaning of Budgeting
“A budget is a pre-determined statement of management policy during a given period which provides a standard for comparison with the results actually.”
-Brown & Howard “Budgeting is a preparation of comprehensive operating and financial plans for specific intervals of time”
-Shilinglaw
Characteristics of good Budgeting
.• Good budgeting should involve persons at
different levels while preparing the budgets.
• There should be proper fixation of authority and responsibility.
.
• The target of budget should be realistic, if targets are difficult to be achieved then they will not enthuse the persons concerned
• A good accounting system is also essential to make the budgeting successful.
.• Budgeting system should have whole
hearted support of the top management.• The employees should be imparted
budgeting education.
Definition & meaning of Budgetary Control
“Budgetary control is a system which uses budgets as a means of planning and controlling all aspects of producing/selling commodities or services”
-J Batty
“A budget is a means and budgetary control is the end result”
Essentials of Budgetary Control
Organization for budgetary control.
Budget centers
Budget officers/committee
Budget manual
Budget period
Organization chart for Budgetary Control
Chief Executive
Budget Officer
Budget committee
Production
manager
Sales manager
Finance manager
Accounts manager
Personnel manager
Research
& develop
ment
manager
Requisites for Budgetary Control System
Clarifying objectives
Proper delegation of authority & responsibility
Proper communication & budget education system
Participation of all employees
Motivation & flexibility
Budgetary control
Advantages
Tool for measuring performance
Creates budget consciousness
Provides specific aims
Introduction of incentive scheme
Limitations
Uncertain future, revision required
Discourages efficient persons
Problem of co-ordination
Conflict in departments
Depends on Top managementTo make COST accounting more reliable
Difference in Budget, Budgeting, & Budgetary Control.
Budgets are business estimates for future period, budgeting is the process of preparing these estimates while budgetary control is a system of achieving performance on the basis of budgets.
Budget and budgeting are the parts of planning whereas as budgetary control is linked with co-ordination & control.
Zero-Base Budgeting
Zero base budgeting is the latest technique of budgeting & it has an increased use of management tools.
In zero base budgeting every year is taken as a new year and previous year is not taken as a base.
It enables management to allocate funds.
It improves efficiency of management and make optimum use of resources.
Helpful in identifying economical & wasteful areas.
Related to organizational goals.
Process of Zero Base Budgeting
Determine Objectives
Plan of action
Prioritization of activities
Cost Benefit Analysis
Approve decision package & Finalize Budget
Zero Base Budgeting
Advantages
Efficient allocation of resources.
Optimum utilization of resources
Enhances capability of Managers.
Identifies & eliminates wasteful and obsolete operations.
Traditional v/s Zero BaseBudgeting
Traditional Budgeting Zero Base Budgeting
.• It is accounting
oriented
. • Its approach is monitoring towards expenditure
.• Its focus is on
increase and decrease of expenditure
. • It is simple to read & prepare
.• Its method of
preparation is based on “extrapolation”
. • It is decision oriented
.• Its approach is
towards achievement of objectives
. • Its focus is on cost benefit analysis
. • It is more complex.
.• Its preparation is
based upon “selection of decision package”
Thank you