Prestige Institute of Management, Gwalior

Budget, Budgeting & Budgetary Control

Presented to: Presented by:Dr. Amitabha Maheshwari Harvinder Kaur

Kajal Sharma Vivek Singhal MBA I “C”

WHAT IS A BUDGET ?

Meaning of BudgetBudget is an itemized summary of likely income and expenses for a period. It’s an invaluable tool to help you prioritize your spending and manage your money.

According to the Chartered Institute of Management Accountants, London

“A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure and the capital to be employed. May be drawn up showing incremental effect on former budgeted or actual Figures or be compiled by zero based budgeting.”

Essentials of budget1. Statement expressed in monetary units.2. Prepared prior to budget period.3. Prepared for Definite future Period.4. Policy to be followed to attain the given objective must be laid before

the budget is prepared.

Budgeting • Complete process of designing, implementing and operating

budgets.

• Budgeting is simply balancing your expenses with your income.

Budgetary ControlBudgetary control is an important technique of management to control the business activities, in which the manager evaluate the business activities and results on the basis of Pre prepared budget.

According to J. Batty,“Budgetary system is a system which budget as a mean s of planning and controlling all aspects of producing and/ or Selling Commodities or services.”

Forecast and Budget

Objectives of Budgetary Control

1. Planning2. Coordination3. Communication4. Motivation5. Control performance evaluation

Merits of Budgetary Control• Advantages of Pre-Planning.• Enhanced efficiency.• Delegation of authority.• Co-ordination.• Maximization of profit.• Forecasting Credit needs.• Uniform policy .• Increase in production.

Limitations of Budgetary Control

• Based on estimates.• Danger of rigidity.• Expensive tool.• No substitute for efficient management.• Expensive tool.• Hide Inefficiencies.• Human Factor.

Prerequisites for the adoption of a system of Budgetary

Control• An organization chart laying out clearly the responsibilities and duties of

each level of executives and delegation of authorities to various levels.• Objectives, plans and policies of the business should be defined in clear

cut and unambiguous terms.• The budget factor or the key factor which will be the starting point of

the preparation of the various budgets should be indicated.• For formulation and efficient execution of the plan, a Budget Committee

should be set up.• There should be an efficient system of accounting to record and provide

data in line with the budgetary control system.

(Contd….)• There should be a proper system of communication and reporting

between the various levels of management.• There should be a budget manual wherein all details regarding the

plan and its procedure of operation are given as also the length of the budget period.• The budget should primarily be prepared by those who are

responsible for performance.• The budget should be comprehensive, complete, continuous and

realistic to attain.• There should be an assurance from the top management executives

for cooperation and acceptance of the budgetary control system.