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Budget and Budgetary Control Management Article shared by: After reading this article you will learn about: Definition and Concept of Budget 2. Definition and Concept of Budgetary Control 3.
Advantages of Budget, Budgeting and Budgetary Control 5. Preparation of Budget 6.
Limitations of Budget 7. Budget as a Means of Planning, Control and Coordination 8.
Operation Working of Budgetary Control. Definition and Concept of Budget: A budget is an instrument of management used as an aid in the planning, programming and control of business activity.
It may include income, expenditure and employment of capital. Based upon this definition, a recreation budget of a person for one fine evening may look as: The budget is a statement showing the way the person plans to spend Rs.
Thus budget is a written plan of action. A budget is used for cost control purposes and it is one of the most important overall control devices employed by management. 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.
A budget is based upon past statistical data and it predicts the estimated labour, sales, production and other management requirements for future, i.
A budget can be thought of as an overall plan for the operation of the business in terms of sales, production and expenditures. Thus budget acts as a coordinating device among the various functions of the business. Definition and Concept of Budgetary Control: Budgetary control attempts to show the plans in financial terms.
Budgetary control is the planning in advance of the various functions of a business so that the business can be controlled. 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.
Budgetary control includes forecasts of income and expenditures for the budgetary period on equipment, machinery, manpower, materials, etc. 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.
Is corrective action needed; should it be applied? Control follows the planning and co-ordination. Deviations from predicted plan or performance are noticed by comparing actual and budgeted performances and costs. The differences between the two i. Budget should specify units to be produced, broken down into sizes and styles, as well as cost of production.
Budget should facilitate planning within the company. It should help planning future income and expenses.Advantages of budgeting and budgetary control There are a number of advantages to budgeting and budgetary control: · Compels management to think about the future, which is probably the most important feature of a budgetary planning and control system.
Budgetary 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.
Difference between Budget, Budgeting & Budgetary control: Individual objectives of a department etc. are indicated by budget, whereas the act of setting the budgets is known as budgeting. All are embraced by budgetary control & also the science of planning the budgets themselves & as an overall management tool, the utilization of such budgets.
Budget, Budgeting, Budgetary Control A budget is a financial and quantitative statement of an operational plan related to a specific time period, which is to be followed during the budgeted period in order to achieve specific financial objectives of an organization.
planning and control process, and how the process is to be conducted • a budget committee, which organises the process of budgetary planning and control; this committee brings together representatives from the main functions of the business –.
• Budgeting and budgetary control process overview Reviewing & confirming corporate strategy Creation of the annual budget Approval of the annual budget Monitoring & control actual results to budget • What are the hindrances to an effective budgeting process?