BUDGETING & BUDGETARY
CONTROL
Objectives of Budgetary Control
Planning
Co-ordination
Control
Communication
Motivation
Performance Evaluation
Advantages of Budgetary Control
Efficiency & Economy
Establishment of responsibility
Co-ordination
Use in standard costing
Safety Signal
Evaluation of performance
Limitations of Budgetary Control
Based on Estimates
Danger of Rigidity
Not a substitute of Management
Costly
Lack of support of Top Management
Resentment by employees
Essentials of An Effective Budgetary Control System
Well Defined Objectives:
▪ The objectives, plans, and policies of the business should be defined in clear cut and unambiguous terms.
▪ Budget can be prepared & implemented effectively only when the objectives are pinpointed and crystal clear
Achievable Goals:
▪ Goals must be capable of being attained.
▪ Must be realistic and not illusory.
▪ Past, present and future all must be considered while establishing targets which are realistically attainable
Participative Management
▪ The budgets should primarily be prepared by those who are responsible for performance
Essentials of An Effective Budgetary Control System
Sound Organisation structure
▪ There should be an organisation chart laying out in clear terms the responsibilities and duties of each level of executives and the delegation of authority to the
various levels.
▪ There should be a proper system of communication and reporting between the various levels of management.
Support of all concerned
▪ There should be an assurance from the top management executives for co- operation and acceptance of the budgetary control system.
Effective accounting system
▪ There should be an efficient system of accounting to record and provide data in line with the budgetary control system.
Budgetary process
Creation of Budget Centre
Introduction of adequate accounting records
Preparation of an
organisatio n Chart
Establishmen t of Budget Committee
Preparation of Budget Manual
Budget Controller
Budget Period
Determination of Key Factor
Types of Budgets
Budget
Time
Long Term Budget
Short Term budget
Capacity
Fixed
Budget Flexible Budget
Scope
Functional
Budget Master
Budget
