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Budget And Budgetary Control Pdf

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Budgetary Control : Meaning, Objectives and Essentials

A budget is a financial and a quantitative statement prepared prior to a defined period of time of the policy to be pursued for the purpose of attaining a given objective. Budget is a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain a given objective. Furthermore a budget is an attempt made at the beginning of each financial year to plan the profit and loss account for the year and to aim for a definite balance sheet. This profit planning must be a well thought- out operational plan with its financial implication expressed as both long and short range profit plans. In any organization where budget is used as a means of profit planning many alternative plans have to be considered and the most profitable one will be adopted, because where the plan chosen in great expectations, then the best use has been made of the available resources. On the other hand budgetary control is the establishment of policies and the periodic review or comparison of the actual result with the budgeted performances either to secure approval for individual action or to serve as a remedial course of action.

Budgetary Control is a means of control in which the actual results are compared with the budgeted results so that appropriate action may be taken about any deviations between the two. Budgetary control is a system of controlling cost which includes preparation of Budgets coordinating the departments and establishing responsibilities comparing performance with budgeted and acting upon results to achieve the maximum profitable. There should be enough scope of flexible individual initiative and drive. Budgetary control is an important device for making the organization an important tool for controlling costs and achieving the overall objectives. The budgeting system has the following objectives, which are of paramount importance in the overall efficiency and effectiveness of the business organization. Planning is necessary for regularly doing any work. A well- prepared plan helps the organization to use the scarce resources efficiently and thus achieving the predetermined targets becomes easy.

Budgets are prepared for main areas of the business purchases, sales revenue , production, labour, trade receivables, trade payables, cash and provide detailed plans of the business for the next three, six or twelve months. The focus of this chapter is the cash budget. In large businesses such planning is very formal while, for smaller businesses, it will be less formal. Planning for the future falls into three time scales: long-term: from about three years up to, sometimes, as far as twenty years ahead medium-term: one to three years ahead short-term: for the next year Clearly, planning for these different time scales needs different approaches: the further on in time, the less detailed are the plans. In the medium and longer term, a business will establish broad business objectives.

Budget and Budgetary Control

Show all documents Analysis of Revenue Budgets and Budgetary Control Policy The budgeting program should contain reasonable flexibility if the situation so demands. However, it should be noted that too much flexibility and too much tightness are both undesirable. Too much flexibility will weaken the cost control and the budget will become inoperative. If conditions have changed making the estimates and budgets inaccurate, the budgets should be revised, a budget is simply a tool to serve managements needs and not an irrevocable contract.

Profit-planning or budgeting is a systematic approach for attaining effective management performance. A budget is a comprehensive and coordinated plan expressed in financial terms, for the operations and resources of an enterprise, for some specific period in future. To communicate expectations to all concerned. To help in making detailed plans. To provide a basis for measuring and controlling activities.

Budgetary control is the process of determining various actual results with budgeted figures for the enterprise for the future period and standards set then comparing the budgeted figures with the actual performance for calculating variances, if any. First of all, budgets are prepared and then actual results are recorded. The comparison of budgeted and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time. The budgetary control is a continuous process which helps in planning and co-ordination. It provides a method of control too. A budget is a means and budgetary control is the end-result.


Budgeting is a management device used for short-term planning and control. It is not just accounting exercise. Meaning and Definition: Budget: According to CIMA​.


Budgeting and Budgetary Control: A Tool for Enhancing Performance of Organizations

Everything you need to know about objectives of budgetary control. The management of an organisation is primarily concerned with the realization of organisational objectives. In its efforts to achieve these objectives, it has to manage the enterprise efficiently by optimising the use of resources and eliminating or minimising the wastes, if any. Budgetary control is one of the important techniques which help the management in controlling business activities in a desired direction. A budget is a numerical statement expressing the plans, policies and goals for a definite future period.

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The budget is a vital part of planning and control and it represents as significant mechanism for performance evaluation. The budget is a document designed to assess income and expenditure over a time period usually the previous year and altered to accommodate any predictable variations.

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