Budgets and Budgetary Control

Management Accounting
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 Modern management is complex
 Planning is very essential to stay in
competitive market and to grow
 Success of business is depends upon careful
planning and implementation
 Efficient, effective and economy of
planning
 u ere s ould be co- ordination and control
in t e organization to ac ieve main
objective.
 Some tools are developed to solve t e
problem of complexity and ave t e control
± budgeting, standard costing, responsibility
accounting, etc.
 Budgeting give a definite direction to t e
organizational activities.
 f course individual budgets exists only in
t e mind of t e individuals concerned and
are rarely available in a written form.
 But t ey are not different from business
budgets so far as t e objective is concerned,
t roug t e latter are more carefully
devised, take a longer period of time and are
in written form.
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 A budget is a forecast of future activities. It

is a c art of future incomes and expenses.
 It is a coordinating financial plan for a
business enterprise.
 It includes estimates of sales, production,
purc ases, labour cost, over eads and
financial position.
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 aA budget is a compre ensive overall plan

in w ic management, on t e basis of
estimated sales volume and receipts,
establis es cost and expense allowances for
future operations. In t is way effectively
integrating and directing activities towards
carefully determined goals.´
±S ubin
 aA budget is a financial and/or quantitative
statement, prepared and approved prior to a
defined period of time, of t e policy to be
pursued during t at period for t e purpose
of attaining objectives. It may include
income, expenditure and employment of
capital.´
±Institute of Cost and Management
Accountants, England
 aA budget is a pre-determined statement of
management policy during a given period
w ic provides a standard for comparison
wit t e results actually ac ieved.´
±Brown and Howard
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 It is a   
of t e business
± It covers all aspects of business operations.
± Departmental budgets are prepared for t e
improvement in t e business effectiveness.
 It is an 





± u e budget committee as to reconcile and
coordinate various budgets prepared by t e
departmental eads.
 ± E.g. t e production budget and sales budget
± u e basic objectives s ould be kept in mind w ile
preparing various departmental budgets
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± Comparison can be possible
± E.g. budgeted production units can be measured
in terms of money and labour efficiency can be
measured wit man-days, t e quantum of raw
material can be measured in monetary terms.
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± Planning and controlling are t e two sides of same coin
of managerial functions
± Comparison of actual and budgeted data can be possible
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± u ere are two types of budgets: long term and s ort term
± uo earn prestige as a firm, long term budgets are been
prepared
± uo ac ieve long term budgets s ort term budgets are
been prepared
  



 
 

  

 

 

 

 
± Resources include t e inputs budget and operations of t e
enterprise include various costs and expenses as well as
t e production units, profits and capital to be employed.
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± After preparation of budgets t e implementation of t e
same is to be done by all t e departments. And after t at
for anot er task budgets are prepared. u us t is process
goes on and on.
Budgeting:-

 The act of preparing budgets is called

budgeting. In the wards of Batty, ³the entire
process of preparing the budgets is known
as budgeting.´
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 Yontrol means, ³some sort of systematic

effort to compare current performance to a
predetermined plan or objective, presumably
in order to take only remedial action
required.´
 ¦owever as a management function, it has
been defined as the ³process by which
managers assure that resources are
obtained & used effectively & efficiently in the
accomplishment of the organisation¶s goal.´






Budgetary control is a process which

covers making of a business budget,
comparison of the actual performance
with the budgeted one and detecting
the errors and mistakes committed so
that an attempt may be made to
rectify them in future.
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³The establishment of budgets relating to
the responsibilities of executives to the
requirements of a policy, and the
continuous comparison of actual with
budgeted results, either to secure by
individual, action the objective of that policy
or to provide a basis for its revision.´
± The Yhartered Institution of Management
Accountants, London
³It is the system of management
control & accounting in which all
operations are forecasted and so far
as possible planned ahead, and the
actual results compared with the
forecasted and planned ones.´
±J.A. Scott