Budgetary Control of india

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BUDGETARY CONTROL

A budget is a quantitative expression of a plan for a defined periodof time. It may include planned sales volumes and revenues, resource

quantities, costs and expenses, assets, liabilities and cash flows. It

expresses strategic plans of business units, organizations, activities or

events in measurable terms.

A budget (derived from old French word bougette, purse) is a

quantified financial plan for a forthcoming accounting period.

Budget is a financial and /or quantitative statement, prepared and

approved prior to a Defined period of time of the policy to be pursued

during that period for the purpose of attaining a given objective. It may

include income, expenditure and employment of Capital.

The establishment of budgets relating the responsibilities of

executives to the requirements of policy, and the continuous comparison

of actual with budgeted results, either to secure by individual action the

objectives of that policy or to provide a firm basis of its revision.

Or in simple words, budgetary control is implementing budgets and

making managers responsible for implementing it.

Budget is financial or quantitative statement. This statement shows

the programs of future operation and expected result. It is made before

work to be done.

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http://en.wikipedia.org/wiki/French_language

http://en.wikipedia.org/wiki/French_language



Budgetary Control

1.Definition:

Budgetary control is defined as “the establishment of budgets,

relating 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 base for its revision.”

2. Salient features:a) Objectives: Determining the objectives to be achieved, over the

budget period, and the policy (ies) that might be adopted for the

achievement of these ends.

b)Activities: Determining the variety of activities that should be

undertaken for achievement of the objectives.

c) Plans: Drawing up a plan or scheme of operation in respect of each

class of activity, in physical as monetary terms for the full budget

period and its parts.

d)Performance Evaluation: Laying out a system of comparison of

actual performance by each person, section or department with the

relevant budget and determination of causes for the discrepancies, if any.

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e) Control Action: Ensuring that when the plans are not achieved,

corrective actions are taken; and when corrective actions are not

possible, ensuring that the plans are revised and objective achieved.

Objectives of Budgeting/Performance

Budgeting

The objectives of budgeting are:-

1. To encourage self-study in all aspects of a company’s operations.

2. To get all members of managers of management to “put theirheads” be run, to make them of a co-ordinated team operating in

unison towards clearly defined objectives.

3.To promote the planning process and provide a sense of direction to

every Member of the organization.

4. To force a definition and crystallisation of company policies andaims.

5. To increase the effectiveness with which people and capital are

Employed.

6. To disclose areas of potential improvement in the company’s

operations.

7. To stimulate study of relationship of the Company to its external

economic environment for improving the effectiveness of its direction.

8. To direct and co-ordinate business activities and units to achieve

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stated targets of performance.

9. To facilitate the control process, by comparing actual results with

plan, and Provide feedback to the employees about their performance.

Objectives of Budgetary Control System

The objectives of a Budgetary Control System are-

1. Definition of Goals: Portying With precision, the overall aims of the business and determining targets of performance for each section

or department of the business.

2. Defining Responsibilities: Laying down the responsibilities of each

individual so that everyone knows what is expected of him and how

he will be judged.

3. Basis for Performance Evaluation: Providing basis for the

comparison of actual performance with the predetermined targetsand investigation of deviation, if any of actual performance and

expenses from the budgeted figures. It helps to take timely

corrective measures.

4. Optimum use of Resources: Ensurying the best use of all available

resources to maximize profit or production, subject to the limiting

factors.

5. Co-ordination : Coordinating the various activities of the business

and centralizing control, but also making a facility for the

management to decentralize responsibility and delegate authority.

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6. Planned action: Engendering a spirit of careful forethought,

assessment of what is possible and an attempt at in .it leads to

dynamism without recklessness. It also helps to draw up long range

plans with a fair measure of accuracy.

7. Basis for policy: Providing a basis for revision of current and future policies.

Advantages of Budgetary Control System

1. Efficiency : It enables the management to conduct its business

activities in an efficient manner. Effective utilization of scarce

resources, i.e. men, machinery, methods and money-is made

possible.

2. Cost Control : It is a powerful instrument used by firms to control

their expenditure. it inculcates the feeling of cost consciousness

among workers.

3. Performance Evaluation : It provides a yardstick for measuring and

evaluating the performance of individuals and their departments.

4. Standard Costing and Variance Analysis : It creates suitable

conditions for the implementation of standard costing system in the

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firm. It reveals the deviations, from the budgeted figures after

making a comparison with actual figures.

5. Policy Formulation : It helps in the review of current trends and

framing of future policies.

Disadvantages/Limitations of the Budgetary

Control System

1. Estimates: Budgets may or may not be true, as they are based on

estimates the assumptions about future events may or may not

actually happen.

2. Rigidity: Budgets are considered as rigid document. too much

emphasis on budgets may affect day –to-day operations and ignores

the dynamic state of organizational functioning.

3. False sense of Security: Mere budgeting cannot lead to

profitability. Budgets cannot be executed automatically. It may

create a false sense of security that everything has been taken care of

in budgets.

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4. Lack of Co-ordination: Staff co-operation is usually not available

during budgetary control exercise.

5. Time and Cost: The introduction and implementation of the system

may be expensive.

Role of the Budget Officer

Successful implementation of a Budgetary Control System depends

upon the working of the Budget Committee, which would be composed

of all functional heads and a member from the board to preside over and

guide the deliberations The Budget committee acts through the budget

officer whose responsibilities include-

1. Functional Budget Preparation: To assist in preparation of

various Budgets by co-ordinating the work of Accounts

Department (which normally compiles Budgets), with the relevant

functional departments like sales, production, plant Maintenance,

etc.

2. Communication to Responsibility Centres: To forward the

Budget to the individuals who are responsible to adhere to them,

and guide them in overcoming any practical difficulties in its

working.

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3. Co-ordination: To prepare the Periodical Budget Report for

circulation to the individuals concerned, co-ordinating with them

in the formulation of budgets for subsequent periods.

4. Follow-up: To determine the follow-up action to be taken on the

Budget Reports.5. Budget Committee Review: To prepare an overall Budget

Working Report for disussion at the Budget Committee Meetings

and to ensure follow-up on the lines of action suggested by the

Committee.

6. Board Review: To prepare Periodical Reports for the Board

Meeting, comparing the Budgeted Profit & Loss Account and

Balance Sheet with the actual results.

STEPS INVOLVED IN THE

PREPARATION OF BUDGETS1. Definition of Objectives: Objectives should be defined precisely.

budgets should be made in written form, with the areas of control

clearly demarcated; and stating the items of revenue and expenditureto be covered by the budget. This will give a clear understanding of

the plan and its scope to all those who must co-operate to make its

implementation a success.

2. Identification of Key (or Budget) Factor: A Key Factor represents

a resource whose availability is less than its requirement and puts a

limit on the firms objective of maximum profitability. For proper

budgeting, the key factor must be located and estimated properly.

3. Budget Committee and Controller: Formulation of a Budget

usually requires whole time services of a senior executive; he must

be assisted in this work by a budget committee, consisting of heads

of all departments along with Managing Director as the Chairman.

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The controller is responsible for co-ordination and development of

budget programmes and preparing the budget Manual.

4. Budget Manual: The Budget manual is a schedule, document or

booklet, which shows in a written form, the budgeting organization

and procedures. The manual should be well written and indexed, and

a copy thereof may be given to each departmental head for guidance.

5. Budget Period: The Period covered by a Budget is known as

Budget Period. Normally, a calendar year or a period co-terminus

with the Financial Year is adopted as the Budget period. It is then

sub-divided into shorter periods-it may be months or quarters or

such periods that coincide with period of trading activity.

6. Standard of Activity or Output: Based on past statistics, knownmarket changes and current conditions and forecasts of future

situations the standards of activity Levels for future period should be

laid down. in a progressive business, the achievement of a year

must exceed those of earlier years.

Budget Manual

Meaning: Budget Manual is a schedule, document or booklet which

shows in written form, the budgeting organization and procedures. A

copy of the manual is given to each departmental head for guidance.

The Manual indicates the following matters

1. Brief explanation of the principles of Budgetary Control System; its

objectives and benefits.

2. Procedure to be adopted in operating the system-in the form of

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3. Definition of duties and responsibilities of –(a) Operational

Executives; (b) Budget committee, and (c) Budget Controller.

4. Nature, type and specimen forms of various reports; persons

responsible for preparation of the Reports and the programme of these reports to the various officers.

5. Account Code and chart of Accounts used by the company.

6. Budget Calendar showing the dates of completion of each part of the

budget and submission of Reports.

7. Budget Periods and Control Periods.

8. Follow-up procedures.

CLASSIFICATION

Types of Budgets:

1. BASED ON TIME PERIOD

Long Term Budget Short Term Budget

(a) Budgets Which are prepared

for periods longer than a year arecalled Long-Term Budgets.

(b)Such Budgets are helpful in

business forecasting and forward

(a)Budgets which are prepared for

periods less than a year are knownas Short-Term Budgets.

(b)Such Budgets are prepared in

cases where a specific action has to

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planning.

(c)Examples: Capital

Expenditure Budget and R&DBudget.

be immediately taken to bring any

variation under control.

(c)Example: Cash Budget.

2. BASED ON TIME CONDITIONS

Basic Budget Current Budget

A Budget, which remains unaltered

over a long period of time, is called

Basic Budget.

A Budget, which is established

for use over a short period of time

and is related to the current

conditions, is called Current

Budget.

3. BASED ON CAPACITY

Particulars Fixed Budget Flexible Budget

(a)Definition It is a Budget designed to

remain unchanged

irrespective of the level of

activity actually attained.

It is a Budget, which

by recognizing the

difference between

fixed, semi-variable

and variable costs is

designed to change

in relation to level of

activity attained.

(b)Rigidity

It does not change with

actual volume of activity

achieved. Thus it is known

It can be re-casted on

the basis of activity

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as a Rigid or Inflexible

budgetThus it’s not rigid.

(c)Level of

Activity

It operates on one level of

activity and under one set

of conditions. It assumes

that there will be no change

in the prevailing conditions,

which is unrealistic.

It consists of various

budgets for different

levels of activity.

(d)Effect of

variance

analysis

Variance Analysis does not

give useful information as

all Costs (fixed, variable

and semi-variable) arerelated to only one level of

activity.

Variance analysis

provides useful

information as each

cost is analyzedaccording to its

behavior.

(e) Use for

Decision making

If the budgeted and actual

activity levels differ

significantly, then aspects

like cost ascertainment and

price fixation do not give a

correct picture.

It facilitates the

ascertainment of

cost, fixation of price

and submission of quotations.

(f)Performance

Evaluation

Comparison of actual

performance with budgeted

targets will be meaningless,

especially when there is a

difference between twoactivity levels.

It provides a

meaningful basis of

comparison of the

actual performance

with the budgetedtargets

4. BASED ON COVERAGE

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Functional Budget Master Budget

Budgets, which relate to the

individual functions in an

organization, are known asFunctional Budgets,

e.g. Purchase Budget, sales Budget,

Production Budget, Plant-Utilization

Budget and Cash Budget.

It is a consolidated summary of

the various functional budgets. It

serves as upon which budgetedProfit & Loss Account and

forecasted Balance Sheet are

built up.

Flexible Budget

1. Meaning: It is a Budget, which by recognizing the difference between fixed, semi-variable and variable costs, is designed to

change in relation to level of activity.

2. Need: The need for the preparation of flexible Budgets arises in the

following circumstances-

a) Seasonal fluctuations in sales and/or production.

b) Introduction of new products, product designs and versions on a

frequent basis;

c) Industries engaged in make-to-order business like shipbuilding;

d) An industry which is influenced by changes in fashion; and

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e) General changes in sales.

3. Situations: Flexible Budgeting may be resorted to in the following

situations-

(a) New business: In case of new business venture, due to itstypical nature, it may be difficult to forecast the demand of a

product accurately.

(b) Uncertain Environment: Where the business is

dependent upon the mercy of nature.

(c) Factor market conditions: In the case of labour intensive

industry where the production of the concern is dependent upon

the availability of labour.

FUNCTIONAL BUDGETSTypes of Functional budgets

Functional budgets are broadly grouped under the following heads.

1.Physical Budgets: Budgets that contain information in terms of physical units about sales, production, etc. for example, Quantity of scale,

Quantity of Production ,Inventories, Manpower Budgets.

2.Cost Budgets: Budgets which provide Cost Information in respect of

manufacturing, selling, administration, etc. for example, Manufacturing

Costs, Selling Costs, Administration Costs, R &D Cost Budgets.

3.Profit Budgets: Budgets that enable the ascertainment of Profit, for

example, Sales Budget, Profit & Loss Budget, etc.

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4.Financial Budgets: A Budgets which facilitates to ascertain the

Financial Position of a concern, for example, Cash Budgets, Capital

Expenditure Budget, Budgeted Balance Sheet, etc.

Commonly used Functional Budgets.

1. Scales Budget. 2.Production Budget.

3. Plant Capacity Utilization Budget.

4. Direct Materials- Usage & Purchase Budgets.

5. Direct Labour- Requirement & Recruitment Budgets.

6. Overhead Cost Budgets- Factory OH, Administration OH, and S&D

OH Budgets.

7. Cost-of-Goods-Sold Budget.8. Specific Budgets – R&D Cost Budget, Capital Expenditure Budget,

Cash Budget.

9. Budget Summaries /Master Budget – Budgeted Income Statement and

Budgeted Balance Sheet.

Factors to be considered in preparing the Sales

Budget

1. Sales Forecast and Sales Budget

Sales Forecast is the initial stage of budgeting. A Sales Forecast

is projection or estimate of the available customer demand. A

Forecast reflects the environment or competitive situation facingthe Company, whereas the Sales Budget shows how the

Management intends to react to this environment and competitive

situation. Thus, the Sales Budget is active rather than passive.

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2. Factors

The following factors have to be considered for preparing the

Sales Budget-

a) Reports by Salesman who have first- hand information about

the local conditions prevailing in their areas, competition, etc.

b) Past Sales Analysis-statistical forecasting who have first-hand

information about the local conditions prevailing in their

areas, competition, etc.

c) General economic and political conditions.

d) Relative product profitability.

e) Market Research studies which provide information like state

of the market, fashion changes, consumer preferences,

activities of competitors, ability of the consumer to pay etc.

f) Pricing Policies.

g) Advertising and Sales Promotion.

h) Quality of Sales force.

i) Competition, Market size and Market Share.

j) Seasonal and cyclical variations.

k) Production Capacity of the plant.

l) Change in Company’s policy like introduction of a new

product or design.

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m)Special conditions affecting the business. For example, an

increase in the production of automobiles with increase in

demand of tyres.

3.Classification

The Sales Budget is prepared on the following bases to facilitate

control-

a) Products or groups of products.

b) Areas, towns, salesmen and agents.

c) Types of customers e.g. (i) Government, (ii) Exports, (iii)

local sales, (iv) Retail Depots

d) Period-months, weeks, etc.

Production Budget

1. Preparation : Production Budget shows the production for the

budget period based upon-

a) Sales Budget,

b) Production Capacity of the factory.

c) Planned increase or decrease in Finished Stocks, and

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d) Policy governing outside purchase.

2. Sales and Production Capacity Comparison:

a) The production facility available and the Sales Budget will becompared and co-ordinated to determine the Production Budget.

b) If production facilities are not sufficient, factors like working

overtime, working in shifts, sub-contracting or purchasing of

additional Plant and Machinery, may be considered.

c) If production facilities are surplus, due consideration should be

given to promote advertising reduction of prices to increase the

sales, sub –contracting of surplus capacity etc.

3. Stock level determination: The level of stocks will depend upon thefollowing factors-

a) Seasonal industries in which stocks have to be built up during

off-season.

b) Steady and uniform level of production to utilize the plant fully

and to avoid retrenchment of workers, and

c) Production in such a way that minimum stocks are maintained at

any time to avoid locking up of funds inventory.

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4. Effect of Stock Level policy:

a) Production Budget can show – (a) stablised production every

month, i.e. the maximum possible production or (b) stablised

minimum quantity of stocks, which will reduce inventory costs.

b) In case of stablised production, the production facility will be

fully utilized but the inventory carrying costs will vary according

to stocks held.

c) In case of stablised stocks, however, the inventory carrying costwill be lowest but there may be under-utilisation of capacity.

Purposes of Plant Utilisation Budget

Plant Utilisation Budget represents, in terms of working hours,weight or other convenient units of plant facilities required to carry out

the programme laid down in the Production Budget. Its main purpose are-

1. To determine the loads on each process, costs or machines for the

Budget Period.

2. To indicate the processes or cost centres which or overloaded so that

corrective action may be taken, e.g. (i) working overtime (ii) sub-contracting (iii) expansion of production facility, etc.

3. To adjust & alter the Sales Production Budgets where it is not

possible to increase the capacity of any of the overloaded processes.

4. To taken steps to increase sales in order to utilize available surplus

capacity.

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Reasons to Determine Plant Capacity Utililisation:1. It is needed to select a Base Activity for overhead rate determination

or Overhead Distribution.

2. It enables the Company to analyse the under or over-absorption of

overheads for proper treatment thereof.3. It helps to compare the actual capacity utilization with budgeted

capacity utilization and to analyse the deviations for taking

corrective action.

4. Capacity determination helps in preparation Flexible Budgeting and

achieving overall Control over business operations.

5. It is required in connection with schedule VI of the companies Act

for indicating the licensed and installed capacity and also the actual production.

6. It is necessary for the Cost Auditor to give his comments on

capacity utilisation.

7. Capacity utilization is an important factor in Price Fixation.

Steps Involved in preparing the Direct Material

Usage Budget

1. Quality : The quality standards for each item of material have to be

specified. In this connection, standardization of size, quality, colour,

etc. may be considered.

2. Quantity : Standard requirement of each item of materials required

should also be set. While setting the standard quantity, consideration

should be given to normal loss in process. The standard allowance

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for normal loss may be given on the basis of past performance, test

runs, technical estimates, etc.

3. Prices: Standard Prices for each item of materials should be setafter giving consideration to available stocks and contracts

entered into.

After setting standards for quantity, quality and prices, the

Direct Material Budget is prepared using the formula = Each item

of material required for production x Standard Price.

Purchase Budget

1. Meaning: Purchase Budget represents the purchases that must be

made during the budget period to meet the needs of the business.

2. Purposes:

(a) To plan the purchase and place long-term contracts wherenecessary,

Taking into consideration the

(b) To plan the finances required for purchase.

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3. Components: It includes cost of direct Materials, Indirect

Materials, purchase of Services, Finished Goods required for resale

as set out in Sales,

Production Costs, Capital Expenditure, R&D Budgets, etc.

4. Considerations: Purchase Budget is prepared after taking into

account the following factors-

a) Material Consumption Quantities for the Budget production,

b) Planned increase or decrease of inventories,

c) Purchase Orders already placed,

d) Material components or parts to be manufactured within the

factory,

e) Economy Order Quantity,

f) Re-Order Point with safety stocks to cover fluctuations in

demand.

Direct Labour Budgets

The following budgets are prepared in relation to Direct Labour Costs-

1. Labour Hour Requirement Budget: This is based on the following

factors-

a) Budgeted Production and Plant Utilisation,

b) Planned increase or decrease of inventories,c) Purchase Orders already placed,

d) Material components or parts to

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2. Labour Cost Budget: Standard rates of wages for each grade of

labour can be introduced and then the direct and indirect labour cost

budget can be prepared.

3. Manpower Recruitment Budget: This is based on the following

factors-a)Direct Labour Hour required during the period.

b) Effective Hours per worker, for different grades.

c) Existing manpower, their skills, need for training, etc.

d) Labour Turnover rates,

e) Labour market conditions and availability of skilled labour.

4. Advantages: The advantages of labour Budget are-a) It defines the direct and indirect labour force required.

b) It enables the Personnel Department to plan ahead in

recruitment and training of workers so that Labour Turnover

can be reduced to the minimum.

c) It reveals the Labour Cost to be incurred in the manufacture,

and facilitates preparation of Manufacturing Cost Budgets and

Cash Budgets for financing the wage bill.

Production Overhead Budgets

1. Items of Cost : Production Overhead consists of all items of Indirect

Materials, Indirect Labour and Indirect Expenses. Thus, the

estimated Factory Overhead Costs necessary for production should be included in the Factory Overhead Costs Budget. The Production

Overhead Budget is useful for working out the Pre-determined

Factory Overhead Recovery Rates.

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2. Manner of Preparation :

(a) This budget usually includes the total estimated costs for each

item of Factory Overhead. So, a careful study and determinationthe behaviour of different types of costs will be essential in

preparation of Factory Overhead Budget.

(b) Supporting Schedules for Factory OH may be prepared for

each department , classifying the OH into those costs for which

Departmental Managers are responsible and those costs which are

not within their sphere of influence (i.e. apportioned costs), in

order to evaluate performance.

3. Considerations : The following factors are relevant in the

preparation of Factory OH Budget-

(a) Fixed Expenses are policy Costs and hence they are based on

policy matters.

(b) For estimating Indirect Labour, work study may be adopted,

and a flexible estimated of number of indirect workers require

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for each level of direct workers employed is made, e.g. one

supervisor for every twenty direct workers.

(d) For estimating the consumption of Indirect Materials, the age

and condition of the plant and machinery should be taken intoconsideration.

4. Production Cost Budget : Production Cost Budget covers Direct

Material Cost, Direct Labour Cost and Manufacturing Expenses.

After preparing Direct Labour and Production Overhead Cost

Budgets, the summary Budget, i.e. Production Cost Budget, can be

prepared.

Administrative Expense Budget

1. Items of Cost: Administrative Expenses are mostly Policy Costs andare, hence, fixed in nature. Some examples are – Audit Fees,

Depreciation of office Equipment, Insurance, Subscriptions, Postage,

Stationery, Telephone, Telegrams, Office Supplies, etc.

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2. Manner of Estimation: Administrative Expenses are estimated

based on past experience; with due regard to anticipated changes

either in general policy or the volume of business. To control AOH,

it is necessary to review them frequently and to determine at regular

intervals whether or not these expenses continue to be adjusted.

Cash Budget

Many small businesses find it helpful to prepare monthly cash

budgets and to analyze any variances between the budgeted andactual amounts on a monthly basis. This enables small business owners

and managers to stay on top of any unexpected cash uses.

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There are three main components necessary for creating a cash budget.

They are:

• Time period

• Desired cash position

• Estimated sales and expenses

Time Period :- The first decision to make when preparing a cash

budget is to decide the period of time for which your budget will apply.

That is, are you preparing a budget for the next three months, six months,

twelve months or some other period? In this Business Builder, we will be

preparing a 3-month budget. However, the instructions given are

applicable to any time period you might select.

Cash Position:- The amount of cash you wish to keep on hand will

depend on the nature of your business, the predictability of accounts

receivable and the probability of fast-happening opportunities (or

unfortunate occurrences) that may require you to have a significant

reserve of cash.

You may want to consider your cash reserve in terms of a certain

number of days’ sales. Your budgeting process will help you to

determine if, at the end of the period, you have an adequate cash reserve.

Estimated Sales and Expenses:- The fundamental concept of a cash

budget is estimating all future cash receipts and cash expenditures thatwill take place during the time period. The most important estimate you

will make, however, is an estimate of sales. Once this is decided, the rest

of the cash budget can fall into place.If an increase in sales of, for

example, 10 percent, is desired and expected, various other accounts must

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be adjusted in your budget. Raw materials, inventory and the costs of

goods sold must be revised to reflect the increase in sales. In addition,

you must ask yourself if any additions need to be made to selling or

general and administrative expenses, or can the increased sales be

handled by current excess capacity? Also, how will the increase in sales

affect payroll and overtime expenditures?At a minimum, the following categories of expected cash receipts

and expected cash payments should be considered:

Cash balance

Expected cash receipts

Cash Sales

Collections of accounts receivable

Other income

Expected cash expenses:

Raw material (inventory)

Payroll

Other direct expenses:

Advertising

Selling expenses Administrative expense

Plant and equipment expenditures

Other payments

Conclusion

From the findings of the study, it was concluded that the appropriate

system of budgeting and budgetary control has been adopted.

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This system has also provided guidelines for managers and

supervisors to ensure that they think well ahead of time to foster effective

utilization of limited resources of the organization. Because budget

preparation plans are made ahead of time, the targets which management

of the pharmacy hopes to achieve are most often easily recognized.

The preparation of budget helps in designing or clarifying the lines of horizontal or vertical communication within the organization. The

respondent also gave his general impressions on budgetary control at

Ernest Chemist; he said the budgetary control system which is currently

in use is more appropriate for the company since the system involves

comparison of actual levels of performance against budgets and reports

all variances with proper analysis to provide a basis for future courses of

action.

Based on this he thinks the current budgetary control has intensively

improved as compared to the past years and he hopes that it will be better

for the years to come. On the other hand, though the appropriate system

is adopted and is in use, there are still problems with its effectiveness.

These problems are associated with the ethical issues mentioned earlier,

for example the lack of true integrity in the budgets. This stands to back

the statement made by Maher and Deakin (1994), which suggests thatcompanies should provide incentives for people to report truthfully,

meaning the company must reward both for honest estimate and good

performance.

BIBLIOGRAPHY

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Abdul Rahman, I.K., Abdul Rahman, A.Z., Tew, Y.H. and Omar, N.

(1998), “A

Survey On Management Accounting Practices In Malaysian

Manufacturing

Companies”, Management Accounting Practices Paper 3, Concurrent

session IC,International Management Accounting Conference, National University

of Malaysia

Agrawal, S. P. 1986. Inflation, maintenance of capital and IRR models of

capital budgeting. Decision Sciences (Winter): 1-15.

Ailman, H. B. 1950. Basic organizational planning to tie in with

responsibility accounting. N.A.C.A. Bulletin (May): 1107-1117.

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Budgetary Control of india