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Budgetary ControlBy Aakrati Rampal, Sauumye Chauhan, Jhanvi Dang, Shivani Sisodia & Hashmeet Kaur

What is a Budget?Abudgetis a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses.It expresses strategic plans of business units, organizations, activities or events in measurable terms.What Is Budgetary Control?Budgetary control is the process of developing a spending plan and periodically comparing actual expenditures against that plan to determine if it or the spending patterns need adjustment to stay on track.

This process is necessary to control spending and meet various financial goals. Governments rely heavily on budgetary control to manage their spending activities, and this technique is also used by companies as well as private individuals, such as heads of household who want to make sure they live within their means.

3PlanningCo-ordinationControls And Performance Evaluation

Communication

Objectives Of Budgetary ControlPlanning: Business requires planning to ensure efficient and maximum use of their resources. The Budget influences strategies that need to be followed by the originations. It cultivates forced planning aiming managers. Co-Ordination: Executives are forced to think of the relationship between their department and the company as a whole This removes unconscious biases against other departments. It also helps to identify weaknesses in the organization structure Control: Budgets also from the basis of performance evaluation in an organization as they reflect realistic estimates of acceptable and expected performance.

4Advantages Of Budgetary ControlCompels management to think about the futureForces management to look ahead, to set out detailed plans for achieving the targets for each department, operation and (ideally) each manager, to anticipate and give the organization purpose and directionPromotes coordination and communication.Clearly defines areas of responsibilityProvides a basis for performance appraisal Enables remedial action to be taken as variances emergesMotivates employees by participating in the setting of budgetsImproves the allocation of scarce resourcesAccording To TimeAccording to FunctionProductionunitsmaybecalculatedinthefollowingway:budgetedsales+desiredclosingstockopeningstock. 8According to FunctionAccording to FunctionAccording to FunctionAccording to FlexibilityMaster BudgetTheaggregationofalllower- level budgets produced bya company'svariousfunctionalareasAlsoincludesbudgetedfinancialstatement,a cash forecast andafinancingplan.Typicallypresentedineither amonthly formatquarterlyformatUsuallycoversacompany'sentirefiscalyearIsthecentralplanningtoolthatamanagement teamusesTodirect theactivitiesofacorporationTojudgetheperformanceofitsvarious responsibilitycenters.Thebudgetsthatrollupintothemasterbudgetinclude:Directlaborbudget Directmaterialsbudget Endingfinishedgoodsbudget Manufacturingoverheadbudget ProductionbudgetSalesbudget Sellingandadministrativeexpensebudget

Oncethemasterbudgethasbeenfinalized,theaccounting staffmayenteritintothe companys accounting software, so that software can issue the financial reports comparingbudgetedandactualresults.

Zero Base BudgetingAplanningandbudgetingprocess whichrequireseachmanagerto justifyhisentirebudgetrequestin detailfromscratch(hencezerobase)Shiftstheburdenofprooftoeach manager to justify why heshouldspendmoneyatall. Theapproachrequiresthatall activitiesbeanalyzedindecision packageswhichareevaluatedby systematicanalysisandrankedintheorderofimportance.StepsinZeroBaseBudgeting1.Determinationofobjectives2.Determinationofextentof application 3.Identificationofdecision makingunits 4.Throughthecost- benefitanalysis 5.Preparationofbudgets THANK YOU