Budgetary control:

Budgetary control:

Introduction:

Budget is a plan of action expressed in quantitative manner which related to future period. It is always expressed in terms of money and quantity.

CIMA defines Budget as “A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure, and the capital to be employed. May be drawn up showing incremental effects on former budgeted or actual figures, or be compiled by zero-based budgeting”.

It helps the management about its objectives to achieve, how the plans to be adopted, whether individual plans fit in the overall organizational objective.

In CIMA (London) terminology –

“Budgetary control is the establishment of budgets relating to responsibilities of executives to the requirement 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 revision.”

Budgets and Forecasts.

A forecast is a prediction of what is going to happen as a result of a given set of circumstances. A budget is an approved plan of action expressed in figures relating to a specified period of time.

Advantages:

1) It helps the management to plan the functions before the action occurs.

2) There will be good co-ordination and participation between the management.

3) All functional heads are get into responsible to make plans with the plans of other departments.

4) It demands the most economical use of labour, materials, facilities and capital.

5) It helps the management to face the changes in business conditions.

6) It helps to understand the problems of co-workers.