Budgetary Control.

Q65. Write short notes about budgetary control:

  1. Meaning,
  2. Feature,
  3. Objectives,
  4.  Advantages,
  5.  Disadvantages.

Ans.

  1.  Meaning: The establishment of budgets relating to the responsibilities of executives to the requirement a policy, the continuous comparison of actual with budgeted result either to secure by individual action the objectives of that policy or to provide a base for its revision.
  2. Features:
    1.  Determining the variety of activities to be performed to achieve determined goals.
    2.  Setting up budget for each level of activities.
    3.  Laying out a system of comparison for continuous comparison of actual with budgeted results.
    4. Ensuring that corrective action will be taken where the plan is not being achieved and if that be not possible, for revision of the plan.
  3. Objectives:Portraying all the objectives and aims of the whole business organization and each department separately.
    1. Laying down each executive responsibility so each executive knows what is expected from him.
    2. It provides basis for the comparison of actual results with budgeted data.
    3.  Ensuring best use of available resources by good co-coordination between all the departments.
    4. Providing a basis for revision of current and future policies.
    5. Drawing up a long range plan with a fair measure of accuracy.
    6.  Providing a yardstick against which actual result can be compared.
  4.  Advantages:It helps the management in conducting the business efficiently.
    1. It provide yardstick for comparison of actual results so performance of management can be compared for control purpose.
    2. It reveals all the variants by comparing actual result with budgeted result.
    3. It helps in standard costing.
    4. It helps in framing business and financial policies and continuous revision in it.
    5. It induces the felling of cost consequences.
    6. It ensures effective utilization of all the resources.
  5. Disadvantages:As budget are based on estimates, it may or may not be true.
    1. Budget are considered as a rigid document.
    2. Merely preparation of budget is not the solution of the problem. Proper implementation is more necessary than budget formulation.
    3. Budgetary control is possible only in case of cooperation in between all the departments. Staff cooperation is usually not available.
    4. Its implementation is quite expensive.

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