Various techniques are used by the management to control business activities, in which budgetary control is an important technique. In budgetary control, prior plans are made in relation to many business activities like production, purchase and sale etc. These plans are called budgets.
What Is Budgetary Control
Both budget and budgetary control are related to each other. The detailed description of budget and budgetary control is as follows:-
Budget
A business budget is such a written plan in which monetary or numerical details of business policies to be adopted for a certain future time period are presented.
Budget is prepared for a fixed period like monthly, quarterly and yearly. Under the budget, forecasts of expenses on purchase, sale and production are made and proper availability of resources for a certain period is also kept in mind.
Budgetary Control
In the objectives of cost accounting, it is important not only to know the actual cost, but it is also necessary to control the costs of production and reduce them comparatively.
Budgeting and budgetary control have an important place in those techniques, the use of which is considered necessary for carrying out all these types of tasks.
Budgetary control is a predetermined plan on the basis of which targets are set to control the expenditure and responsibilities of the individuals are also fixed for achieving these targets.
Budgetary control is a method of controlling business activities by management, in which industrial activities are carried out on the basis of a pre-prepared budget and the actual results are evaluated by accounting.
To establish efficient control over costs and earn maximum profit In order to do this, it becomes necessary that financial plans are made for all the departments.
These plans are termed as budgets and later the difference between the two is reviewed by comparing the budget with the actual results.
Need And Objective of Budgetary Control
(1) Determination of Targets
Budgetary control is helpful in setting short term and long term targets for the benefits of the organization. Apart from this, financial and physical goals can also be set with its help.
(2) Control Over Costs
Under budgetary control, different budgets are prepared for different departments for the purpose of controlling the costs, so that it can be determined that which department has spent more than the approved expenses and Who less This can minimize costs.
(3) Finding Out the Variations
Budgetary control finds out the causes of deviations by comparing the actual results with the prescribed parameters and controlling these deviations is the main objective of budgetary control.
(4) Encouragement to Research and Development
The main objective of budgetary control is to find out deviations and deficiencies and to find ways to remove those deficiencies. To fulfill these objectives, it tries to increase efficiency, reduce costs and achieve sales targets by encouraging research and development, as a result of which the development of the entire organization is possible.
(5) Determination of Amount of Capital
The purpose of budget preparation in budget control is to obtain information about capital expenditure and research and development expenditure for a fixed period.this, it is determined that what amount of capital will be required for these expenses.
(6) Co-operation
Another objective of budgetary control is to develop a sense of cooperation among the officers and employees of the organization so that the set goals can be achieved easily.
(7) Helpful for Administration
All (managerial functions are performed by the various budgets or master budgets) by the managers. Helping the management for these works is also an important objective of budgetary control. Therefore, budgetary control is also helpful for administrative works.)
(8) Economical
Budgetary control does not only control production expenses, but its important objective is to bring economy in management, advertising, buying and selling and administrative expenses etc.
(9) Determination of Responsibility
Determining the rights and responsibilities of all officers and employees related to the work to run all the departmental activities of the organization smoothly and according to the purpose is also an important objective of budgetary control.
(10) Work Efficiency
The purpose of budgetary control is not only to see whether the works have been planned or not, but also to see whether the work is being done efficiently according to the prescribed plan or not. Therefore, budgetary control is responsible for all the activities of the organization. operates efficiently.
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