Budget, Budgeting & budgetary control
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Transcript of Budget, Budgeting & budgetary control
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Budgeting & Budgetary Control
Submitted by:
(MBA Ist SEM.)
• Chetna prasad• Shikha pathak• Chitra totwani• Shilpi Panchal
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Contents
• Budgeting [characteristics]
• Budgetary control• Difference in budget, budgeting, budgetary
control
• Essentials in budgetary control
• Requisites for budgetary control system
• Merits & limitations
• Zero-based budgeting
• Difference in Traditional & Zero based budgeting.
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Definition & Meaning of Budgeting
“A budget is a pre-determined statement of management policy during a given period which provides a standard for comparison with the results actually.”
-Brown & Howard “Budgeting is a preparation of comprehensive operating and financial plans for specific intervals of time”
-Shilinglaw
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Characteristics of good Budgeting
.• Good budgeting should involve persons at
different levels while preparing the budgets.
• There should be proper fixation of authority and responsibility.
.
• The target of budget should be realistic, if targets are difficult to be achieved then they will not enthuse the persons concerned
• A good accounting system is also essential to make the budgeting successful.
.• Budgeting system should have whole
hearted support of the top management.• The employees should be imparted
budgeting education.
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Definition & meaning of Budgetary Control
“Budgetary control is a system which uses budgets as a means of planning and controlling all aspects of producing/selling commodities or services”
-J Batty
“A budget is a means and budgetary control is the end result”
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Essentials of Budgetary Control
Organization for budgetary control.
Budget centers
Budget officers/committee
Budget manual
Budget period
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Organization chart for Budgetary Control
Chief Executive
Budget Officer
Budget committee
Production
manager
Sales manager
Finance manager
Accounts manager
Personnel manager
Research
& develop
ment
manager
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Requisites for Budgetary Control System
Clarifying objectives
Proper delegation of authority & responsibility
Proper communication & budget education system
Participation of all employees
Motivation & flexibility
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Budgetary control
Advantages
Tool for measuring performance
Creates budget consciousness
Provides specific aims
Introduction of incentive scheme
Limitations
Uncertain future, revision required
Discourages efficient persons
Problem of co-ordination
Conflict in departments
Depends on Top managementTo make COST accounting more reliable
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Difference in Budget, Budgeting, & Budgetary Control.
Budgets are business estimates for future period, budgeting is the process of preparing these estimates while budgetary control is a system of achieving performance on the basis of budgets.
Budget and budgeting are the parts of planning whereas as budgetary control is linked with co-ordination & control.
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Zero-Base Budgeting
Zero base budgeting is the latest technique of budgeting & it has an increased use of management tools.
In zero base budgeting every year is taken as a new year and previous year is not taken as a base.
It enables management to allocate funds.
It improves efficiency of management and make optimum use of resources.
Helpful in identifying economical & wasteful areas.
Related to organizational goals.
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Process of Zero Base Budgeting
Determine Objectives
Plan of action
Prioritization of activities
Cost Benefit Analysis
Approve decision package & Finalize Budget
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Zero Base Budgeting
Advantages
Efficient allocation of resources.
Optimum utilization of resources
Enhances capability of Managers.
Identifies & eliminates wasteful and obsolete operations.
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Traditional v/s Zero BaseBudgeting
Traditional Budgeting Zero Base Budgeting
.• It is accounting
oriented
. • Its approach is monitoring towards expenditure
.• Its focus is on
increase and decrease of expenditure
. • It is simple to read & prepare
.• Its method of
preparation is based on “extrapolation”
. • It is decision oriented
.• Its approach is
towards achievement of objectives
. • Its focus is on cost benefit analysis
. • It is more complex.
.• Its preparation is
based upon “selection of decision package”
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Thank you