Page 149 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Self Assessment

Fill in the blanks:

12. Budgetary control contains two different processes one is the preparation of the budget
and another one is the ……………… of the prepared budget.
13. ……………… is a system which uses budgets as a means of planning and controlling all
aspects of producing and/or selling commodities and services.

7.5 Features of Budgetary Control System

The following are the essentials or pre-requisites for the successful implementation of a sound
system of budgetary control:
(i) The business objectives, plans and policies should be clearly defi ned.
(ii) The organisational chart should be clear with responsibility and authority.
(iii) The budgeted output should be stated in clear terms.

(iv) Budget committee should be setup for the establishment and efficient execution of the plan.
(v) Budget centres should be established for cost control and all budgets should be related to
cost centres.
(vi) The budgetary control system should have full support of top management of the
organisation.
(vii) The accounting system should provide accurate and timely information.
(viii) Staff of the organisation should be strongly and properly motivated towards the system.
(ix) The budget should lay down the targets which are realistic and attainable, and

(x) The budgets should be flexible nature for permit the adjustments in the light of changed
operational circumstances.

7.6 Objectives of Budgetary Control

The following are the key objectives of budgetary control:
1. To use different levels of management in a co-operative endeavour for achievement of the
objectives of the fi rm.
2. To facilitate centralised control with delegated authority and responsibility.
3. To achieve maximum profitability by planning income and expenditure through optimum

use of the available resources.
4. To ensure adequate working capital in other resources for efficient operation of business.

5. To reduce losses and wastes to the minimum.
6. To bring out clearly where effort is needed to remedy the situation.

7. To see that the firm is not deflected from marching towards its long-term objectives without

being overwhelmed by emergencies.
8. Various activities like production, sales, purchase of materials, etc., are coordinated with
the help of budgetary control.
9. To define the goal of the enterprise.

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