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Unit 8: Budgetary Control
It is in other words as “detailed plan of action of the business for a definite period of time.” It is Notes
a statement of financial affairs/quantitative terms of an activity for a defined period, to achieve
the enlisted objectives.
Did u know? What is budgeting?
Budgeting is the course involved in the preparation of budget of an activity.
8.1 Meaning of Budgetary Control
Budgetary control contains two different processes one is the preparation of the budget and
another one is the control of the prepared budget.
According to J. Batty, “Budgetary control is a system which uses budgets as a means of planning
and controlling all aspects of producing and/or selling commodities and services.”
According to ICMA, England, a budgetary control is, “the establishment of budgets relating to
the responsibilities of executives to the requirements of a policy and the continuous comparison
of actual with budgeted results, either to secure by individual action the objectives of that policy
or to provide a basis for its revision”.
Figure 8.1: Steps Involved in Budgetary Control
Preparation of the Budget for definite future
Actual performance has to be recorded
Comparison in between the actual and budget figures
Corrective steps Deviations in between Actual & Budget
Revision of the budget
8.2 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 co-ordinated with
the help of budgetary control.
9. To define the goal of the enterprise.
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