Page 160 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 8: Budgetary Control

Self Assessment Notes

Fill in the blanks:

15. The ..................... considers the current year as a new year for the preparation of the
budget.

16. The very first step is to prepare the Zero-base Budgeting is to enlist the ..................... .
8.6 Summary

Budget is an estimate prepared for definite future period either in terms of fi nancial or
non-fi nancial terms.
Cost control contains two different processes one is the preparation of the budget and
another one is the control of the prepared budget.
The production budget is a statement of goods, how much should be produced.

The ultimate aim of the production budget is to find out the volume of production to be
made during the year based on the sale volume.
Sales Budget is an estimate of anticipation of sales in the near future prepared by
the responsible person for the sale of a product by considering the various factors of
infl uence.

The expected increase or decrease in the sales volume should be incorporated at the time
of preparing the sales budget from the yester periods sale fi gures.

Cash budget is nothing but an estimation of cash receipts and cash payments for specifi ed
period. It is prepared by the head of the accounts department, i.e. Chief Accounts Offi cer.

Constant budget is mainly meant for the fixed overheads of the firm, which are constant in
volume irrespective level of production.
Zero-base budgeting is one of the renowned managerial tools, developed in the year 1962
in America by the Former President Jimmy Carter.

The Zero-base budgeting considers the current year as a new year for the preparation of the
budget but the yester period is not considered for consideration.
The future activities are forecasted through the zero base budgeting in accordance with the
future activities.

8.7 Keywords

Budget: A financial statement prepared for specified activity for future periods.

Budgeting: Activity of preparing the budget is known as budgeting.
Budget Control: Quantitative controlling technique to assess the performance of the
organization.
Cash Budget: It is a statement prepared by the organization to identify the future needs and
receipts of cash from the yester activities.

Flexible Budget: It is a financial statement prepared on the basis of principle of flexibility to identify

the cost of the unknown level of production from the existing level of operational capacity.

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