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Unit 9: Budgetary Control

Cash budget is nothing but an estimation of cash receipts and cash payments for specified Notes
period. It is prepared by the head of the accounts department i.e. Chief Accounts Officer.
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.
Responsibility accounting is a concept of accounting performance measurement systems.

The basic idea under responsibility accounting is that large diversified organizations are
difficult, if not impossible to manage as a single segment.

9.7 Keywords

Budget Control: Quantitative controlling technique to assess the performance of the organization.

Budget: A financial statement prepared for specified activity for future periods.
Budgeting: Activity of preparing the budget is known as budgeting.
Cash Budget: It is a statement prepared by the organization to identify the future needs and
receipts of cash from the yester activities.
Cost center: A cost center is part of an organization that does not produce direct profit and adds
to the cost of running a company.

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.
Investment center: A unit within an organisation whose manager not only has profit
responsibility but also some influence on capital expenditures.
Profit Center: A segment of a business for which costs, revenues, and profits are separately
calculated.

Revenue Center: Unit within an organization that is responsible for generating revenues.
9.8 Self Assessment

Choose the appropriate answer:
1. Budget is a statement of
(i) Qualitative affairs (ii) Quantitative affairs
(iii) Financial affairs (iv) Both (b) & (c)

2. Budgets can be classified into
(i) By functions (ii) By time
(iii) By flexibility (iv) (a), (b) & (c)

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