In our daily life, we use to prepare budgets for matching the expenses with income; and available funds can be invested in a profitable manner. Similarly in business, budgets are prepared on the basis of future estimated production and sales in order to find out the profit in a specified period. A budget is in the nature of an estimate and is a quantified plan for future activities to coordinate and control the use of resources for a specified period. Thus, budget is a quantitative statement of management plans and policies for a given period and is used as a guide for the purpose of attaining the given objectives.Budget is used as standard with which actual performance is measured.
Budgets must be prepared with full knowledge and acceptance by the executives whose performance is to be measured against the budget.Different types of budgets are prepared for different purposes.Budgeting may be defined as the process of preparing plans for future activities of a business enterprise after considering and involving the objectives of the said organization. This also provides process/steps of collection and comparison of data, by which deviations from the plan, either favourable or adverse, can be measured. This analysis is helpful in performance analysis, cost estimation, minimizing wastage and better utilisation of resources of the organisation.
Definition of Budget and Budgetary Control
Budgeting is a process, which includes two important functions: Budget and Budgetary control, where Budget is a planning function and budgetary control is a controlling system or technique. One has the knowledge that planning looks to the future and a process by which a manager looks to the future, searches for alternative courses of action and predetermines a course of action to be taken in relation to known events and the possibilities of future problems. Thus, the budget will do this work for the activities of a business enterprise. I C. M. A., London defines the meaning of budget,“Budget is financial and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given object”.
At the same time, controlling is the process of measuring current performances and guiding them towards some predetermined goals. The essence of control lies in checking existing actions against some desired results determined in the planning process.Thus, the budgetary control is a tool of control to achieve the budgeted goals. I. C. M. A., London defines budgetary control as, “Budgetary control is the establishment of budgets relating to the responsibilities of executives to the requirement 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.”
In nutshell, Budgetary control is a system and a technique which uses budgets as a means of controlling all aspects of the business and is designed to assist management in the allocation of responsibility and authority and for the measurement of actual performance, for the analysis of variations between budgeted and actual results and to develop basis of measurement. A budget is a means and budgetary control is the result, evolved in the light of experience gained and results achieved, with which to evaluate performance and efficiency of the operations.
Budgets must be prepared with full knowledge and acceptance by the executives whose performance is to be measured against the budget.Different types of budgets are prepared for different purposes.Budgeting may be defined as the process of preparing plans for future activities of a business enterprise after considering and involving the objectives of the said organization. This also provides process/steps of collection and comparison of data, by which deviations from the plan, either favourable or adverse, can be measured. This analysis is helpful in performance analysis, cost estimation, minimizing wastage and better utilisation of resources of the organisation.
Definition of Budget and Budgetary Control
Budgeting is a process, which includes two important functions: Budget and Budgetary control, where Budget is a planning function and budgetary control is a controlling system or technique. One has the knowledge that planning looks to the future and a process by which a manager looks to the future, searches for alternative courses of action and predetermines a course of action to be taken in relation to known events and the possibilities of future problems. Thus, the budget will do this work for the activities of a business enterprise. I C. M. A., London defines the meaning of budget,“Budget is financial and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given object”.
At the same time, controlling is the process of measuring current performances and guiding them towards some predetermined goals. The essence of control lies in checking existing actions against some desired results determined in the planning process.Thus, the budgetary control is a tool of control to achieve the budgeted goals. I. C. M. A., London defines budgetary control as, “Budgetary control is the establishment of budgets relating to the responsibilities of executives to the requirement 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.”
In nutshell, Budgetary control is a system and a technique which uses budgets as a means of controlling all aspects of the business and is designed to assist management in the allocation of responsibility and authority and for the measurement of actual performance, for the analysis of variations between budgeted and actual results and to develop basis of measurement. A budget is a means and budgetary control is the result, evolved in the light of experience gained and results achieved, with which to evaluate performance and efficiency of the operations.
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