Budgetary Control


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The management is efficient if it is able to accomplish the objective of the enterprise. It is efficient when it accomplishes the objectives with minimum effort and cost. In order to attain long-range efficiency and effectiveness, management must chart out its course in advance. A systematic approach to facilitate effective management performances profit-planning and control, or budgeting. Budgeting is therefore an integral part of management. In a way, a budgetary control system has been described as a historical combination of  a “goal – setting machine for increasing an enterprise’s profits, and a goal-achieving machine for facilitating organizational coordination and planning while achieving the budgeted targets.”

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Definitions

The Institute of Cost and Management Accountants, London, gives the following definitions:

 

A budget is “a financial and / or quantitative statement, prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective. It may include income, expenditure and the employment of capital.*

 

Budgetary control. “The establishment of departmental budgets relating the responsibilities of executive to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of the policy, or to provide a firm basis for its revision.”

 

Thus, a budget is a predetermined statement of management policy during a given period which provides a standard for comparison with the results actually achieved. Budgetary control is a system of controlling costs which includes the preparation of budgets, coordinating the departments and establishing responsibilities, comparing actual performance with that of budgeted and acting upon results to achieve maximum profitability. Budgeting is essentially concerned with planning, and can be broadly illustrated by comparison with the routine a ship’s captain follows on each voyage.

 

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We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

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