Q. Define Budgetary Control. Describe the objectives of budgetary control.
SBP
Ans. MEANING OF BUDGETARY CONTROL: Budgetary control is an important technique of control on business activities by management, in which business activities are operated on the basis of pre-prepared budget and thereafter actual results are evaluated in the light of budget estimates.
DEFINITIONS OF BUDGETARY CONTROL: Important definitions of budgetary control are as follows:
1. According to Brown and Howard, “Budgetary control is a system of controlling costs which includes the preparation of budgets, co-ordinating the departments and establishing responsibilities, comparing actual performance with budgeted and acting upon results to achieve maximum profitability.”
2. According to J. Batty, “Budgetary Control is a system which uses budgets as a means of planning and controlling all aspects of productivity and/or selling commodities or services.”
In brief, budgetary control is a tool of management control and accounting which directs and co-ordinates the working operation on the basis of budgets. If there are variances in actual results, then they are corrected or budget is modified so that the objective of maximum efficiency as per the policy of management may be achieved.
OBJECTIVES OF BUDGETARY CONTROL: Budgetary control is essential for policy planning and control. It also acts as an instrument of co-ordination. The main objectives of budgetary control are as follows:
1. To assist in policy formulation on the basis of proper and reliable data.
2. To ensure planning for future by setting up various budgets.
3. To determine short-term and long-term financial and physical targets.
4. To operate various cost centres and departments with efficiency and economy.
5. To classify expenses according to their nature such as direct and indirect expenses; fixed, variable and semi-variable, etc.
6. To help administration as under this system, executives perform their functions according to pre-determined budgets.
7. To anticipate capital requirements and to make necessary arrangements for it.
8. To make cost accounting more reliable and systematic.
9. To promote research in order to bring down cost, to increase efficiency, and to achieve the targets of sales.
10. To develop co-ordination and co-operation among employees and executives.
11. To eliminate waste and profitability.
12. To correct the variations from the established standards.
13. To fix the responsibility of various individuals in the organisation.
VK
Ans. The main objective of budgetary control is to maximise the profits by proper use of limited business resources. It is an important tool for policy planning and control. The main objectives of budgetary control are as follows:
1. To help in policy making.
2. To determine the capital requirement.
3. To coordinate the activities of different departments.
4. To control the costs of various departments.
5. To control research and development activities.
6. To eliminate the wastage and increase in profitability.
7. To anticipate capital expenditure for the future.
8. To bring economy in costs by classifying them into fixed and variable.
9. To increase the efficiency of production.
10. To help the management in administrative functions.
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