Q28.

Methodical control of an organization's operations through establishment of standards and targets regarding income and expenditure, and a continuous monitoring and adjustment of performance against them. A control technique whereby actual results are compared with budgets. Advantages of budgetary control 1. Maximization of Profit: The budgetary control aims at the maximization of profits of the enterprise. To achieve this aim, a proper planning and co-ordination of different functions is undertaken. There is proper control over various capital and revenue expenditures. The resources are put to the best possible use. 2. Co-ordination: The working of the different departments and sectors is properly co-ordinate. The budgets of different departments have a bearing on one another. The co-ordination of various executives and subordinates is necessary for achieving budgeted targets. 3. Specific Aims: The plans, policies and goals are decided by the top management. All efforts are put together to reach the common goal of the organization. Every department is given a target to be achieved. The efforts are directed towards achieving come specific aims. If there is no definite aim then the efforts will be wasted in pursuing different aims. 4. Tool for Measuring Performance: By providing targets to various departments, budgetary control provides a tool for measuring managerial performance. The budgeted targets are compared to actual results and deviations are determined. The performance of each department is reported to the top management. This system enables the introduction of management by exception. 5. Economy: The planning of expenditure will be systematic and there will be economy in spending. The finances will be put to optimum use. The benefits derived for the concern will ultimately extend to industry and then to national economy. The national resources will be used economically and wastage will be eliminated. 6. Determining Weakness: The deviations in budgeted and actual performance will enable the determination of weak spots. Efforts are concentrated on those aspects where performance is less than the stipulated. 7. Corrective Action: The management will be able to take corrective measures whenever there is a discrepancy in performance. The deviations will be regularly reported so that necessary action is taken at the earliest. In the absence of a budgetary control system the deviation can determined only at the end of the financial period. 8. Consciousness: It creates budget consciousness among the employees. By fixing targets for the employees, they are made conscious of their responsibility. Everybody knows what he is expected to do and he continues with his work uninterrupted. 9. Reduces Costs: In the present day competitive world budgetary control has a significant role to play. Every businessman tries to reduce the cost of production for increasing sales. He tries to have those combinations of products where profitability is more. 10. Introduction of Incentive Schemes: Budgetary control system also enables the introduction of incentive schemes of remuneration. The comparison of budgeted and actual performance will enable the use of such schemes. LIMITATIONS OF BUDGETARY CONTROL 1. Opposition against the very spirit of budgeting - T h e r e w i l l b e a l w a y s a c t i v e a n d p a s s i v e r e s i s t a n c e t o b u d g e t a r y c o n t r o l a s i t points efficiency or inefficiency of individuals. The opposition is due to human nature- thetendency to resist change. 2. Budgeting and changing economy - The preparation of a budget, which gives a realistic position of the firm's affairsunder inflationar y pressure and changing government, is very difficult. Thus, the accurate position of the business cannot estimate. 3. Time factor - Accuracy in budgeting comes through experience. Management must not expect toomuch expect too much during the development period. 4. Not a substitute for management - Budget is only a management tool. It cannot substitute management. Besides that no b u d g e t a r y p r o g r a m m e r c a n b e s u c c e s s f u l u n l e s s a d e q u a t e a r r a n g e m e n t s a r e m a d e f o r supervision and administration. 5. Co-operation required - T h e s u c c e s s o f t h e b u d g e t a r y c o n t r o l d e p e n d s u p o n w i l l i n g c o o p e r a t i o n a n d teamwork. Budget officer must have co -operation from all department managers. Thesemanagers must feel the responsibility for achieving departmental goals laid down in the budget. Q16. A contingent liability is an amount that may be due depending on future events. Because it cannot be determined whether the amount must be paid until events unfold, the company's likelihood of loss is scored as one of the following: Probable. The future event or events are likely to occur. Reasonably possible. The chance of occurrence of future events is between probable and remote. Remote. The chance of future event or events occurring is slight.

Q19.Preliminary expenses are the nature of fictitious assets. These are the formation expenses of the company before any operation of the business held. These are transferred to the profit and loss accounts and written off every year from the profits of the business. These expenses are shown on the assets of the balance sheet under the head miscellaneous.

Q2Financial Performance Ratios is used to depict the performance of a business. These ratios are derived from the items of a financial statement. There are many ratios that can be determined from the balance sheet. They are used by bankers, investors and venture capitalists as indicators of the strength and health of your enterprise. Some of the more popular ratios are:Cash Ratio -.Quick Ratio Q4 That part of statement of sources and application of funds (also called funds statement)uses of the funds section of the statement of changes in financial position. Using the working capital concept of funds, the four applications are: (1) net loss; (2) increase in noncurrent assets, such as the purchase of land for cash; (3) decrease in noncurrent liabilities such as long-term debt payments; and (4) decrease in stockholders (5) increase in current assets other than cash; Q6. Conversion Cost = Direct Labor Cost + Manufacturing Overhead Cost