Financial Control Techniques (Budget)

By: Ganesh Raman

 quantitative statement stated in monetary value.
the managements plans to achieve certain objective in a
given time frame.
Budgeting period depends on the requirements of the
user and is prepared before the start of financial period.
For example: The Malaysian budget for 2017 is prepared
and presented to the parliament in September 2016.
Departments and Units in an organization will prepare a
separate budget according to the units plans and goals
and it called as Component budget.
 Sales Budget
Operational Budget
Direct Material Budget

Production Budget

Component Budget

Balance sheet budget

Cash Budget
Financial Budget
Capital expenditure
budget
 Budget can be prepared in a fixed and flexible
format.
Fixed budget estimates are based on single level
of activity.
Flexible budget estimates are based on several
level of activity.
Budget are also used as a control tool through
the preparation of the budget performance
report.
The report compares revenues with the actual
cost of activities and the budgeted cost for
operational level that was achieved.
 Each division, department, or unit in an organization
will prepare the budget performance according to
the suitable frequency.
The more often reports are prepared, the
organizations the organizations operation and
financial position will be more in control.
The differences between actual and planned
achievement in the budget are known as variances.
Positives variance shows that actual achievements
are better than planned achievements, while
negative variances show that the planned
achievements are better than actual achievements.
 Management must investigate the variances and
find the causes of the variances. Some causes
are under the managements control.
Therefore, corrective action to eliminate the
variances can be taken promptly. If corrective
action cant be performed especially for
variances caused by factors outside of the
managements control then the budget must be
adjusted.
Types Of Budgets