BUDGETARY CONTROL

Define Budget
Define Budgetary Control
Objectives
Frame Work
Key Factors
Types of Budget
Budgetary Control

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 1
 Budget
• Statement expressed in monetary &/or
quantitative terms, reflecting the policy of a
business and determining business operations
in respect of a particular trading period
• Organization budget represents an estimate of
future costs and revenues from business
perspective

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 2
 Stages for preparing Budget
• Establishing financial objectives
• Forecasting revenue
• Estimating expenses
• Determining net income
• Reviewing and approving the budget

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 3
• Budgeting: Budgeting is the process
by means of which budgets are
evolved for a business as well as
the various departments/sections
of a business

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 4
Budgetary Control

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL 5
Steps involved in budgetary control
• Objectives should be defined & specified
by budgetary control
• business plans are to be prepared by
budgetary control
• Budgetary control translates the plans into
budgets & relates to particular section of
the budget, the responsibilities of
individual executives & managers
BHM305 - B.Sc. in H & H.A.
Sem VI BUDGETARY CONTROL
Slide number 6
Steps involved in budgetary control
• Budgetary control compares the actual
results with the budget, differences
between the actual & budgeted
performance are calculated
• Major differences are investigated by
budgetary control

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 7
Steps involved in budgetary control
• In a suitable form, budgetary control presents
the information to the management, relating
the variances to individual responsibility
• To avoid repetition of any over-expenditure or
wastage, management takes corrective actions
• Alternatively, where due to the change in
circumstances, the budgeted targets cannot be
achieved, the budget is revised

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 8
 Objectives of Budgetary Control
• Compel for planning
• Communication of ideas & plans
• Coordinating the activities
• Establishing a system of control
• Motivating employees

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 9
 Framework for
Budgetary Control

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL 10
Essentials of Budgetary Control
• Organization for Budgetary Control
• Budget Centres
• Budget Manual
• Budget Officer
• Budget Committee
• Budget Period
• Determination of Key Factor
BHM305 - B.Sc. in H & H.A.
Sem VI BUDGETARY CONTROL
Slide number 11
Organization for Budgetary Control
• Proper organization is essential
• A Budgetary Committee is formed comprising of
departmental heads of various departments
• Chief Executive
• Budget officer is the convener of the budget
committee who co-ordinates the budgets of
different departments

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 12
 Budget Centres
• Part of the organization for which the budget is
prepared
• May be a department, section of a department or any
other part of the department
• Establishment of budget centres is essential for
covering all parts of the organization
• Also necessary for cost control purposes
• Appraisal performance of different parts of the
organization becomes easy

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 13
 Budget Manual
• A document which spells out the duties
and also the responsibilities of various
executives concerned with the budgets
• Specifies relations amongst various
functionaries

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 14
 Budget Officer
• Chief Executive appoints some person as
Budget Officer
• Empowered to scrutinize the budgets and
to make changes in them
• Actual performance of different
departments communicated to the Budget
Officer

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 15
 Budget Officer
• Determines the deviations in the budgets and
the actual performance
• Takes necessary steps to rectify the deficiencies
if any
• Works as a coordinator among different
departments
• Also informs the top management about the
performance of different departments

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 16
 Budget Committee
• In small-scale concerns, accountant is made
responsible
• In large-scale concerns, a committee known as Budget
Committee is formed
• Heads of all the important departments are members
of this committee
• Committee is responsible for preparation and
execution of budgets
• Budget Officer acts as a convener of this committee

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 17
 Budget Period
• Depends upon the following considerations:
1. The type of budget i.e., sales budget, production
budget, raw materials purchase budget, capital
expenditure budget. A capital expenditure budget may
be for a longer period i.e. 3 to 5 years purchase, sale
budgets may be for one year
2. The nature of demand for the products
3. The timings for the availability of the finances
4. The economic situation of the country
5. The length of trade cycles
BHM305 - B.Sc. in H & H.A.
Sem VI BUDGETARY CONTROL
Slide number 18
Determination of Key Factor
• Factor that influences all other budgets is
known as Key Factor or Principal Factor
1. Sales volume
2. Seating capacity
3. Management policy
4. Materials
5. Labour

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 19
 Types of Budget
• Sales budget
• Production budget
• Capital budget
• Cash flow/cash budget
• Marketing budget
• Project budget
• Revenue budget
• Expenditure budget
BHM305 - B.Sc. in H & H.A.
Sem VI BUDGETARY CONTROL
Slide number 20
Budgetary Control

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL 21
Advantages of Budgetary Control
• Maximization of Profits
• Co-ordination
• Specific Aims
• Tool for Measuring Performance
• Economy

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 22
Advantages of Budgetary Control
• Determining Weaknesses
• Corrective Action
• Consciousness
• Reduces Costs
• Introduction of Incentive Schemes

BHM305 - B.Sc. in H & H.A.

Sem VI BUDGETARY CONTROL
Slide number 23
Limitations of Budgetary Control
• Uncertain Future
• Budgetary Revision Required
• Discourage Efficient Persons
• Problem of Co-ordination
• Conflict Among Different Departments
• Depends Upon Support of Top
Management
BHM305 - B.Sc. in H & H.A.
Sem VI BUDGETARY CONTROL
Slide number 24