VISHWALATA ART'S ,COMMERCE AND SCIENCE COLLEGE,

BHATGAON ,YEOLA, DIST-NASHIK

SYBBA (FINANCE) - 2019 Credit Pattern

SEM - III

SUB - B305 MANAGEMENT ACCOUNTING

NAME OF STUDENT : VIKAS MADHUKAR PABALE

EXAM SEAT NO :

NAME OF GUIDANCE : Prof. Akshay Bale

TOPIC : BUDGET AND BUD-
GETARY CONTROL
 INDEX

1 BUDGET 4 DEFINATION

2 INTRODUCTION 5 FEATURES

3 MEANING 6 TYPES OF BUDGET

1 BUDGET
What is Budget ?
A Budget is a statement that gives the details of
‘where money comes from’ and ‘where the money goes
to’.
In technical terms, the money that ‘comes in’ is
referred to by terms such as income, revenue, receipts, etc.,
and the money that ‘goes out’ is referred to as expenses,
expenditure, spending, etc.
2 INTRODUCTION
 A budget is a financial plan to control future operations
and results. It is expressed in numbers, such as dollars, units,
pounds, hours, manpower, and so on. It is needed to operate
effectively and efficiently. Budgeting, when used effectively, is a
technique resulting in systematic, productive management.
Budgeting facilitates control and communication and also provides
motivation to employees.
3 MEANINGE
 The term ‘Budget’ is derived from the French word
‘Bougette’ which means a little bag, containing documents and
accounts. A Budget is a plan which relates to definite period of
time and which is expressed in quantitative terms.
Thus it is a predetermined statement which incorporates
the policy of the management during a given period and serve as
a standard for comparing the actual result. There is a difference
between budget and budgetary control. Budgetary Control on the
other hand means use of the budget.
4 DEFINATION
1) Kohler –
“A Financial Plan serving as a pattern for and a
control over future operations”

2) Brown and Howard –

“ It is a predetermined statement of management
policy during a given period which provides a
standard for comparison with the result actually
achieved.”
5 FEATURES
1) Establishment of budgets for each department or function
of
the organization.
2) Co-ordination of various budgets as a total plan for the
entire organization.
3) Recording and reporting of actual result.
4) Comparing the actual result continuously with the
budgeted
performance.
5) Finding out the variances.
6) Analysing the reasons for such variables.
7) Fixing the responsibilities for every controllable variances.
8) Taking corrective action wherever possible.
9) To see that the mistakes of the past are not repeated in the
future.
10) Revising the budgets in the light of changes in plans and
policies.
6 TYPES OF BUDGET
A ACCORDING TO TIME FACTOR
 1. LONG TERM BUDGET

2. SHORT TERM BUDGET

3. CURRENT BUDGET
 1. LONG TERM BUD-
GET

These budgets are related with forecasting planning

the operations of the business for the period five to ten
years.
 2. SHORT TERM BUDGET

These budgets are used in monetary terms. Short

terms budgets are usually for one or two years.
 3. CURRENT BUDGET

Current budgets based on current conditions and

positions of the business. These budgets are very short
period. For a period up to one accounting period.
B
ACCORDING TO FUNCTIONAL FACTOR
 1. SALES BUDGETS

2. PRODUCTION
BUDGET

3. CASH BUDGET

4. SELLING AND DIS-

TRIBUTION BUDGET

5. PRODUCTION
COST BUDGET
 6. PERSONNEL BUDGET

7. PURCHASE BUDGET

8. RESEARCH AND DEVELOP-

MENT BUDGET

9. PLANT UTILISATION BUD-

GET

10. CAPITAL EXPENDITURES

BUDGET
 1. SALES BUDGETS

• This is the first budget in the business.

• It is the foundation budget on which all the other func-
tional budgets are built up.
• Sales manager should be made directly responsible for
the making and execution of this budget.
• This budget is the forecast of the market i.e sales for
the one year.
While preparing the sales budget the following points
should be taken into consideration
1) Analysis of past sales and interpretation of the past
sales data.
2) Plant Capacity.
3) Seasonal Fluctuations
4) Demand & Supply of Materials
5) Implementing general business conditions

6) Market Research

7) Pricing Policy

8) Corporate Objectives.
 2. PRODUCTION BUDGET

Production Budget will be prepared after the

• preparation of sales budget.
• The basic aim of the production budget is to assure fin-
ished goods to meet the demands of the sales depart-
ment.
• Production budget helps for inventory control.
The production budget is essential and important for
determination of units produced and total cost of the
• finished product.

• It insure that the production of finished goods in quanti-

ties sufficient to meet the requirement of the sales bud-
get.
While preparing the production budget the
production manager has to consider the following
points –

1) Sales Budget
2) Budgeted Factor
3) Production Capacity of the Company
4) Opening and Closing Stock of Finished Goods
5) Management Policy
6) Market Condition
 3. CASH BUDGET

• Cash budget is an essential and important budget.

• It guides the management in making long term plans
• profitable investment.
• Through cash budget the surplus and deficit of finds is
calculated and the surplus funds will be invested in prof -
itable area outside the business.
 4. SELLING AND DISTRIBUTION
BUDGET

It is a forecast of the cost of selling and distribution of

• goods during the budget period.
• This budget is based upon sales budget.
• This budget is prepared by sales manager for preparing
this budget cost will be ascertained by grouping accord-
ing to elements
For this budget some factors are also taking into
consideration i.e.
1) Medium or way of distribution of product
2) Market Area
3) The policy of sales promotion
4) Advertising
5) Period of Credit
6) The mode of packing and delivery charges.
 5. PRODUCTION COST BUDGET

It is an estimate of cost of production, planned for a

• budget period.
• This budget is developed to provide more detailed infor-
mation about the products, process of
production,element wise cost, labour etc.
• It is based upon the production budget and this budget
converted into production cost budget.
 6. PERSONNEL BUDGET

It is related with the direct and indirect labour to carry

out the budget plan as laid down in sales, production,
• cash and capital expenditure budget.
Main objectives of the personnel budget are –
1) Minimise Labour Turnover

2) Efficient Personnel Management.

3) To analyse and stabilisation of the ratio between direct

and indirect labour

4) Proper Labour control and labour appraisal.

 7. PURCHASE BUDGET

When production budget is prepared than determined

• the actual inputs required for production.
• One of such input is the raw material.
• The purchase budget shows the number of units of direct
and indirect material and the services to be purchased
during the budget period.
In preparing a purchase budget, following factors must
be taking into consideration i.e.
1) Opening and closing stock of material.
2) Break Even Point
3) Minimum & Maximum Stock Level.
4) Economic Order Quantity.
5) Financial Resources.
6) List of Suppliers
7) Purchase Order
 8. RESEARCH AND DEVELOPMENT
BUDGET

This is a forecast of the research and development costs

• to be incurred.
• For these expenses prior approval of management is ne-
cessary and should be governed by the business object -
ives.
Research cost are incurred for finding new markets,
new products, techniques and methods of production
• and makes some improvement in them.

There are two types of research –

1) Basic research

2) Applied research
 9. PLANT UTILISATION BUDGET

It is a forecast of plant capacities available for fulfilling

• production according to the production budget.
• The main functions of this budget is to indicate the
budgeted machine load in departments and machines.
 10. CAPITAL EXPENDITURES BUDGET

• It shows the capital expenditure acquired for assets.

• It depends on production and plant budget.
• This budget concerned with available production capaci-
ties, probable reallocation of existing assets and im-
provement in production techniques.
• This budget divided into different projects.s.
• It acts as a guide for the management
C
ACCORDING TO FLEXIBILITY FACTOR
 1. FIXED BUDGET

22. FLEXIBLE BUDGET

 1. FIXED BUDGET

According to ICWA London – “A Budget which is

designed to remain unchanged irrespective of the level
• of activity actually attained.”
• This budget will remain same and will not changed ac-
cording to the circumstances and the level of activity.
It represent the cost details for a specific level of
• activity.
• It does not shows the cost variances.
• This type of budget is not of much use to the manage-
ment.
• This type of budget is rigid or fixed in nature and as such
it is not much used in the small scale or large scale busi-
ness
 22. FLEXIBLE BUDGET

According to ICWA London – “A Budget designed to

change in accordance with the level of activity actually
• attained.”
• This budget provides cost budgeted at different level of
activity.
To prepare flexible budget all cost should be classified
• into 3 types
1) Variable Cost
2) Semi Variable Cost
3) Fixed Cost.
Variable and Semi Variable expenses vary, the extent
• or degree of their variability should be determined.
• After these expenses are determined budgets for each
levels of output can be build up by aggregating the differ-
ent items of expenses of there 3 categories.
• It is also known as variable or sliding scale or control
types budget.
• It adjusts itself automatically to the actual level of activity
attained.
THANK YOU