BUDGET & BUDGTERY CONTROL, FIXED AND FLEXIBLE BUDGET 
Learning Outcome : -
If you learn this post you will able to following outcome
- Meaning of budget
- Advantage & disadvantage of budget
- importance of Budget
- Budgtery Control
- Fix & Flexible Budget
BUDGET &
BUDGETING
Meaning of Budget
• A
Budget is the monetary or quantitative presentation of business plans and
policies to pursued in the future period of time.
Definition of Budget
• “
A Budget is a financial statement prepared prior to a predetermined period of
time of the policy to be pursued during that period for the purpose of
attaining a given objective.”
(ICMA
London)
• “Budget
is an estimate of future need arranged according to an orderly basis covering
some or all the activities of an enterprise for a define period of time”
(George R. Terry)
Meaning of Budgeting
• Budgeting
is part of management process which includes preparation of budget , budget
control, budget co-ordination, and all those activities that are related with
budget.
Objective of Budgeting
• To
Express the policies and objective in quantitative terms .
• To
Prepare base for work performance
• To
Determine responsibilities of various department .
• To
establish balance between available fund and estimate expenditure
• To
Clarify Business planning
• To
forecast in respect of sales , Cost of production , cash flow etc .
Importance and Advantage of Budgeting
• Action
on the basis of well decided plan
• Mechanism
for policy Implementation
• Communication
• Co
– ordination in Budget preparation
• Co
– ordination in working
• Control
on Cost of production
• Control
on Capital Expenditure
• Effective
for measuring performance
• Feeling
of cost consciousness
Limitation of Budgeting
• Budgets
are based on Plan Estimates
• Budgeting
is not a substitute of Management
• Operation
of the budget plan is not automatic
• Time
effect
• Prohibitive
cost
• Effective
of changing condition
Types of Budget
• On
the basis of period
(1) Long
Term Budget
(2)
Short Term Budget
(3)
Current Budget
• On
the Basis of Flexibility
(1)
Fixed Budget
(2)
Flexible Budget
On the basis of Function
• Master
Budget
• Functional
Budget
– Sales
Budget
– Production
Budget
– Cost
Budget
– Cash
Budget
– Capital
Expenditure Budget
– Other
Budget
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 result are evaluated in the light of
budget estimated.
Characteristics of Budgetary
Control
• Planning
• Co-ordination
• Proper
Recording
• Assignment
of Responsibility
• Review
• Follow
up
Advantage or importance of
Budgeting Control
• A
tool for Improvement in Planning
• As
an aid in Co – ordination
• A
vehicle of Comprehensive Control
• An
Instrument of Motivation
• A
media of Communication
Limitation Of Budgeting Control
• Changing
Situation
• Effect
of Unclarified facts
• Dictatorial
Attitude
• Limited
freedom for accountats
• Formal
Arrangement
• Efforts
to hide variations
BUDGET &
BUDGETING
Meaning of Budget
• A
Budget is the monetary or quantitative presentation of business plans and
policies to pursued in the future period of time.
Definition of Budget
• “
A Budget is a financial statement prepared prior to a predetermined period of
time of the policy to be pursued during that period for the purpose of
attaining a given objective.”
(ICMA
London)
• “Budget
is an estimate of future need arranged according to an orderly basis covering
some or all the activities of an enterprise for a define period of time”
(George R. Terry)
Meaning of Budgeting
• Budgeting
is part of management process which includes preparation of budget , budget
control, budget co-ordination, and all those activities that are related with
budget.
Objective of Budgeting
• To
Express the policies and objective in quantitative terms .
• To
Prepare base for work performance
• To
Determine responsibilities of various department .
• To
establish balance between available fund and estimate expenditure
• To
Clarify Business planning
• To
forecast in respect of sales , Cost of production , cash flow etc .
Importance and Advantage of Budgeting
• Action
on the basis of well decided plan
• Mechanism
for policy Implementation
• Communication
• Co
– ordination in Budget preparation
• Co
– ordination in working
• Control
on Cost of production
• Control
on Capital Expenditure
• Effective
for measuring performance
• Feeling
of cost consciousness
Limitation of Budgeting
• Budgets
are based on Plan Estimates
• Budgeting
is not a substitute of Management
• Operation
of the budget plan is not automatic
• Time
effect
• Prohibitive
cost
• Effective
of changing condition
Types of Budget
• On
the basis of period
(1) Long
Term Budget
(2)
Short Term Budget
(3)
Current Budget
• On
the Basis of Flexibility
(1)
Fixed Budget
(2)
Flexible Budget
On the basis of Function
• Master
Budget
• Functional
Budget
– Sales
Budget
– Production
Budget
– Cost
Budget
– Cash
Budget
– Capital
Expenditure Budget
– Other
Budget
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 result are evaluated in the light of
budget estimated.
Characteristics of Budgetary Control
• Planning
• Co-ordination
• Proper
Recording
• Assignment
of Responsibility
• Review
• Follow
up
Advantage or importance of Budgeting Control
• A
tool for Improvement in Planning
• As
an aid in Co – ordination
• A
vehicle of Comprehensive Control
• An
Instrument of Motivation
• A
media of Communication
Limitation Of Budgeting Control
• Changing
Situation
• Effect
of Unclarified facts
• Dictatorial
Attitude
• Limited
freedom for accountats
• Formal
Arrangement
• Efforts
to hide variations
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