Explain budgetary control. Budget and Budgetary Control 2019-01-06

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Chapter 4

explain budgetary control

In using these techniques consider: 路 company's pricing policy 路 general economic and political conditions 路 changes in the population 路 competition 路 consumers' income and tastes 路 advertising and other sales promotion techniques 路 after sales service 路 credit terms offered. Co-ordination: The working of different departments and sectors is properly coordinated. A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit. Definition of terms Budgeting: The certified nation accountant, the official journal of the institute of chartered accountants of Nigeria. If the tractor is used for more than 1,000 hours then there will be an over-recovery on its operational costs and if used for less than 1,000 hours there will be under-recovery, i.

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Budgetary Controlling Techniques

explain budgetary control

Providing plans for achieving the objectives so defined. Thus, if changes are not started in the budget period, it will be difficult for the business to make the progress necessary to achieve longer term objectives. The first step in budgetary planning is to construct a budget. As a result, the owner can see the level of cash immediately on hand. If there is no definite aim then the efforts will be wasted in achieving some other aims. This help in making and revising business policies in the organisation. If you continue browsing the site, you agree to the use of cookies on this website.

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The Uses of Budgetary Control

explain budgetary control

It is important since it helps the manager understand what the future financial position of the organization will be. It has resulted in the elimination of waste and excess costs in every suitable instance where budgetary control has been properly instituted. The treasurer of the local government: Is the chief financial adviser to the local government. Written and comparative reports from different departments. Meaning of budgetary control: Every business firms have main objective to maximize the profits and to minimize the cost.

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Budget and Budgetary Control

explain budgetary control

Most costs are composed of two elements - the quantity used and the price per unit. Budgeting Budgetary control Budget preparation Management action and cost control Master budget Price and quantity variance Responsibility centres Zero based budgeting. Support of the Management: The top management in the organisation supports a good system of budgetary control. Budgets may be used too rigidly. By providing a frame work that contains flexible plan to accommodate unanticipated changes, this is the essence of budgeting. Statistics of past operations are not inadequate and unreliable in the organisation. The change in future conditions upsets the budgets which have to be prepared on the basis of certain assumptions.

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The Uses of Budgetary Control

explain budgetary control

Introduction of Incentive Schemes: Budgetary control system also enables the introduction of incentive schemes of remuneration. Budgets help new people and lower-level managers see where the organization is going and where they fit in the organization. Figures for January are now history and will not change. This information is sometimes open to the public, and occasionally accessible only to employees with authorized access to it. Proposal writers serve their interests, therefore, by learning thoroughly how the entity plans and decides how to use funds. Labour The difference between actual labour costs and budgeted or standard labour costs is known as direct wages variance.

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What Is Budget & Budgetary Control?

explain budgetary control

Budgetary Revision Required: Budgets arc prepared on the assumptions that certain conditions will prevail. They publish both numbers because both are helpful, later, for. He determines the deviations in the budgets and the actual performance and takes necessary steps to rectify the deficiencies, if any. In some cases, it is more efficient to supply managers with a preliminary budget model that already contains an estimated budget. A good system of budgetary control allows sufficient flexibility to the persons concerned with the implementation of budgets in the organisation.

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What Is Budgetary Control? (with pictures)

explain budgetary control

Conclusion and Recommendation Conclusion A budget can be an extremely important and effective tool for management in piloting the affairs of the organization. In the light of the reasons identified, further course of action is planned so that in future there is no such variation in the organisation. The table above lists six line item components. Fixation of budget period: By budget period we mean the period for which we are going to prepare a budget. A statement regarding the objective that how that objective can be achieved. To show management when action is needed to remedy a deviation. Thus, an alternative way is to look in depth at one area of the business each year on a rolling basis, so that each sector does a zero base budget every five years or so.

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Budget and Budgetary Control

explain budgetary control

For these costs, the manager must often rely on experience and judgment. This could include taking on debt, cutting the scope of a project, or moving funds over from another project or program to keep it going. The comparison of budgeted and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time. Budgetary control system should be capable of using key factors in a proper manner. Its main uses are: 路 to maintain control over a firm's cash requirements, e. Specific due dates are needed to ensure that the management team creates their respective portions of the budget on a timely basis, so that these pieces can be rolled into the main budget model.

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