BUDGETARY CONTROL

Budget is an estimate prepared for definite future period either in terms of financial or non financial terms. Budget is prepared for any course of action or business or state or Nation, as a whole. The budget is usually expressed in terms of total volume. According to ICMA, England, a budget is as follows "a financial and or quantitative statements prepared and approved prior to a defined period of time, of the policy to be pursed during the period for the purpose of attaining a given objective".
It is in other words as " detailed plan of action of the business for a definite period of time".
What is meant by Budget It is a statement of financial affairs/quantitative terms of an activity for a defined period, to achieve the enlisted objectives.
What is budgeting?
Budgeting is the course involved in the preparation of budget of an activity. What is Budgetary Control? Budgetary control contains two different processes one is the preparation of the budget
and another one is the control of the prepared budget. According to ICMA, England, a budgetary control is " the establishment of budgets relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of that policy or to provide a basis for its revision".
According to J.Batty "Budgetary control is a system which uses budgets as a mans of planning and controlling all aspects of producing and/or selling commodities and services".
CASH BUDGET
Cash budget is nothing but an estimation of cash receipts and cash payments for specified
period. It is prepared by the head of the accounts department i.e., chief accounts officer.
The utility of the cash budget is as follows:
To meet the revenue and capital expenditures with adequate funds
It should highlight the additional requirement cash whenever the need arises Keeping of excessive funds available in the business firm wont fetch any return to the enterprise but this estimate of future cash needs and resources will guide the firm to plan for an effective investment out of the surplus funds estimated ; enhances the wealth of the investors through proper investment planning out of the future funds available.
Cash budget can be prepared in three different ways:
1. Receipts and payments method
2. Adjusted profit and loss account
3. Balance Sheet Method
Cash receipts can be classified into various categories
FIXED & FLEXIBLE BUDGET
Fixed Budget
It is a budget known as constant budget, never registers the changes in the preparation of a budget, being prepared for irrespective level of output or production. This budget is mainly meant for the fixed overheads of the firm which are constant in volume irrespective level of production. The ultimate utility of the budget is to control the cost as a cost controlling measure, but the fixed budget is meaningless in having comparison with the actual performance.
Flexible Budget
Flexible budget is prepared for any level of production as an estimate of statement of all expenses i-e the expenses are classified into three categories viz variable, semi-variable
and fixed expenses. The structure of the budget for any output is only to the tune of the
actual performance achieved. This is the budget facilitates not only to have comparison in
between various levels of production but also to identify the level of lowest production cost.
Utilities of the flexible budget:
This budget is most useful tool of analysis in studying the sales at when the
circumstances are not warranting to predict
It is mostly suited to the seasonal business, where the sales volume is getting differed
from one period to another due to changes taken place in the taste and preferences
of the buyers The production is being done on the basis of demand of the products in the market.
The demand of the products is studied only through demand forecasting. The flexible budget is more applicable in the case of products, which are greatly finding difficult to forecast the demand The budget is prepared only during the time of acute shortage of resources of production viz Men, Material and so on
ZERO BASE BUDGETING (ZBB)
Zero base budgeting is one of the renowned managerial tool, developed in the year 1962 in America by the Former President Jimmy Carter. The name suggests, it is commencing from the scratch, which never incorporates the methodology of the other types of budgeting in determining the estimates. The Zero base budgeting considers the current year as a
new year for the preparation of the budget but the yester period is not considered for
consideration. The future activities are forecasted through the zero base budgeting in
accordance with the future activities. Peter A Pyher “A planning and budgeting process which requires each manager to justify his entire budget request in detail from scratch (Hence zero base) and shifts the burden of proof to each manger to justify why he should spend money at all. The approach requires that all activities be analysed in “decision packages” which are evaluated by systematic analysis and ranked in order of importance” This type of budgeting requires the manager to reason out the aim of spending , but in the case of traditional budgeting is unlike , which are never emphasize the reasons of spending in terms of expenses.

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