Budgetary Control
The following steps are involved in the process of budgetary control:
(a) The objectives which are required to be achieved by the business should be defined & specified by budgetary control.
(b) For the purpose of ensuring that the desired objectives are accomplished, business plans are needed to be prepared by budgetary control.
(c) Budgetary control translates the plans into budgets & relates to particular sections of the budget, the responsibilities of individual executives & managers.
(d) Budgetary control constantly compares the actual results with the budget & the differences between the actual & budgeted performance are calculated.
(e) For the purpose of establishing the causes, the major differences are investigated by budgetary control.
(f) In a suitable form, budgetary control presents the information to the management, relating to variances to individual responsibility.
(g) In order to avoid a 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.
Key elements
- Assignment of responsibility – sales targets, profit margins, cost ceilings, etc.
- Comparison of actual and budgeted results
- Ascertainment of variances (a difference between budgeted and actual results)