Presentation on Budget, budgeting and budgetary control..
Contents-
1) Budgeting [characteristics]
2) Budgetary control
3) Difference in budget, budgeting, budgetary control
4) Essentials in budgetary control
5) Requisites for budgetary control system
6) Merits & limitations
7) Zero-based budgeting
8) Difference in Traditional & Zero based budgeting.
2. Contents
• Budgeting [characteristics]
• Budgetary control
• Difference in budget, budgeting, budgetary control
• Essentials in budgetary control
• Requisites for budgetary control system
• Merits & limitations
• Zero-based budgeting
• Difference in Traditional & Zero based budgeting.
3. Definition & Meaning of Budgeting
“A budget is a pre-determined statement of
management policy during a given period
which provides a standard for comparison
with the results actually.”
-Brown & Howard
“Budgeting is a preparation of comprehensive
operating and financial plans for specific
intervals of time”
-Shilinglaw
4. Characteristics of good Budgeting
.
• Good budgeting should involve persons at different levels while
preparing the budgets.
• There should be proper fixation of authority and responsibility.
.
• The target of budget should be realistic, if targets are difficult to
be achieved then they will not enthuse the persons concerned
• A good accounting system is also essential to make the
budgeting successful.
.
• Budgeting system should have whole hearted support of the top
management.
• The employees should be imparted budgeting education.
5. Definition & meaning of
Budgetary Control
“Budgetary control is a system which uses
budgets as a means of planning and
controlling all aspects of producing/selling
commodities or services”
-J Batty
“A budget is a means and budgetary control is
the end result”
6. Essentials of Budgetary Control
Organization for budgetary control.
Budget centers
Budget officers/committee
Budget manual
Budget period
7. Organization chart for Budgetary
Control
Chief
Executive
Budget
Officer
Budget
committee
Production
manager
Sales
manager
Finance
manager
Accounts
manager
Personnel
manager
Research &
development
manager
8. Requisites for Budgetary Control
System
Clarifying objectives
Proper delegation of authority & responsibility
Proper communication & budget education system
Participation of all employees
Motivation & flexibility
9. Budgetary control
Advantage
s
Tool for measuring
performance
Provides specific aims
Creates budget consciousness
Introduction of incentive
scheme
Limitation
s
Uncertain future, revision
required
Discourages efficient persons
Problem of co-ordination
Conflict in departments
To make COST accounting Depends on Top management
more reliable
10. Difference in Budget, Budgeting, &
Budgetary Control.
Budgets are business estimates for future
period, budgeting is the process of preparing
these estimates while budgetary control is a
system of achieving performance on the basis
of budgets.
Budget and budgeting are the parts of
planning whereas as budgetary control is
linked with co-ordination & control.
11. Zero-Base Budgeting
Zero base budgeting is the latest technique of budgeting &
it has an increased use of management tools.
In zero base budgeting every year is taken as a new year
and previous year is not taken as a base.
It enables management to allocate funds.
It improves efficiency of management and make optimum
use of resources.
Helpful in identifying economical & wasteful areas.
Related to organizational goals.
12. Process of Zero Base Budgeting
Determine
Objectives
Plan of
action
Prioritization
of activities
Cost
Benefit
Analysis
Approve decision
package & Finalize
Budget
13. Zero Base Budgeting
Advantages
Efficient allocation of
resources.
Optimum utilization of
resources
Enhances capability of
Managers.
Identifies & eliminates wasteful
and obsolete operations.
Disadvantages
Non financial matters cannot be
considered for cost benefit
analysis
Difficulty in process of ranking of
decision packages
It is time Consuming
14. Traditional v/s Zero Base
Budgeting
Traditional Budgeting Zero Base Budgeting
.
• It is accounting oriented
.
• Its approach is monitoring
towards expenditure
.
• Its focus is on increase and
decrease of expenditure
.
• It is simple to read & prepare
.
• Its method of preparation is
based on “extrapolation”
.
• It is decision oriented
.
• Its approach is towards
achievement of objectives
.
• Its focus is on cost benefit
analysis
.
• It is more complex.
.
• Its preparation is based upon
“selection of decision package”