Accounting Assignment Help With Concept of Budget And Budgetary control
What do you mean by Budget?
Budget refers to a quantitative expression of a featured plan which is stated in terms of monetary. It is clearly defined for a particular period of time and have a limit. A budget includes aspects on which a business firm or a company sees to improve upon. It may include various departments or seen the whole firm as one. The budget is made up by a team of decision makers who analyze the expenses and revenue of the firm and also studies the past expense and revenue of the firm. After making much research work, then the decision makers come up with an appropriate budget which foresees the needs and wants of the firm under tight cost and expenditure. A budget includes planned volume sales and the revenue attached to that, the costs and expenses, liabilities, assets, resource quantities ad cash flows. The budget is like an expression which expresses the main strategic plans of the business operations comprising of the organizations, activities, events and units which can be measured in a measurable terms. In simpler words, a budget is basically the total sum of money which is carefully allocated for a very specific motive and the overall summary of these intended expenditures is taken along in consideration. The proposals are set and charges are made for how to meet them efficiently.
What is the purpose of making a budget?
There are a lot of things that go into the decision making for the budget as it helps in innumerable way in improving the expenditure stature of the firm. It helps in making plans for the operations which are to be operated actually by forcing the concerned managers of those particular departments. They make the managers to consider how the best conditions are to be used and opportunities are to be grabbed for making a good budget. There are certain conditions which changes without any prior notice, so the managers and the budget decision makers have to be well prepared and should anticipate it well. The activities are well coordinated and executed when a proper budget is drawn. The activities of the business firm or the organization are processed well from inside as well as from outside. The managers are compelled to study and analyze the relationship between the operations of other departments and operation of their own. Budge is also used for the control of the resources. These resources are factors of production and employee helper resources. The budget helps in communicating the plans about the various responsibilities which a center manager have to take up and execute as per plans. The budget also motivates the managers for striving towards achieving the goals which are set by the department or the company. It can also be a personal goal. The managers are helped immensely by the budget to evaluate their performances and achieve excellence in the work. The visibility of the company’s performance and a parameter to compare is provided by the budget. Tools of budget enable the actual financial operation of the business to be measured against the forecast.
What do you mean by budgetary control?
Budgetary control basically means how well the managers and coordinators are using up and utilizing the resources as per the budget which is provided. Managers set some standards and parameters under which they also monitor and control cost and the operations which are related with them. In simpler terms the budgetary control refers to the process by which the managers set the financial goals as well as the performance goals for the firm and its employees with the budgets, comparing them with the actual result and adjusting the ongoing performance with it as well as what is needed. There are four simple steps in the budgetary control process:
- The budget is prepared and created following the research work.
- Next, the management needs to take up the charge of that budget and applying the needs and wants and making the inside public of the firm understand it and lately making the needful comparisons.
- After the comparisons are drawn, the managers have the task to analyze and study the actual performance hart with the goals which were budgeted.
- And lastly, the final step in the budgetary control is to look over the budget and comparisons after the end of the financial year and make appropriate plans for the next year.
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What are the advantages of the budgetary control?
The advantages of budgetary control are:
1. Maximization of profits
Budgetary control helps in aiming the maximization of the profit by the optimum utilization of the resources which are available to the firm. For achieving the best profit, a proper planning and coordination as well is needed. Different functions are undertaken and the work is equally distributed. The resources are fully used and put to best use of them. There is also a proper control over various capital and revenue expenditures.
2. Co-ordination
Co-ordination simply means that the various departments and the employees of that departments should work relentlessly and as a whole team. This is done with the help of the budgetary control process. Different sectors and departments are properly coordinated. Sometimes, the budgets are set as a whole for the whole company and sometimes different budgets are set for different departments in the company. The co-ordination of various managers and subordinates is very important for achieving the desired budgeted targets.
3. Specific aims
The top management decides and checklists the goals, policies and the plans for the company. All the other efforts which are to be put together for reaching that common goal is to put up by the budgetary control. Every department and sector is allotted with a specific target which have a certain deadline within which it is to be achieved. Those efforts which are planned with the budgetary control are automatically directed towards the achieving of the specific aims.
4. Economy
The expenditure and the planning process will be very systematic and outgoing. The economy of the organization will be on spending. There will be an optimum use of finances and the benefits which are derived from the industry will be reaped with the profit. There will be an elimination of the wastage of the resources of the national sources.
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