Budgetary Control
The salient features of such a system are the following:
1. Determining the objectives to be achieved, over the budget period, and the policy or policies that might be adopted for the achievement of these ends.
2. Determining the variety of activities that should be undertaken for the achievement of the objectives.
3. Drawing up a plan or a scheme of operation in respect of each class of activity, in physical as well as monetary terms for the full budget period and its parts.
4. Laying out a system of comparison of actual performance by each person, section or department with the relevant budget and determination of causes for the discrepancies, if any.
5. Ensuring that corrective action will be taken where the plan is not being achieved and, if that be not possible, for the revision of the plan.
In brief, it is a system to assist management in the allocation of responsibility and authority, to provide it with aid for making, estimating and planning for the future and to facilitate the analysis of the variation between estimated and actual performance.
In order that budgetary control may function effectively, it is necessary that the concern should develop proper basis of measurement or standards with which to evaluate the efficiency of operations, i.e., it should have in operation a system of standard costing.
Beside this, the organisation of the concern should be so integrated that all lines of authority and responsibility are laid, allocated and defined. This is essential since the system of budgetary control postulates separation of functions and division of responsibilities and thus requires that the organisation shall be planned in such a manner that everyone, from the Managing Director down to the Shop Foreman, will have his duties properly defined.
1. Determining the objectives to be achieved, over the budget period, and the policy or policies that might be adopted for the achievement of these ends.
2. Determining the variety of activities that should be undertaken for the achievement of the objectives.
3. Drawing up a plan or a scheme of operation in respect of each class of activity, in physical as well as monetary terms for the full budget period and its parts.
4. Laying out a system of comparison of actual performance by each person, section or department with the relevant budget and determination of causes for the discrepancies, if any.
5. Ensuring that corrective action will be taken where the plan is not being achieved and, if that be not possible, for the revision of the plan.
In brief, it is a system to assist management in the allocation of responsibility and authority, to provide it with aid for making, estimating and planning for the future and to facilitate the analysis of the variation between estimated and actual performance.
In order that budgetary control may function effectively, it is necessary that the concern should develop proper basis of measurement or standards with which to evaluate the efficiency of operations, i.e., it should have in operation a system of standard costing.
Beside this, the organisation of the concern should be so integrated that all lines of authority and responsibility are laid, allocated and defined. This is essential since the system of budgetary control postulates separation of functions and division of responsibilities and thus requires that the organisation shall be planned in such a manner that everyone, from the Managing Director down to the Shop Foreman, will have his duties properly defined.
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