Introduction

1.1 Introduction to the Study

The establishment of budgets relating the responsibilities of executives to the

requirements of a policy, and the continuous comparison of actual results with

budgeted results, either to secure by individual action the objective of that policy, or

to provide a basis for its revision. Budget is a formal statement of the financial

resources set aside for executing specific activities in a given period of time. It helps

to coordinate the activities of the organization. A budget is a quantitative expression

of a plan of action relating to the forthcoming budget period. It represents a written

operational plan of management for the budget period. A plan expressed in money. It

is prepared and approved prior to the budget period and may show income,

expenditure, and the capital to be employed, may be drawn up showing incremental

effects on former budgeted or actual figures, or be compiled by zero based

budgeting. Budget and Budgetary control. The terms budget and budgetary control

are often used interchangeable to refer to a system of managerial control. Budgetary

control implies the use of a comprehensive system of budgeting to aid management in

carrying out its functions like planning, co-ordination and control.According to

Institute of Chartered Management Accountants (ICMA) England A plan qualified in

monetary term prepared and approved prior to a defined period of time usually

showing planned income to be generated and or to be incurred during that period and

the capital to be employed to attain a given objective. The Chartered Institute of

Management Accountants (CIMA) London defines budgetary control as

establishment budget relating to the responsibility of executives to the requirement

policy and the continuous comparison of actuals with budgeted results either to secure

individuals action the objective of policy or to provide a basic for its revision.

1
1.2 Need for the Study

To know about the budget and budgetary control of a LANCO Infratech

Limited..To know about the status of a company by different financial Budgetary

policies in the year 2009 to 2013. To know about the present scenario of

Manufacturing companies Investment estimation that are existed in the market and

about the present impact of budgetary control on the Financial position of the

company. To know about the fast performance to based on future Estimation of the

budgetary control of the techniques.

1.3 Scope of the Study

The scope is confined to study and analyse the Budget Control LANCO Infratech

limited Limited, Hyderabad for the period 2009-2013.

1.4 Objective of the Study

To analyze the budgetary system in practice in LANCO Infratech Limited

with particular reference to their objectives and phases of organizational and
re-appropriation.
To study the budgeted estimates and accruals of the revenue expenditure and
revenue receipts.

1.5 Methodology of the Study

Secondary data
The data colleted from the secondary data
Annual reports of LANCO Infratech Limited.
Financial management text books.
Printed Materials.
Journals and magazines
News papers.

2
1.6 Limitations

1. The study is purely based on the information provided by the company and the
data is collected from the reports, annual reports, and magazines of the
company.
2. Estimates are used as basis for budget plan and estimates are based mostly on
available facts and best managerial judgment
3. To study is restricted to limited period i.e 2009-13.

3
 Industry Profile

About Industry

Manufacturing is the use of machines, tools and labor to produce goods for use or

sale. The term may refer to a range of human activity, from handicraft to high tech,

but is most commonly applied to industrial production, in which raw materials are

transformed into finished goods on a large scale. Such finished goods may be used for

manufacturing other, more complex products, such as aircraft, household appliances

or automobiles, or sold to wholesalers, who in turn sell them to retailers, who then sell

them to end users the "consumers"Manufacturing takes turns under all types of

economic systems. In a free market economy, manufacturing is usually directed

toward the mass production of products for sale to consumers at a profit. In a

collectivist economy, manufacturing is more frequently directed by the state to supply

a centrally planned economy. In free market economies, manufacturing occurs under

some degree of government regulation.Modern manufacturing includes all

intermediate processes required for the production and integration of a product's

components. Some industries, such as semiconductor and steel manufacturers use the

term fabrication instead.The manufacturing sector is closely connected with

engineering and industrial design. Examples of major manufacturers in North

America include General Motors Corporation, General Electric, and Pfizer. Examples

in Europe include Volkswagen Group, Siemens, and Michelin. Examples in Asia

include Toyota, Samsung, and Bridgestone.

4
History and development

In its earliest form, manufacturing was usually carried out by a single skilled
artisan with assistants. Training was by apprenticeship. In much of the pre-
industrial world the guild system protected the privileges and trade secrets of
urban artisans.
Before the Industrial Revolution, most manufacturing occurred in rural areas,
where household-based manufacturing served as a supplemental subsistence
strategy to agriculture (and continues to do so in places). Entrepreneurs
organized a number of manufacturing households into a single enterprise
through the putting-out system.
Toll manufacturing is an arrangement whereby a first firm with specialized
equipment processes raw materials or semi-finished goods for a second firm.

5
Economics of manufacturing

According to some economists, manufacturing is a wealth-producing sector of an

economy, whereas a service sector tends to be wealth-consuming.[1][2] Emerging

technologies have provided some new growth in advanced manufacturing

employment opportunities in the Manufacturing Belt in the United States.

Manufacturing provides important material support for national infrastructure and for

national defense.On the other hand, most manufacturing may involve significant

social and environmental costs. The clean-up costs of hazardous waste, for example,

may outweigh the benefits of a product that creates it. Hazardous materials may

expose workers to health risks. Developed countries regulate manufacturing activity

with labor laws and environmental laws. Across the globe, manufacturers can be

subject to regulations and pollution taxes to offset the environmental costs of

manufacturing activities. Labor Unions and craft guilds have played a historic role in

the negotiation of worker rights and wages. Environment laws and labor protections

that are available in developed nations may not be available in the third world. Tort

law and product liability impose additional costs on manufacturing.

Manufacturing may require huge amounts of fossil fuels. Automobile construction

requires, on average, 20 barrels of oil.

Manufacturing and Investment

Surveys and analyses of trends and issues in manufacturing and investment around the
world focus on such things as

the nature and sources of the considerable variations that occur cross-

nationally in levels of manufacturing and wider industrial-economic growth;

6
 competitiveness; and

attractiveness to foreign direct investors.

In addition to general overviews, researchers have examined the features and factors

affecting particular key aspects of manufacturing development. They have compared

production and investment in a range of Western and non-Western countries and

presented case studies of growth and performance in important individual industries

and market-economic sectors.

Evolution of the manufacturing industry

Manufacturing industries came into being with the occurrence of technological and

socio-economic transformations in the Western countries in the 18th-19th century.

This was widely known as industrial revolution. It began in Britain and replaced the

labor intensive textile production with mechanization and use of fuels.

Working of manufacturing industry

Manufacturing industries are the chief wealth producing sectors of an economy. These

industries use various technologies and methods widely known as manufacturing

process management. Manufacturing industries are broadly categorized into

engineering industries, construction industries, electronics industries, chemical

industries, energy industries, textile industries, food and beverage industries,

metalworking industries, plastic industries, transport and telecommunication

industries.Manufacturing industries are important for an economy as they employ a

huge share of the labor force and produce materials required by sectors of strategic

importance such as national infrastructure and defense.

7
World Manufacturing Industry

Owing to the emerging technologies world wide, the world manufacturing industry

has geared up and has incorporated several new technologies within it's purview.

Economists consider the World manufacturing industry as a sector which generates a

lot of wealth. Generating employment, introducing latest techniques, real earnings

from shipments etc., have put the world manufacturing industry in a favorable

position.

World manufacturing industry and type of Economy

Capitalist economy

Collectivist Economy

Modern Economy

Paints
Demand for paints comes from two broad categories

Decoratives: Major segments in decoratives include exterior wall paints, interior wall
paints, wood finishes and enamel and ancillary products such as primers, putties etc.
Decorative paints account for over 72% of the overall paint market in India. Asian
Paints is the market leader in this segment. Demand for decorative paints arises from
household painting, architectural and other display purposes. Demand in the festive
season (September-December) is significant, as compared to other periods. This
segment is price sensitive and is a higher margin business as compared to industrial
segment.

Industrial: Three main segments of the industrial sector include automotive coatings,
powder coatings and protective coatings. Kansai Nerolac is the market leader in this
segment. User industries for industrial paints include automobiles engineering and
consumer durables. The industrial paints segment is far more technology intensive
than the decorative segment. The paints sector is raw material intensive, with over

8
300 raw materials (30% petro-based derivatives) involved in the manufacturing
process. Since most of the raw materials are petroleum based, the industry benefits
from softening crude prices.

Key Points

Supply

Supply exceeds demand in both the decorative as well as the industrial paints
segments. Industry is fragmented.

Demand

Demand for decorative paints depends on the housing sector and good monsoons.
Industrial paint demand is linked to user industries like auto, engineering and
consumer durables.

Barriers to entry

Brand, distribution network, working capital efficiency and technology play a crucial
role.

Bargaining power of suppliers

Price increase constrained with the presence of the unorganised sector for the
decorative segment. Sophisticated buyers of industrial paints also limit the bargaining
power of suppliers. It is therefore that margins are better in the decorative segment.

Bargaining power of customers

High due to availability of wide choice.

Competition

In both categories, companies in the organised sector focus on brand building. Higher

pricing through product differentiation is also followed as a competitive strategy.

Financial Year '11

9
FY11 was a mixed bag for the paint companies. While all the 3 players viz. Asian

Paints, Kansai Nerolac and Berger Paints reported strong growth in sales, operating

margins came under severe pressure due to raw material price inflation. Top-line

growth was boosted by strong demand from the decorative paints segment.

Nonetheless, the demand environment in the industrial segment continues to remain

challenging due to rising interest rates. Performance on the margins front was a big

disappointment. Rising prices of crude oil and titanium dioxide increased the overall

expenditure thereby impacting profitability growth. However, companies are

undertaking a gradual and calibrated price increase to shield margins. Nonetheless, as

a complete pass on of raw material price increase is not possible in the industrial

segment, the blended margins continue to suffer.

Prospects

The market for paints in India is expected to grow at 1.5 times to 2 times GDP in the

next five years. With GDP growth expected to be over 7% levels, the top three players

are likely to clock above industry growth rates, especially given the fact that

protection that was available to unorganised players has come down significantly.

Decorative paints segment is expected to witness higher growth going forward. The

fiscal incentives given by the government to the housing sector have benefited the

housing sector immensely. This will benefit key players in the long term.Although the

demand for industrial paints is lukewarm it is expected to increase going forward.

Increased industrial paint demand, especially powder coatings and high performance

coatings will also propel topline growth of paint majors in the medium term.

10
 Company Profile

About LANCO

As one of India's leading business entities, LANCO Infratech Limited has been

driving growth in the domains of Engineering, Procurement and Construction (EPC),

Power, Solar, Natural Resources and Infrastructure over the last two-and-a-half

decades. Its continuous focus on innovation and expansion together with its

commitment to quality and excellence has contributed significantly to the progress

that the company has made over a short span of time. The 25-year-old LANCO group

is, today, uniquely poised to attain leadership position in its areas of operation.

Propelling the organisation's dynamic advancement is its strategic plan -- LANCO's

Vision 2015 -- that is aimed at building an achievement-oriented and customer-centric

organisation, committed to attaining industry leadership, with aggressive growth plans

for the business verticals that it operates in. LANCO Infratech Limited became a

listed entity in November 2006 following the Initial Public Offering of shares.

LANCO's gross revenue before elimination as on 31 March 2012 was Rs 15,398

Crores (USD 3.07 billion) .Seamless integration of its core business competence and

strength, EPC, with other domains such as infrastructure, construction and power, has

borne rich dividends for LANCO. The organisation's expertise in building large civic

and urban infrastructure projects has been deployed in constructing thermal and hydro

power projects across the country. In a bid to find cost-effective, sustainable and

green solutions to the county's energy requirements, LANCO has made its presence

felt in the area of solar power as well. LANCO is fast emerging as one of the top three

private sector power developers in India with 4480 megawatt (MW) under

operation,4898 MW under construction, and 7,103 MW of projects under

development.

11
In a strategic move that provides increased fuel security for its current power

generating assets and its future power portfolio expansions, LANCO through its

Australian subsidiary, LANCO Resources Australia, has acquired Griffin Coal

Mining Company and Carpenter Mine Management. Griffin Coal owns the largest

operational thermal coal mines in Western Australia, producing around 4 million

tonnes per annum (mtpa) of coal which can be ramped up to upto 20 mtpa in the near

term, post development of evacuation infrastructure. LANCO also has strategic global

partnerships with leading power companies including Genting, Harbin, GE,

Dongfang, Doosan, etc.

With a team strength of over 8,000 people, LANCO, headquartered in Gurgaon close

to New Delhi, has a pan India presence in strategic locations and an expanding

footprint in the emerging global markets. Currently, its international operations are

located in 12 countries. LANCO is a privileged member of the World Economic

Forum and has been acknowledged as an elite member of the top 200 "Global Growth

Companies".Entrepreneurship, a far-sighted vision, dynamic leadership, ability to

overcome adversity and take calculated risks, teamwork by committed professionals,

and agility to take advantage of emergent opportunities.

1960-76

The Seeds of Enterprise

In 1960, brothers Amarappa Naidu, Venkata Rama Naidu and Venkata Ratnam Naidu

laid the foundation of LANCO by starting a transport business with one truck (a

converted bus) inherited from their father L.V. Subba Naidu. Amarappa Naidu's

business acumen and the brothers' commitment soon led to orders pouring in from

construction companies that needed material to be transported to and from

12
construction sites. By 1976, the thriving business boasted of a fleet of 100 trucks that

serviced the construction industry in Andhra Pradesh.

1977-85

Building the Foundation

Having succeeded beyond imagination, the Naidu brothers planned to enter the

construction business themselves. In 1980, Uma Maheshwar Rao and Company was

established and soon made a name for itself in the construction industry by delivering

several prestigious turnkey projects in Andhra Pradesh and Karnataka. By 1980, the

company's assets included 150 trucks, eight excavators, 10 bulldozers and 15 drilling

machines. In 1985, L.V. Rama Naidu's son, L. Rajagopal, a mechanical engineer, was

inducted into the company.

1986-90

Overcoming Adversity

In 1986, when the company went through some tough circumstances, L. Rajagopal's

resolve to succeed even got firmer. He acquired a new construction firm, S.V.

Contractors, in partnership with his brother-in-law, G. Bhaskara Rao, also an

engineer. The first year of operation saw a profit of Rs. 1 crore; by 1990 the

company's annual turnover was Rs. 25 crore.

1991-94

Seizing Opportunities

Taking advantage of the new opportunities offered by the liberalisation of the Indian

economy, L. Rajagopal diversified from construction business to manufacturing by

setting up a pig iron plant of 90,000 tpa. He took inspiration from his uncle

13
Lagadapati Amarappa Naidu and named this new business as LANCO Ferro. LANCO

is an acronym for Lagadapati Amarappa Naidu and Company and is tribute to his

vision and ideals. In 1991, L. Rajagopal inducted his younger brother, L.

Madhusudhan Rao, to manage the business at LANCO Ferro, which was renamed as

LANCO Industries in 1993. L.

Madhusudhan Rao launched several ambitious initiatives and expanded LANCO

Ferro into a fully-integrated plant producing cement,ductile iron pipes and pig iron.

1995-1999

Diversifying to Grow

Diversification through joint venture partnerships became the key word at LANCO as

the organisation embarked on an aggressive growth path. In 1995, the Andhra Pradesh

government opened the power sector to private players. LANCO entered the power

sector against a power purchase agreement with the state government with a 368 MW

gas power plant in Kondapalli, commissioned in 2000. LANCO Kondapalli Power

Ltd. (LKPL), a joint venture between LANCO and the Genting Group of Malaysia

marked a major milestone in the organisation's growth as an independent power

producer.

2000-05

A New Century, a New Vision

In 2002, L. Rajagopal retired from the business to pursue public life, and L.

Madhusudhan Rao took over as the Chairman of the organisation. This was a period

of change and reorganisation, as LANCO prepared itself to meet the challenges of a

new century. LANCO also consolidated its position in the power sector by

commissioning large projects, winning bids for several others, and winning a range of

14
business and industry awards and prestigious recognition forums.

2005-10

Poised for Industry Leadership

LANCO Infratech Limited, a new holding corporate entity, was created in 2006 to

consolidate LANCO's diverse operations under a single brand. LANCO decided to

focus on its core business - energy and construction - and enter the infrastructure and

property development sectors. As part of its business strategy, the organisation has

chalked out an ambitious growth plan - in Power and Solar energy. LANCO also

envisages aggressive growth plans for EPC with a strong order book growth.

Our Mission

Development of Society through Leadership, Entrepreneurship and Ownership

Our Vision

Most Admired Integrated Infrastructure Enterprise

Our Values

Integrity

We choose to be honest in all our Business Interactions and Transactions and remain

steadfast even when challenged. We strive for consistency between - what we Think,

what we Say and what we Do.

Humility & Respect

We are consistently humble in our approach to and interactions with people. We treat

every person with respect at all times, unconditionally.

Organization before Self

We recognize that organization interest is supreme, above individual preferences and

goals. In all our decisions, actions and dealings we put the Organization before self.

Achievement Drive

15
We have an urge that drives us to intensely focus on performance and act decisively

with high energy to achieve the desired results.

Positive Attitude

We always demonstrate a 'can-do' mind-set and engage to deliver organizational

goals. We look upon challenging circumstances as opportunities to enhance our

capabilities and find ways of achieving.

Accountability

we own up to our words, actions and outcome. When we commit to do something, we

own it and we do it- decisively and responsibly.

Teamwork

we work harmoniously with a shared vision, energized by our collective talent. We

Trust, Listen to, Share with and Empower team members and take collective

responsibility for the results.

Continuous learning

We strive to continuously learn and consistently set higher standards of performance.

We learn together on a day-to-day basis from each of our stakeholders, both internal

and external. We change to learn, and learn to change at a fast pace in order to excel;

ultimately creating an edge in everything that we do.

Financial Performance

Your company on a consolidated basis registered gross revenue growth (before

elimination) of 36% up from Rs. 11,305 crore in the previous year to Rs. 15,398 crore

in FY12. This growth can be attributed to the development in EPC and Resources

business. EPC revenue grew primarily on account of Babandh, Vidarbha, Moser Baer,

Amarkantak (Unit III & IV) and Kondapalli (Unit III) power projects. On the other

16
hand, the Resources business witnessed a fi rst full year of operation at Griffi n after

its acquisition. PAT including profi t Eliminated witnessed a decrease of 27.6% for

the full year from Rs. 945 crore to Rs. 684 crore in FY12. Your company achieved a

growth of 13% in Cash profi t for the full year from Rs. 1218 crore to Rs. 1378 crore.

Your company operates in a capital intensive industry where there is constant need for

both debt and equity to maintain the pace of execution of on-going projects as well as

for the future projects. Your company is taking active steps to raise capital to help

maintain the growth momentum as well as to handle the various issues that the entire

power sector is facing.

Power Business

The current economic environment is challenging for companies engaged in power

generation on the back of various issues. However 2011-12 witnessed the

Government taking several initiatives to address the sectors concerns on an urgent

basis. A number of reforms have been proposed to push growth. Once implemented,

these reforms will positively impact the overall situation of the sector.

Firstly, steps have been taken by the electricity appellate tribunal towards the tariff fi

xation process resulting in authorising the state electricity regulatory commissions

(SERC) to raise tariffs on a suo-moto basis, if DISCOMs do not demand tariff

revision. Following this, several states have adopted revisions in power tariffs.

Secondly, in December 2011, the Shunglu Committee recommended several measures

that were aimed at improving the fi nancial health of state-owned power distribution

companies.The government has also persuaded Coal India Limited to enter into new

fuel supply agreements. Despite many challenges, the outlook for the sector appears

encouraging. The 12th Plan (2012-17) proposes to add around 76GW of power

17
capacity with the private sector estimated to contribute 56% towards the capacity

addition.

Solar

Over the past seven years, the global solar industry has experienced unprecedented

growth. The key reasons being increasing concerns over climatic change and the need

for green and clean energy. The Government is keen to increase the share of

renewable energy in the total generation capacity of power in the country. Thus,

renewable energy is expected to contribute 10% of the total energy procurement by

2015, and 15% by 2020.Your company has set up an integrated model in solar power

generation starting from polysilicon manufacturing to solar power plant

establishment..

Resources

Your companys Natural Resources business consists of 2 key assets, namely Griffi n

Coal Mines located in Western Australia and the Mahatamil Project in Chhattisgarh.

With a resource base of 1.1 Bn ton, Griffi n has been producing coal and supplying to

the domestic Australian market and to the export market. It produced 3.16 MT of Coal

during FY12, of which 0.59 MT was exported and 2.57 MT was sold in the domestic

market. Capacity enhancement of the mine from 4 MTPA to 18 MTPA is in the

planning phase.

Infrastructure Projects

Your companys current portfolio of infrastructure projects consists of highway

projects of 440 km length, for which the Concession Agreements are signed with the

NHAI. For the 82 km NH48 project in Karnataka and the 81 km NH4 project also in

18
Karnataka, construction was completed during the year. The fi nancial closure for the

283 km Aligarh to Kanpur project was achieved during FY12.

Human Resources

People have always been the key assets for your company and the company has

continued to give utmost importance to development of human capital. In the current

environment, a need was felt to look at the organization critically. Your company has

taken steps towards consolidation and restructuring of its EPC and Construction arms,

as well as its support functions.Your company has endeavoured to build a high

performance organization through tools like LEO (Leadership, Entrepreneurship and

Ownership) to assess, identify and develop employees with potential to become

leaders.

Corporate Social Responsibility

Your Company has always considered Corporate Social Responsibility a core vertical

within the Company. The focus of our CSR initiatives is towards triple bottom line

and sustainable development.Maintaining a right balance between business and

CSR programmes and remaining committed to its social responsibilities, the

companys CSR arm, Lanco Foundation, is focussing on Health, Education, provision

of Safe Drinking Water, empowering the disabled, Community Development and

Environment. It is currently active in 14 locations in 12 states spanning across 227

villages and directly helping over 300,000 people. All these programmes are delivered

through a dedicated team of over 200 employees.

Our ability to generate greater value for the organisation and its shareholders

constitutes a distinct, sustainable edge over competition. The Lanco edge is an

19
amalgamation of the values and ethics, human resources policies, business practices,

systems and beliefs our core business philosophy -- that we have put into place over

the years, which allows us to gain and retain an incisive advantage in todays

competitive market place. We seek to remain always inspiring and attain the Lanco

edge in every business vertical and domain that we operate in.

At LANCO, our objective is to create value for our stakeholders, including our
shareholders, clients, employees, and communities. Good corporate governance
standards that promote the principles of integrity, transparency, and accountability
will protect and likely enhance our stakeholder value. Thus, we believe that good
business practices, transparency in corporate financial reporting, and the highest
levels of corporate governance are essential components of our success.
Consistent with this belief, today at LANCO:

Excluding the CEO, all Board members are independent

Board committees that address auditing, compensation, corporate

governance, and nominating functions are comprised solely of independent
directors

Committee charters clearly establish the committees' roles and

responsibilities

Corporate Governance Guidelines are regularly reviewed and updated in response to

changing regulations and stakeholder concerns.

Our bylaws have recently been updated to provide for majority voting in uncontested

director elections.The company will continue to take any steps the Board believes will

further improve our standards, controls, and accountabilities and, as additional

regulations and recommendations on corporate governance are announced, will

continue to make required changes to our policies.

"LANCO's corporate governance has been, and continues to remain, an important area

of focus for LANCO's senior executives and Board of Directors. We have a track

record of judiciously managing the business and disclosing our performance to

20
investors. We will not only run our operations in accordance with Government of

India regulations but also within the spirit of those regulations.

Corporate governance needs and practices continue to change, and I am proud that

LANCO proactively amends its policies and oversight to keep current with, or remain

ahead of, such change. We believe that keeping our policies and practices current and

our oversight strong make us a better and more successful company."

Awards & Recognition

Industry Leadership

Construction World has adjudged LANCO as one of the Most Admired

(Construction and engineering) Companies in India 'Sep 2011
EPC-World Awards 2010 for 'Outstanding Contribution in the Power and
Energy Sector (Generation)'
Ranked first by the 8th Construction World Annual Awards 2010 in the
category Fastest Growing Construction Company (Large)
Ranked third by the 7th Construction World Annual Awards 2009 in the
category Fastest Growing Construction Company (Large)
Construction World National Institute of Construction Management and
Research (NICMAR) Awards 2007 for the Second Fastest Growing
Construction Company (Medium Category) in India
Excellence in Bridge Engineering Award 1999 from the Indian Institute of
Bridge Engineers

Safety, Health and Environment

Lanco Kondapalli Power Ltd has bagged "EHS Excellence Award 2011"
instituted by Corporate Sustainability Initiative Forum, CII- SR in
Infrastructure/Power Sector for Best Practices ON EHS
CM Leadership and Excellence in Safety, Health and Environment Award,

21
 2002

Corporate Communications

Designomics Awards for branded environment design, 2011

Conferred by the Public Relations Society of India (PRSI)
National Award for House Journal (English) - First Prize, 2008
Golden Jubilee Award for the 'Most Impressive Public Relations Initiatives,'
August 2008
National Award for House Journal (English) - First Prize, 2007
National Award for Corporate Film in English - First Prize, 2007
National Award for Corporate Brochure - First Prize, 2007
National Award for In- House Magazine (Content and Layout) Second Prize,
2006
National Award for Corporate Campaign - Second Prize, 2006
National Award for Corporate Brochure - Second Prize, 2006
National Award for In-house Magazine (Content and Layout)-Third Prize,
2005
State (Andhra Pradesh) Award for In- house Magazine (Content and Layout)
- Second Prize, 2005

22
 Theoretical Review

Introduction to Budget and Budgetary Control

Budget

Budget is essential in every walk of our life national, domestic and Business. A

budget is prepared to have effective utilization of funds and for the realization of

objective as efficiently as possible. Budgeting is a powerful tool to the management

for performing its functions i.e., formulation plans, coordination activities and

controlling operations etc., efficiently. For efficient and effective management

planning and control are tow highly essential functions. Budget and budgetary control

provide a set of basic techniques for planning and control.A budget fixes a target in

terms of rupees or quantities against which the actual performance is measured. A

budget is closely related to both the management function as well as the accounting

function of an organization.

As the size of the organization increases, the need for budgeting is correspondingly

more because a budget is an effective tool of planning and control. Budget is helpful

in coordinating the various activities (such as production, sales, purchase etc) of the

organization with result that all the activities precede according to the objective.

Budgets are means of communication. Ideas of the top management are given the

practical shape. As the activities of various department heads are coordinated at the

much needed for the very success of an organization. Budget is necessary to future to

Definitions of Budget

According to Institute of Charted Management Accountants, England A plan

quantified in monetary term prepared and approved prior to a defined period of time

usually showing planned income to be generated and / or to be incurred during that

period and the capital to be employed to attain a given objective.

23
The process of budgetary control includes.

1. Establishment of budget for each function and section of the organization.

2. Executive responsibility in order to perform the specific tasks so that

objectives of the enterprise may be attained.

3. Continues comparison of the actual performance with that of the budget and

placing the responsibility of executives for failure to achieve the desired result

a given in the budget

4. Taking suitable remedial action to achieve the desired objective if there is a

variation of the actual performance from the budgeted performance.

5. Revision of budgets in the light of changed circumstances.

Definitions of Budgetary Control

According to the Brown and Howard Budgetary control is the system of controlling

costs which includes the preparation of Budgets, co-coordinating the department and

establishing the responsibilities, comparing the actual performance with the budgeted

and acing upon the results to achieve the maximum profitability

Budget, Budgeting And Budgeting Control

Row land and William in their book entitled Budgeting for management control has

given the difference between budge, budgeting and budgetary control as

follows:Budgets are the individual objectives of a department etc where as budgeting

may be said to be the act of building budgets. Budgetary control embraces all this and

in addition includes the science of planning the budgets themselves and the utilization

of such budgets to effect on overall management tool for the business planning and

control. Thus, a budget is a financial plan and budgetary control results from the

administration of the financial plan.

Essential Features of a Budgetary

24
 Budgetary control defines the objectives and policies of the undertaking as a

whole.

It is an effective method of controlling the activities of various departments of

a business unit. It fixed targets and the various departments have to efficiently

to reach the targets.

It secures proper co-ordination among the activities of various departments.

It helps the management to fix up responsibility in case the performance is

below expectations.

It helps the management to reduce wasteful expenditure. This leads to

reduction in the cost of production.

It brings in efficiency and economy by promoting cost consciousness among

the employees.

It facilitates centralized control with decentralized activity.

It acts as internal audit by a continuous evaluation of departmental results and

osts.

Limitations of Budgetary Control

The preparation of a budget under inflationary conditions and changing

Government policies is really difficult. Thus, the accurate position of the

business can not be estimated.

Accuracy in budgeting comes through expenditure. Hence it should not be

relied on too much in the initial stages.

Budget is only a management tool. It is not a substitute for management. It

cannot replace management in decision making.

Budgeting involves a heavy expenditure, which small concerns cannot afford.

25
 There will be active and passive resistance to budgetary control as it points out

the efficiency or inefficiency of individuals.

The success of budgetary control depends upon wiling co-operation and team

work. This is often lacking.

Frequent changes maybe called for in budgets due to fast changing industrial

climate. It may be difficult for a company to keep pace with these fast

changes, because revision of budgets is expensive exercise.

Objectives of Budgetary Control

Planning

Co-ordination

Control

Approved Plan

Communication

Budget procedures

Having the budget organization and fixed the period, the actual work or budgetary

control can be taken upon the following pattern.

Steps in Budgeting Control

Organization for Budgeting

The setting up of a definite plan of organization is the first step towards installing

budgetary controlling system in an organization a budget manual should be prepared

giving details of the powers, duties, responsibilities and areas of operation of each

executive in the organization.

Budget Manual

26
A Budget manual lays down the details of the organizational set up, the routine

procedures and programmers to be followed for developing budgets for various items

and the duties and responsibilities of the executives regarding the operation of the

budgetary control system. CIMA England defines a budget manual as a document

schedule or Booklet which sets out, inter alia, the routine of and the forms and records

required for budgetary control. Responsibility and functions of each executive in

regard to budgeting are written down in the budget manual to avoid any duplication or

overlapping of responsibilities. Steps and the methods for developing various budgets

and the methods of reporting performance against the budget are written down in the

budget manual. In short it is a written document which gives everything relating to the

preparation and execution of various budgets. It should be clear and there should be

no ambiguity in it.

The following are some of the most important matters covered in a Budget manual:

a) Introducing and brief explanation of the objects, benefits and principles of

budgetary control.
b) Organization chart giving the titles to different personnels with full
explanation of the duties of each to operating system and preparation of
departmental and functional budgets.
c) Length of budget periods and control periods should be clearly stated.
d) A method of accounting and control of expenditure.
e) A statement showing the responsibility and of authority given to each
manger for approval of budgets, vouchers and all other forms and
documents which authorize them to spend the money. The authority for
granting approval must be clearly stated.
f) The entire process of budgeting programme including the time table for
periodical reporting. A schedule should be drawn for this.
g) Purpose, specimen form and number of copies to be used for each report
and statement. Budget centers involved should also be stated clearly.
h) Outline of main budgets and their accounting relationships.

27
 i) Explanation of key budgets.

Fixation Of Budget Period

The budget period mean the period for which a budget is prepared and employed. The

budget period will depend upon the type of business and the control aspect.Budget

period mean the period for which a budge is prepared and employed. The budget

period depends upon the nature of the business and the control techniques. For

example, in case of seasonal industries (i.e., food or clothing) the budget period

should be a short one and should cover one season. From control point of view, the

budget period should be a short one so that the actual results may be compared with

the budget each week end or month end and discussed with and discussed with the

Budget committee. There should be a regular time plan for budget preparation. It may

be on the following lines.

Long-term budgets for three to five years should be prepared for expansion

and modernization of the undertaking, introduction of new products or new

projects and undertaking heavy advertisement.

Annual budgets coinciding with financial accounting year should be prepared

for the operations activities (i.e., sales, purchases, and production etc, of the

business)

Budgetary controller

Although the chief executive l finally responsible for the budgetary programme. It is

better if a large part of the supervisory responsibility is deluged to an official

designated as Budget Controller or Budget Director. Such a person should have

28
knowledge of the technical details of the business and report directly to the president

or the chief executive.

Rolling (Continues) Budget

This is a budget which is updated continuously by adding a further period (a

month\quarter) and deducting a corresponding earlier period. Budgeting is a

continuous process under these methods of preparation of budget. Once the first

period elapses, the forecast for that period is dropped and the forecast for the future

period beyond the existing could not be predicted and forecast reliably, this method is

useful. However, it is a costly exercise but matched by considerable reduction in

operational variances.

Annual Vs Continues budgeting system

In some organizations budgets are prepared on annual basis. But annual budgets may

not help the management to have control because variances due to rapidly changing

conditions affect the sales in quantity and prices, severe rapidly changing conditions

affect the sales in quantity and prices, severe inflationary conditions exist resulting

fast increase in the prices of inputs without reflecting in sales prices immediately and

wide range of products being produced making it not feasible to have precise estimate

of levels of activity for a year. The procedure in continuous budgeting will be that a

year will be divided into four quarters. Monthly budgets for the first quarter and three

quarterly budgets for the next year can be prepared. For the first quarter precise

estimates can be drawn up monthly. The budget estimates for the second quarter may

be revised working out separately monthly estimates on more precise basis for control

purposes before the starting of the second quarter. Similarly procedure may be

followed for third and fourth quarters.

Principal Budget (limiting) factor

29
Principal budget factor is such an important factor that it would affect all the

functional budgets to a large extent. The extent of its influence must be assessed first

in order to ensure that functional budgets are reasonably capable of fulfillment. This is

the factor in the activities of an undertaking which at a particular point in time or over

a period will limit the volume of output. It is essential to locate the limiting factor

may be any one of the following:

Different Types of Budget

Different types of budgets have been developed keeping in view the different

purposes they serve. Budgets can be classified according to:

The coverage they encompass;

The capacity to which they are related;

The conditions on which they are based; and

The periods which they cover.

Functional Budget

A functional budget is a budget which relates to any of the functions of an

undertaking e.g., sales, production, research and development, cash etc, the following

budgets are generally prepared.

Budget prepared by

1. Sales Budget including selling and Sales Manager

Distribution Cost Budget

2. Production Budget Production Manager

3. Material Budget Purchase Manager

4. Labor and Personnel Budget Personnel Manager

5. Manufacturing Overheads Production Manager

6. Administration Cost Budget Finance Manager

30
 7. Plant Utilization Budget Production Manager

8. Capital Expenditure Budget Chief Executive

9. Research and Development

Cost Budget R&D Manager

10. Cash Budget Finance Manager

Sales Budget

Sales budget is the most important budget and of primary importance. It forms the

basis on which all the budgets are built up. This budget is a forecast of quantities and

values of sales to be achieved in a budget in a budget period. The sales Manger should

be made directly responsible for the preparation and execution of the budget. The

sales budget may be prepared according to products, sales territories, types of

customers; salesmen etc., in the preparation of the sales budget, the sales manager

should take into consideration the following factors:

1. Past Sales Figures and Trends.

2. Salesmens Estimation.
3. Plant Capacity.
4. Availability of Raw Material and other Supplies.
5. General Trade Prospects.
6. Orders in Hand.
7. Seasonal Fluctuations.
8. Financial Aspect.
9. Adequate Return on Capital Employed.
10. Competition.
11. Miscellaneous Considerations.

31
Production Budget

Production budget is a forecast of the total output of the whole organization broken

down into estimates of output of each type of product with a scheduling of operations

(by weeks and months) to be performed and a forecast of the closing finished stock.

This budget may be expressed in quantitative (weight, units etc) r financial (rupees)

units or both. This budget is prepared after taking into consideration the estimated

opening stock, the estimated sales and the desired closing finished stock of each

product. The works manger is responsible for the total production budget and the

departmental managers are responsible for the departmental production budget. In

preparing the production budget, the following factors are considered. The time lag

between the production in the factor and sales to the customer should be considered so

as to allow for the time required or the dispatch of goods from the factory to the place

of the customers.

Cost of production Budget

After determining the volume of output the cost of procuring the output must be

obtained by preparing a cost of production budget. This budget is an estimate of cost

of output planned for a budget period and may be classified into material cost budget,

labor cost budget and overhead budget because cost of production includes material,

labor and overheads.

Materials Budget

In drawing up the production budget, one of the first requirements to be considered is

material. As we know, materials may be direct or indirect. The materials budget deals

with the requirements and procurement of direct materials. Indirect materials are dealt

with under the works overhead budget. The budget should be related to the production

32
budget and the period of the budget should be of short duration because this budget

has an important bearing on the cash budget

Purchase Budget

Purchase Budget is mainly dependent on production budget and material requirement

budget. This budget provides information about the materials to be acquired from the

market during the budget period.Purchase budget should be prepared by the purchase

manger by getting relevant information about capital items, tools, general supplies

and direct materials required during the budget period from other related departments.

Like other budgets, the purchasebudget has to be approved by the budget committee.

After approval it becomes th e responsibility of the purchase officer to see that

purchases are made as per the purchase budget. Sometimes additional purchases

which are not covered by the purchase budget are made under the following

circumstances.

Direct Labor Budget

This budget gives as estimate of the requirements of direct labor essential to meet the

production target. This budget may be classified into labor Requirements budget and

recruitment budget. The labor recruitment budget is developed on the basis of

requirement of the production budget given and detailed information regarding he

different classes of labor e.g., fitters, welders, turner, millers, and grinders and drillers

etc., required for each department, their scales of pay and hours to be spent. This

budget is prepared with a view to enable the personnel department to carry out

programmers of training and transfer and to find out sources of labour needed so that

every effort may be made to remove difficulties arising in production the available

workers in each department, the expected changes in the labour force during the

budget period due to the labour turnover. This budget gives information about the

33
personnel specification for the jobs for which workers are to be recruited, the degree

for skill and experience required and the rates of pay. Where standard costing system

is applied, the labor cost budget is dev eloped on the basis of standard labor cost per

unit multiplied by the quantity of anticipated production determined in the production

budget.

Manufacturing Overheads Budget

This budget gives an estimate of the works overhead expenses to be incurred in a

budget period to achieve the production target. The budget includes the cost of

indirect material, indirect labour and indirect works expenses. The budget may be

classified into fixed cost, variable cost and semi-variable cost. It can be broken into

departmental overhead budget to facilitate control. In preparing the budget, fixed

works overhead can be estimated on the basis of past information after taking into

consideration the expected changes which may occur during the budget period.

Administrative Expenses Budget

This budget covers the expenses incurred in framing policies, directing the

organization and controlling the business operations. In other words, the budget

provides as estimate of the expenses of the central office and of management salaries.

The budget can be prepared with the help of past experience and anticipated changes.

Budget may be prepared be prepared for each administration department so that

responsibility for increasing such expenses. This budget covers the expenses incurred

in framing policies, directing the organization and controlling the business operations.

In other words, the budget provides an executive. Much difficulty is not experiences

in developing such budget as most of the administration expenses are of a fixed

nature.

34
Budgeted Income Statement

A budgeted income statement summarizes all the individual budges i.e., sales budget,

cost of goods sold budget, selling budget, and administrative sales budget. This

budget determines income before taxes. If the tax rate is available net income after

taxes can also be computed.

Selling and Distribution Costs Budget

This budget is the forecast of the cost selling and distribution for budget period and is

clearly related to the sale budget. All expenses related to selling and distribution of

the various products as indicated in the sales budget are included in it. These expenses

are based on the volume of sales set in the sales budget and budget and budgets are

prepared for each item of selling and distribution overhead.

Plant Utilization Budget

This budget lays down the requirements of plant capacity to carry out the production

as per the production programme. This budget is terms of convenient physical units as

weight or number of products or working hours. The main functions of this budget

are:

It will show the machine load in each department during the

Budget period.

It will indicate the overloading on some departments, machine or group of

machine and alternative courses of actions as working overtime, off loading,

procurement or expansion of plants, sub-contracting etc., can be taken.

Idle capacity in some departments may be utilized by making efforts to

increase the demand for the products by providing after sale service,

conducting advertisement campaign, reducing prices, introducing lucky prize

coupons, recruiting efficient sales staff etc.

35
Capital Expenditure Budget

The capital expenditure budget gives an estimate of the amount of capital that may be

needed for acquiring the assets required for fulfilling production requirements a

specified in the production budget. The budget is prepared after taking into

consideration in the available productive capacities, probable reallocation of the

existing assets such as plant and equipment budget, building budget etc. The capital

expenditure budget is an important budget proving for acquisition of assets,

necessitated by the following factors.

Research And Development Cost Budget

While developing research and development cost budget, it should be clear in mind

that work relating to research and development is different from that relating to the

manufacturing function. Manufacturing function gives quicker results than research

and development which may go on for several years. Therefore, these budgets are

established on a long term basis; say for 5 to 10 years which can be further subdivided

into short-term budgets on annual basis. As a rule research workers are less cost

conscious; so they are not susceptible to strict control.

Cash (Financial) Budget

The cash budget can be prepared by any of the following method

1. Receipts and payments method

2. The adjusted profit and loss method

3. The balance sheet method

1. Receipts and payments method: In case of this method the cash receipts from

various sources and the cash payments to various agencies are estimated. In

the opening balance of cash, estimated cash receipts are added and from the

36
 total of estimated cash payments are deducted to find out of the closing

balance.

2. The adjusted profit and loss method: In case of this method the cash budget is

prepared n the basis of opening cash and bank balance of the various assets an

liabilities.

3. The balance sheet method: With the help of budget balances at end except cash

and bank balances, a budgeted balance sheet can be prepared and the balancing

figure would be the estimated closing cash\bank balance.

Thus under this method, closing balances, other than cash\bank will have to be found

out first to be put in the budget balance sheet. This can be done by adjusting the

anticipated.

Master Budget (Finalized Profit Plan)

The Master Budget is consolidated summary of the various functional budgets. It has

been defined as a summary of the budget schedules in capsule form made for the

purpose of presenting, in one report, the highlights of the budget forecast. The

definition of this budget given by the Chartered Institute of Management Accountant,

England, is as follows:

Thus summary budget incorporating its components functional budgets and which

are finally approved and employed.

Fixed Budget

This budget is drawn for one level of activity and one set of conditions. It has been

defined as a budget which is designed to remain unchanged irrespective of the volume

of output or turnover attained. It is rigid budget and is drawn on the assumption

that there will be no change in the budgeted level of activity. A fixed budget will,

therefore, be useful only when the actual level of activity corresponds to the budgeted

37
level of activity. A master budget tailored to a single output level of (say) 20,000

units of sales is a typical example of a fixed budget. But in practice, the level of

activity and set conditions will change as a result of internal limitations and external

factors like changes in demand and price, shortage of materials and power, acute

competition etc.

Flexible Budget

The Chartered Institute of Management Accountants, defines a flexible budget also

called sliding scale budget as a budget which, by recognizing the difference in

behavior between field an d variable costs in relation to fluctuations in output,

turnover, or other variable factors such a number of employees, is designed to change

appropriately with such fluctuations.A flexible budget making an intelligent

classification of all expenses between fixed, semi-variable and variable because the

usefulness of such a budget depend upon the accuracy with which the expenses can be

classified. Such a budget is prescribed in the following cases.

Where the level of activity during the year varies from period, either

due to the seasonal nature of the industry or to variation in demand.

Where the business is a new one and it is difficult to foresee the

demand.

Where the undertaking is suffering from shortage of a factor of

production such as materials, labour, plant, capacity etc. The level of

activity depends upon the availability of such a factor of production.

Where an industry is influenced by changes in fashion.

Where there are general changes in sales.

38
 Where the business units keep on introducing new products or make

changes in the design of its products frequently.

Where the industries are engaged in make to order business like

shipbuilding.

Basic Budget

A Basic budget has been defined as a budget which is prepared for use unaltered over

a long period of time. This does not take into consideration current conditions and

can be attainable under standard conditions.

Current Budget

Long-Term Budget

Short- Term Budget

Performance Budget

Zero Based Budgets

Advantages Of Budgetary Control

The most important advantage of a budgetary control is to enable management to

conduct business in the most efficient manner because budgets are prepared to get the

effective utilization of resources and the realization of objectives as efficiently. It lies

down as objective for the business as a whole. Even though a monetary reward is not

offered the budget becomes a game a goal to achieve or a target to shoot at and

hence it is more likely to be achieved or hit that if there was no predetermined goal or

target. The budget is an impersonal policeman that maintains ordered effort and

brings about efficiency in result. It ensures effective utilization of men, materials,

machines and money because production is planned according to the availability of

these items. Everyone working in the concern knows what exactly to do because

budgetary control laid emphasis on the staff organization. It ensures that individual

39
responsibilities are clearly defined and that the required authority commensurate with

the responsibility is delegated so that buck passing ay is prevented when the budgeted

results are not achieved. Budgetary control creates conditions for setting up a system

of standard costing. It is helpful in reviewing current trends in the business and in

determining further policy of the business because current and future trends are

studied in the preparation of the budget.

Dis-Advantages Of A Budget

While budgets may be essential part of activity they do have number of

disadvantages, particularly in perception terms.

Budgets can be seen pressure devices imposed by management, thus resulting in:

a) bad labor relations

b) Inaccurate record-keeping.

Departmental conflict arises due to:

a) dispute over resources allocation

b) Departmental blaming each other if targets are not attained. It is difficult to

reconcile personal\individual and corporate goals. Waste may arise as managers

adopt the view, we had better sped it or we will lose it. This is often coupled with

empire building in order to enhance the prestige of department. Responsibility

versus controlling, i.e. some costs are under the influence of more than one person,

eg. Power costs.

40
 Data Analyses and Interpretation
Calculation of Revenue Receipts Budget For The Year 2012-2013
(Cr)
S.No Description Budgeted Actuals Variance

Interest Earned 8965.24 8604.99

1. 360.25
Other Income 75.35 64.26 11.09
2.
Balance In 1025.36 999.02
Bank(Inventory) 26.34
3.

Total 10065.95 9668.27 397.68

Table 1.1
Interpretation

In this year it can be seen that every item actual are bellow the budget estimate which

reprehensions a positives indications of savings, the actual are beyond budget

estimates due to revision in pay scales. This can be ignored, because in total budget

estimates are more than the actual

In revenue receipts, the actual are below the budgeted. Except in increase in inventory

value is negative. The budget estimates with a good variation percentage.

41
 Calculation of Revenue Expenditure Budget for the Year 2012-2013
(Cr)

S. Description Budgeted Actuals Variance

No.

1. Interested Expanded 421.25 340.26 80.99

Operating Expenses
2. 7458.69 7108.25 350.44
Employee Remuneration &
3. 624.37 507.91 116.46
Benefits

Administrative &Operation
4. Expenses ----- ---- -----

Provisions & Contingencies

5. 763.91 648.57 115.34

Depreciation

6. 159.68 101.44 58.24

Total 9427.90 8706.43 721.47

Table1.2

42
 Calculation of Revenue Receipts Budget for the Year 2011-2012
(Cr)
S.No Description Budgeted Actual Variance

Interest Earned 8965.24 8604.99

1. 360.25
Other Income 75.35 64.26 11.09
2.
Balance In 1025.36 999.02
Bank(Inventory) 26.34
3.

Total 10065.95 9668.27 397.68

Table1.3
Interpretation

In this year it can be seen that every item actuals are bellow the budget estimate which

reprehensions a positives indications of savings, the actuals are beyond budget

estimates due to revision in pay scales. Which can be ignored, because in total budget

estimates are more then the actuals

In revenue receipts, the actuals are below the budgeted. Except in increase in

inventory value is negative. The budget estimates with a good variation percentage.

43
 Calculation of Revenue Expenditure Budget For The Year 2011-2012
(Cr)

S. Description Budgeted Actuals Variance

No.
1. Interested Expanded 421.25 340.26 80.99
Operating Expenses
2. 7458.69 7108.25 350.44
Employee Remuneration &
3. 624.37 507.91 116.46
Benefits

Administrative &Operation
4. Expenses ----- ---- -----

Provisions & Contingencies

5. 763.91 648.57 115.34

Depreciation

6. 159.68 101.44 58.24

Total 9427.90 8706.43 721.47

Table 1.4

44
 Calculation Of Revenue Receipts Budget For The Year 2010-2011
(Cr)
S.No Description Budgeted Actuals Variance

Net Sales(Earned) 6231.58 5903.71 327.87

1.
Other Income 18.69 11.47 7.22
2.
Balance In Inventory 805.67 761.88 43.79

3.

Total 7055.94 6677.06 378.88

Table1.5

Interpretation

In this year, the budgeted are above the actuals. Interested Earned is high value the

budget estimates among all items and in total that shows a good budgeting effort

makes the actuals.

In revenue receipts, the budgeted are above the actuals, but with a minimum

percentage of variation as compared with previous year.

45
 Calculation Of Revenue Expenditure Budget For The Year 2010-2011

S. Description Budgeted Actuals Variance

No.
1. Interested Expanded 215.68 169.64 46.04
Operating Expenses
2. 4785.69 4502.61 283.08
Employee Remuneration &
3. 458.69 412.81 45.88
Benefits

Administrative &Operation
4. Expenses ---- ----- -----

Provisions & Contingencies

5. 902.67 818.65 84.02

Depreciation

6. 89.67 72.06 17.61

Total 6452.40 5975.77 476.63

(Cr)

Table1.6

46
 Calculation Of Revenue Receipts Budget For The Year 2009-2010
(Rs)
S.No Description Budgeted Actuals Variance

6214.25 5886.70 327.25

Net Sales(Earned)
1.
184.57 111.52 73.05
Other Income
2.
Balance In Inventory 517.83 447.21 70.62

3.

Total 6916.65 6445.43 471.22

Table1.7
Interpretation

During this year budget estimates are above actuals are below. The budgets and
actuals increasing in compared to previous year.In revenue receipts budget estimates
are above the actuals which indicates a good variation.

47
 Calculation Of Revenue Expenditure Budget For The Year 2009-2010
(Rs)

S. No. Description Budgeted Actuals Variance

1. Interested Expanded 204.69 173.53 31.16

Operating Expenses
2. 4978.21 4643.31 334.90
Employee Remuneration &
3. 286.37 201.33 85.04
Benefits

Administrative &Operation
4. Expenses 10.25 2.24 8.01

Provisions & Contingencies

5. 916.37 866.29 50.08

Depreciation

6. 97.68 59.77 37.91

Total 6493.57 5964.47 547.10

Table1.8

48
 Calculation Of Revenue Receipts Budget For The Year 2008-2009
(Rs)
S.No Description Budgeted Actuals Variance

4258.69 4082.59 176.10

Net Sales(Earned)
1.
31.02 15.06 15.96
Other Income
2.
Balance In Inventory 587.14 421.98 165.16

3.

Total 4876.85 4519.63 357.22

Table1.9
Interpretation

This year budgets and actuals estimates are below compared to the 2008-2009 except
in employee remuneration and benefits. In revenue receipts, the budgeted are above
the actuals. Increase in inventors value in negative the budget estimates with a good
percentage of variation.

49
 Calculation Of Revenue Expenditure Budget For The Year 2008-2009
(Rs)

S. Description Budgeted Actuals Variance

No.
1. Interested Expanded 102.58 88.48 14.10
Operating Expenses
2. 3459.67 3278.45 181.22
Employee Remuneration &
3. 190.20 147.89 42.31
Benefits

Administrative &Operation
4. Expenses 2.06 0.65 1.41

Provisions & Contingencies

5. 648.69 567.12 81.57

Depreciation

6. 61.20 40.53 20.67

Total 4464.40 4123.12 341.28

Table1.10

50
 Calculation Of Revenue Receipts Budget For The Year 2007-2008
(Rs)
S.No Description Budgeted Actuals Variance

Net sales(Earned) 1824.01 1574.55 249.26

1.
Other Income 37.17 28.03 9.14
2.
Balance in Inventory 201.57 155.97 45.60

3.

Total 2062.75 1758.55 304.20

Table1.11
Interpretation

In this year the budgets are above the previous year and all expenditures and in all it

shows a good signification of budget techniques. It we see the revenue receipts,

budget are above the actual, with minimum difference. Increase in inventory total five

years values is negative.

51
Calculation Of Revenue Expenditure Budget For The Year 2008

(cr.

S. Description Budgeted Actuals Variance

No.

1. Interested Expanded 15.21 08.03 7.18

Operating Expenses
2. 1281.31 1147.73 133.58
Employee Remuneration &
3. 92.21 61.43 30.78
Benefits

Administrative &Operation
4. Expenses 60.21 42.77 17.44

Provisions & Contingencies

5. 390.21 314.32 75.89

Depreciation

6. 20.91 11.62 9.29

Total 1860.06 1585.90 274.16

.)
Table1.12

52
 Interested Expanded
(Cr..)
Year Budgeted Actuals
2007-2008 15.21 08.30
2008-2009 102.58 88.48
2009-2010 204.69 173.53
2010-2011 215.68 169.64
2011-2012 421.25 340.26

Table1.13

450

400

350

300

250
BUDGETED
200
ACTUALS
150

100

50

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram1.1

Interpretation

By observing the above graph the materiel consumption is fluctuating from 2008-

2012. The interested expenditure the state at which the implementation of the need

and the elements of the company is 340.26 cr so the company needs effective budget

technique to get targeted actual.

53
 Provisions and Contingences
(Cr..)
Year Budgeted Actuals
2007-2008 390.21 314.32
2008-2009 648.69 567.12
2009-2010 916.37 866.29
2010-2011 902.67 818.65
2011-2012 763.91 648.57

Table 1.14

1000
900
800
700
600
500 BUDGETED

400 ACTUALS

300
200
100
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.2
Interpretation

By observing the above graph the consumable stores is fluctuating from 2008-2012.

The value is increased from 314.32 in 2008 to 648.57 in 2012 so the company needs

effective budget techniques to get targeted actual.

54
 Employee Remuneration & Benefits
(Cr..)

Year Budgeted Actuals

2007-2008 2365.54 2078.90
2008-2009 2009.63 1971.70
2009-2010 2103.65 1925.79
2010-2011 2996.31 2816.93
2011-2012 3608.91 3515.28

Table1.15
4000

3500

3000

2500

2000 BUDGETED
ACTUALS
1500

1000

500

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.3
Interpretation

By observing the above graph the employee remuneration and benefits are fluctuating

from 2008 to 2012. There is an increase in the values from 2078.90 in 2008 to

3515.28 in 2012. So the company should follow the same technique and also improve

to get targeted actual.

55
 Administrative & Operation Expenses
(Cr..)

Year Budgeted Actuals

2007-2008 60.21 42.77
2008-2009 2.06 0.65
2009-2010 10.25 2.24
2010-2011 ---- ----
2011-2012 ---- -----

Table1.16

70

60

50

40
BUDGETED
30 ACTUALS

20

10

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.4
Interpretation

By observing the above graph the administrative and operation expenses are

fluctuating from 2008 to 2012. There is a decrease in the values from 42.77 in 2008 to

2.24 in 2010 so the company needs effective budget techniques to get targeted actual.

56
 Tax

Year Budgeted Actuals

2007-2008 112.24 96.91
2008-2009 158.91 138.17
2009-2010 291.21 233.72
2010-2011 201.24 141.41
2011-2012 0.00 -9.41

Table 1.17
350

300

250

200
BUDGETED
150
ACTUALS
100

50

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
-50

Digram 1.5
Interpretation

By observing the above graphs the Tax are fluctuating from 2008-2012 there is an

decrease in the values from 96.91 in 2008 to -9.41 in 2012. So the company should

follow the same technique and also improve to get targeted actual.

57
 Depreciation

Year Budgeted Actuals

2007-2008 20.91 11.62
2008-2009 61.20 40.53
2009-2010 97.68 59.77
2010-2011 89.67 72.06
2011-2012 159.68 101.44

Table 1.18
180

160

140

120

100
BUDGETED
80
ACTUALS
60

40

20

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.5
Interpretation

By observing the above graph the depreciation values are fluctuating from 2008-2012.

There is an increase in the values from 11.62 in 2008 to 101.44 in 2012 so the

company need effective budget techniques to get targeted actual.

58
 Assets

Year Budgeted Actuals

2007-2008 2258.61 2145.97
2008-2009 3458.47 3204.66
2009-2010 6014.25 5894.37
2010-2011 7501.34 7236.55
2011-2012 8027.91 6988.33

Table 1.19
9000

8000

7000

6000

5000
BUDGETED
4000
ACTUALS
3000

2000

1000

0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.6

Interpretation

By observing the above graph the Assets are fluctuating from 2008-2012.there is an

increase in the values from 2145.27 in 2008 to 6988.33 in 2012. There is an increase

in the actual so the company need effective budget techniques to increase the sale of

targeted actual.

59
 Other Income
(Cr..)
Year Budgeted Actuals
2007-2008 37.17 28.03
2008-2009 31.02 15.06
2009-2010 184.57 111.52
2010-2011 18.69 11.47
2011-2012 75.35 64.26

Table 1.20
200
180
160
140
120
100 BUDGETED

80 ACTUALS

60
40
20
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.6
Interpretation

By observing the above graph the other incomes are also fluctuating from 2008-2012

there is a increase in the value 28.03 in 2008 to 64.26 in 2012 so the company need

effective budget techniques to get targeted actual in the year 2009-2010 the company

plant location was sold out and the income earned in that year is high i.e. 111.52 Cr.

60
 Capital Work in Programs
(Cr..)
Year Budgeted Actuals
2007-2008 102.54 81.42
2008-2009 36.69 22.37
2009-2010 48.91 33.44
2010-2011 185.64 102.08
2011-2012 41.27 24.39

Table 1.21

200
180
160
140
120
100 BUDGETED

80 ACTUALS

60
40
20
0
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012

Digram 1.7
Interpretation

By observing the above graph the decrease in working process values. The values are

in positive. The company should concentrate on this to improve the increasing in the

inventory and in the year 2010-2011 the valuation is high berceuse the increase in the

investment to the plants.

61
Findings

The budget and budgetary control of LANCO Infratech Limited. Was found to

be very effective when considered all categories of items.

In spite of having techniques many techniques of budget system, the company

is not following any of the system to control budget.

In the 2008-2012 the total budgets value was high. Where was in the next two

years it has come down drastically.

In all the five years budget expenditure was of high consumption a value.

Material consumed which is one of the inputs for the production.

It is also found that the reasons for maintaining huge stock of Banking

expenses in 2007-2008 is due to high production of manufacturing expenses as

well as the sales is also high in the year of 2008-2012 compared to other year.

62
Suggessions

It is recommended to the company that every item to be considered

when categorizing the items into budgets.

As company is not using any budget techniques we can suggest the

company to follow budget techniques for better and effective budget

and budgetary control.

Preaudit of all expenditure proposals before issue of order and to check

whether the expenditure is legitimate, approved by appropriate

authority and availability of funds for the above items.

The budget estimations should be made that they will reach with the

actual for every year with very less variation.

In LANCO Infratech Limited revenue expenditure and revenue

receipts are not interdependent on each other.

The revenue expenditure will be spent based on the production target

irrespective of the revenue receipts.

In this proves the effective financial performance of budget department

in the organization

63
Conclusions

Since, all the production units in LANCO Infratech Limited. Will run perpetually

throughout the year, there will be minimum variations in the revenue expenditure

budget estimates and actual. As the expenditure will be incurred more or less to the

estimations made by the organization.In concern with overhead expenses, it will also

be with minimum variations between budget estimates and actual. Since the

production process will be consistent. Any change in the items of expenditure, will

lead to the review in the budget estimates by the accounts and finance department. It

is also suggested to the company that budget techniques will be very useful to control

and manage cost effectively.

64