Académique Documents
Professionnel Documents
Culture Documents
BUDGETING AND
BUDGETARY CONTROL
- Mrs. Geetika Gahlot
MEANING OF BUDGET
A budget is a detailed plan of operations for some specified
future period.
It is an estimate prepared in advance of the period to which
it applies.
The Chartered Institute of Management Accountants,
MEANING OF BUDGETARY
CONTROL
The Chartered Institute of Management Accountants,
FORECASTS
INSTALLATION OF BUDGETARY
CONTROL SYSTEM
I.
II.
III.
III.
ii.
President
Budget Controller
Or Director
Submit, Discuss &
Finally approve the
Budget figures
Technical side
of the
business
Budget Committee
Head of Departments
Sub-Committees
Executives
IV.
V.
Budget Procedure:
i.
Determination of key factors.
ii. Making of forecasts.
iii. Consideration of alternative combinations of forecasts.
iv. Preparation of budgets.
v. Choice between fixed and flexible budgets.
CLASSIFICATION OF BUDGETS
1.
2.
3.
According to Time.
According to Function.
According to Flexibility.
1. According to Time
a)
b)
c)
d)
2. According to Function
a)
b)
c)
d)
e)
g)
h)
i)
3. According to Flexibility
a)
b)
CONTROL RATIOS
Three important ratios are commonly used by the
i. Activity Ratio
It is a measure of the level of activity attained over a
period.
It is obtained when the number of standard hours
Budgeted hours
100
Budgeted hours
100
production.
It is obtained when the standard hours equivalent to the
100
ZERO-BASE BUDGETING
Zero-based budgeting is a technique of planning and
No
increasing or decreasing.
Definition of ZBB
According to Peter A. Phyrr, ZBB is
an operating
planning and budgeting process which requires each
manager to justify his entire budget requests in detail
from scratch (hence) zero basis. Each manager states why
he should spend any money at all. This approach requires
that all activities be identified as decision packages which
would be evaluated by systematic analysis and ranked in
order of importance.
Advantages of ZBB
1.
2.
3.
Limitations of ZBB
1.
2.
3.
4.
Implementation problems
Decision packages formulation problems
Ranking process problems
Cost problems
1.
a)
b)
c)
d)
e)
f)
g)
Month
s
Credit
Sales
(Rs)
March
60,000
36,000
9,000
4,000
2,000
4,000
April
62,000
38,000
8,000
3,000
1,500
5,000
May
64,000
33,000
10,000
4,500
2,500
4,500
June
58,000
35,000
8,500
3,500
2,000
3,500
July
56,000
39,000
9,500
4,000
1,000
4,500
Augus
t
60,000
34,000
8,000
3,000
1,500
4,500