INDEX Chapter 1 INTRODUCTION Need for the study Scope of the Study Objectives of the Study Limitations of the

e Study Methodology of the Study Chapter II INDUSTRY PROFILE Chapter III COMPANY PROFILE Chapter IV THEORETICAL FRAMEWORK OF BUDGETARY CONTROL Chapter V DATA ANALYSIS AND INTERPRETATION Chapter V I FINDINGS SUGGESTION CONCLUSION Chapter VII BIBLIOGRAPHY

INTRODUCTION
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.

BUDGET:
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.

BUDGETORY CONTROL:
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 actual with budgeted results either to secure individuals action the objective of policy or to provide a basic for its revision. A budget is the monetary and quantitative expressions of business plans and policies to be pursued in the future period of time the term budgeting is used for preparing budgets and other procedures for planning co-ordination and control of business enterprise. Budgetary control is the process of determining various budgeted figures for the enterprises for the future period and then comparing the budgeted figures with the actual performance for calculating variations, if any first of all budgets are prepared and then actual results are recorded.

NEED FOR THE STUDY

The need for budgetary control is felt in view of its critical decision making phase like in which activity budget is to be allocated this includes planned and non planned budget and looking into the need for them. Budgetary control helps on eliminating wastes and raises the profitability position of an enterprise. When budget is not done properly it brings about inefficiency in working of the organization and also increases wastages and loss of financial assets. A budget is plan for coordinating the various operations of the business expressed in a financial terms. Budget is prepared to have effective utilization of funds for the realization of objectives as efficiently as possible Budget estimation is required for following activities To analyze how much amount required for running operational activities. To estimate future revenues. To face the future financial problems. To estimate future expenses. Effective utilization of funds.

OBJECTIVES OF THE STUDY

 To study the budgeting system and budgeting principles of HERITAGE FOODS. To evaluate the pre-requisites of HERITAGE FOODS for their effective budgetary control system. To review the budget proposal, budget periods and the functions of budget Assistant in HERITAGE FOODS. To understand about co-ordination among different department in HERITAGE FOODS in preparing their budgets. To studying about how HERITAGE FOODS utilizing their resources to achieve their objectives. To study the requirement for effective budgeting system in HERITAGE FOODS. To study the various aspects of budget and budgetary control. To analyze the revenue expenditure and revenue receipts. To compare actual performance with budgetary performance. To facilitate centralized control with delegation of authority and responsibility.

SCOPE OF THE STUDY

The scope of the study is very wide as it ranges from the various specific budgets of each department to the overall master budget and performance budget of the organization. The procedures and guidelines provided in this manual are applicable to all the locations within the company. The following topics have been covered in this chapter: o Budget formulation o Execution and operation of approved budget o Budget monitoring: and o MIS of Budget Selection

METHODLOGY OF THE STUDY

Methodology is the back of industry; methodology means by way one researcher selects his sample, data collection, various tools used for studying a problem with certain object in view. This study adopts the methodology of collecting data from both sources primary and secondary. The data which is mentioned in this report totally collected from the channels. That is primary data secondary data. Primary data: The primary data collected though the Interaction with manages and employees. Observation method. Personal interview with Budget Assistant.

Secondary data:
Particularly it is very difficult to collect the entire through primary sources. So the researcher has to depend on secondary data. Any data that have been gathered earlier for some other purpose is known as secondary data. It has been collected from past records magazines and newspapers and other sites from internet. Secondary data collected through Annual reports Budget estimates Company manuals Company website

LIMITATIONS OF THE STUDY

The study is conducted in a short period during the limitation time. The study may not be detailed in all aspects. The study is conducted with the available data from the annual reports of and analysis The study based on the secondary data. Even through company is having No of branches, HERITAGE FOODS, hyd, only has been taken for the study. If company annual reports publish any mistakes that should be taken for the data analysis. 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. To study is restricted to HERITAGE .Co. To study is restricted to limited period.

was mad accordingly.

HISTORY OF INDIAN FOODS INDUSTRY

Retailing is one of the pillars of the economy in India and accounts for 35% of GDP. The retail industry is divided into organized and unorganized sectors. Over 12 million outlets operate in the country and only 4% of them being larger than 500 sq ft (46 m2) in size. Organized retailing refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local kirana shops, owner manned general stores, pan/beedi shops, convenience stores, hand cart and pavement vendors, etc. Most Indian shopping takes place in open markets and millions of independent grocery shops called kirana. Organized retail such supermarkets accounts for just 4% of the market as of 2008. Regulations prevent most foreign investment in retailing. Moreover, over thirty regulations such as "signboard licenses" and "anti-hoarding measures" may have to be complied before a store can open doors. There are taxes for moving goods to states, from states, and even within states.

GROWTH
An increasing number of people in India are turning to the services sector for employment due to the relative low compensation offered by the traditional agriculture and manufacturing sectors. The organized retail market is growing at 35 percent annually while growth of unorganized retail sector is pegged at 6 percent. The Retail Business in India is currently at the point of inflection. Rapid change with investments to the tune of US $ 25 billion is being planned by several Indian and multinational companies in the next 5 years. It is a huge industry in terms of size and according to management consulting firm Technopak Advisors Pvt. Ltd., it is valued at about US $ 350 billion. Organized retail is expected to garner about 16-18 percent of the total retail market (US $ 65-75 billion) in the next 5 years.

India has topped the A.T. Kearneys annual Global Retail Development Index (GRDI) for the third consecutive year, maintaining its position as the most attractive market for retail investment. The Indian economy has registered a growth of 8% for 2007. The predictions for 2008 are 7.9%. The enormous growth of the retail industry has created a huge demand for real estate. Property developers are creating retail real estate at an aggressive pace and by 2010, 300 malls are estimated to be operational in the country. With over 1,000 hypermarkets and 3,000 supermarkets projected to come up by 2011, India will need additional retail space of 700,000,000 sq ft (65,000,000 m2) as compared to today. Current projections on construction point to a supply of just 200,000,000 sq ft (19,000,000 m2), leaving a gap of 500,000,000 sq ft (46,000,000 m2) that needs to be filled, at a cost of US$1518 billion. According to the Icrier report, the retail business in India is estimated to grow at 13% from $322 billion in 2006-07 to $590 billion in 2011-12. The unorganized retail sector is expected to grow at about 10% per annum with sales expected to rise from $ 309 billion in 2006-07 to $ 496 billion in 2011-12.

THE INDIAN RETAIL MARKET

Indian market has high complexities in terms of a wide geographic spread and distinct consumer preferences varying by each region necessitating a need for localization even within the geographic zones. India has highest number of outlets per person (7 per thousand) Indian retail space per capita at 2 sq ft (0.19 m2)/ person is lowest in the world Indian retail density of 6 percent is highest in the world. 1.8 million Households in India have an annual income of over 45 lakh Delving further into consumer buying habits, purchase decisions can be separated into two categories: status-oriented and indulgence-oriented. CTVs/LCDs, refrigerators, washing machines, dishwashers, microwave ovens and DVD players fall in the status category. Indulgence-oriented products include plasma TVs, state-of-the-art home theatre systems, iPods, high-end digital cameras, camcorders, and gaming consoles. Consumers in the status category buy because they need to maintain a position in their social group. Indulgence-oriented buying happens with those who want to enjoy life better with products that meet their requirements. When it comes to the festival shopping season, it is primarily the status-oriented segment that contributes largely to the retailers cash register. While India presents a large market opportunity given the number and increasing purchasing power of consumers, there are significant challenges as well given that over 90% of trade is conducted through independent local stores. Challenges include: Geographically dispersed population, small ticket sizes, complex distribution network, and little use of IT systems, limitations of mass media and existence of counterfeit goods.

MAJOR INDIAN RETAILERS

Indian apparel retailers are increasing their brand presence overseas, particularly in developed markets. While most have identified a gap in countries in West Asia and Africa, some majors are also looking at the US and Europe. Arvind Brands, Madura Garments, Spykar Lifestyle and Royal Classic Polo are busy chalking out foreign expansion plans through the distribution route and standalone stores as well. Another denim wear brand, Spykar, which is now moving towards becoming a casual wear lifestyle brand, has launched its store in Melbourne recently. It plans to open three stores in London by 2008end. The low-intensity entry of the diversified Mahindra Group into retail is unique because it plans to focus on lifestyle products. The Mahindra Group is the fourth large Indian business group to enter the business of retail after Reliance Industries Ltd, the Aditya Birla Group, and Bharti Enterprises Ltd. The other three groups are focusing either on perishables and groceries, or a range of products, or both.

Vivek Limited Retail Formats: Viveks, Jainsons, Viveks Service Centre, Viveks Safe Deposit Lockers PGC Retail -T-Mart India Switcher , Respect India , Grand India Bazaar ,etc., REI AGRO LTD Retail-Formats:6TEN Hyper & 6TEN Super RPG Retail-Formats: Music World, Books & Beyond, Spencers Hyper, Spencers Super, Daily & Fresh Pantaloon Retail-Formats: Big Bazaar, Food Bazaar, Pantaloons, Central, Fashion Station, Brand Factory, Depot, aLL, E-Zone etc. The Tata Group-Formats: Westside, Star India Bazaar, Steeljunction, Landmark, and Titan Industries with World of Titans showrooms, Tanishq outlets, Chroma. K Raheja Corp Group-Formats: Shoppers Stop, Crossword, Hyper City, Inorbit Lifestyle International-Lifestyle, Home Centre, Max, Fun City and International Franchise brand stores. Pyramid Retail-Formats: Pyramid Megastore, TruMart Nilgiris-Formats: Nilgiris supermarket chain Subhiksha-Formats: Subhiksha supermarket pharmacy and telecom discount chain.

Trinethra- Formats: Fabmall supermarket chain and Fabcity hypermarket chain Vishal Retail Group-Formats: Vishal Mega Mart BPCL-Formats: In & Out Reliance Retail-Formats: Reliance Fresh Reliance ADAG Retail-Format: Reliance World

COMPANY PROFILE HERITAGE AT A GLANCE:

The Heritage Group, founded in 1992 by Sri Nara Chandra Babu Naidu, is one of the fastest growing Private Sector Enterprises in India, with three-business divisions viz., Dairy, Retail and Agri under its flagship Company Heritage Foods (India) Limited (HFIL), one infrastructure subsidiary - Heritage Infra Developers Limited and other associate Companies viz., Heritage Fin lease Limited, Heritage International Limited and Heritage Agro Marine Private Limited. The annual turnover of Heritage Foods crossed Rs.347 crores in 2006-07 and is aiming for Rs.700 crores during 2007-08. Presently Heritages milk products have market presence in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Maharashtra and its retail stores across Bangalore, Chennai and Hyderabad. Integrated agri operations are in Chittoor and Medak Districts and these are backbone to retail operations. In the year 1994, HFIL went to Public Issue to raise resources, which was oversubscribed 54 times and its shares are listed under B1 Category on BSE (Stock Code: 519552) and NSE (Stock Code: HERITGFOOD)

ABOUT THE FOUNDER: Sri Chandra Babu Naidu is one of the greatest Dynamic, Pragmatic, Progressive and Visionary Leaders of the 21st Century. With an objective of bringing prosperity in to the rural families through co-operative efforts, he along with his relatives, friends and associates promoted Heritage Foods in the year 1992 taking opportunity from the Industrial Policy, 1991 of the Government of India and he has been successful in his endeavor. At present, Heritage has market presence in all the states of South India. More than three thousand villages and five lakh farmers are being benefited in these states. On the other side, Heritage is serving more than 6 lakh customers needs, employing more than 700 employees and generating indirectly employment opportunity to more than 5000 people. Beginning with a humble annual turnover of just Rs.4.38 crores in 1993-94, the sales turnover has reached close to Rs.300 crores during the financial year 2005-2006.

Sri Naidu held various coveted and honorable positions including Chief Minister of Andhra Pradesh, Minister for Finance & Revenue, Minister for Archives & Cinematography, Member of the A.P. Legislative Assembly, Director of A.P. Small Industries Development Corporation, and Chairman of Karshaka Parishad. Sri Naidu has won numerous awards including " Member of the World Economic Forum's Dream Cabinet" (Time Asia ), "South Asian of the Year " (Time Asia ), " Business Person of the Year " (Economic Times), and " IT Indian of the Millennium " ( India Today).

Sri Naidu was chosen as one of 50 leaders at the forefront of change in the year 2000 by the Business Week magazine for being an unflinching proponent of technology and for his drive to transform the State of Andhra Pradesh.

FORWARD LOOKING STATEMENTS:

We have grown, and intended to grow, focusing on harnessing our willingness to experiment and innovate our ability to transform our drive towards excellence in quality, our people first attitude and our strategic direction. MISSION: Bringing prosperity into rural families of India through co-operative efforts and providing customers with hygienic, affordable and convenient supply of Fresh and Healthy " food products. VISION: To be a progressive billion dollar organization with a pan India foot print by 2012.To achieve this by delighting customers with "Fresh and Healthy" food products, those are a benchmark for quality in the industry. We are committed to enhanced prosperity and the empowerment of the farming community through our unique "Relationship Farming" Model. To be a preferred employer by nurturing entrepreneurship, managing career aspirations and providing innovative avenues for enhanced employee prosperity.

HERITAGE SLOGAN: When you are healthy, we are healthy When you are happy, we are happy We live for your "HEALTH & HAPPINESS QUALITY POLICY OF HFIL: We are committed to achieve customer satisfaction through hygienically processed and packed Milk and Milk Products. We strive to continually improve the quality of our products and services through up gradation of technologies and systems. Heritage's soul has always been imbibed with an unwritten perpetual commitment to itself, to always produce and provide quality products with continuous efforts to improve the process and environment. Adhering to its moral commitment and its continuous drive to achieve excellence in quality of Milk, Milk products & Systems, Heritage has always been laying emphasis on not only reviewing & re-defining quality standards, but also in implementing them successfully. All activities of Processing, Quality control, Purchase, Stores, Marketing and Training have been documented with detailed quality plans in each of the departments. Today Heritage feels that the ISO certificate is not only an epitome of achieved targets, but also a scale to identify & reckon, what is yet to be achieved on a continuous basis. Though, it is a beginning, Heritage has initiated the process of standardizing and adopting similar quality systems at most of its other plants.

COMMITMENTS:

MILK PRODUCERS: Change in life styles of rural families in terms of:

Regular high income through co-operative efforts. Women participation in income generation. Saved from price exploitation by un-organized sector. Remunerative prices for milk. Increase of milk productivity through input and extension activities Shift from risky agriculture to dairy farming Heritage Financial support for purchase of cattle; insuring cattle Establishment of Cattle Health Care Centers Supplying high quality Cattle feed Organizing "Rythu Sadasu" and Video programmers for educating the farmers in dairy farming

CUSTOMERS:

Timely Supply of Quality & Healthy Products Supply high quality milk and milk products at affordable prices Focused on Nutritional Foods More than 4 lakh happy customers High customer satisfaction 24 hours help lines ( <10 complaints a day)

EMPLOYEES:

Enhancing the Technical and Managerial skills of Employees through continuous training and development Best appraisal systems to motivate employees Incentive, bonus and reward systems to encourage employees Heritage forges ahead with a motto "add value to everything you do"

SERVICE:

Highest impotence to investor service; no notice from any regulatory authority since 2001 in respect of investor service Very transparent disclosures

SUPPLIERS: Doehlar: technical collaboration in Milk drinks, yogurts drinks and fruit flavored drinks Alfa-Laval: supplier of high-end machinery and technical support Focusing on Tetra pack association for products package. SOCIETY:

Potential Employment Generation More than 3500 employees are working with heritage More than 9500 procurement agents got self employment in rural areas More than 5000 sales agents associated with the company

Employment for the youth by providing financial and animal husbandry support for establishing MINI DAIRIES Producing highly health conscious products for the society

QUALITIES OF MANAGEMENT PRINCIPLES:

Customer focus to understand and meet the changing needs and expectations of customers. People involvement to promote team work and tap the potential of people. Leadership to set constancy of purpose and promote quality culture trough out the organization. Process approach to assess the efficiency and effectiveness of each process. Systems approach to understand the sequence and interaction of process. Factual approach to decision making to ensure its accuracy. Continual improvement processes for improved business results. Development of suppliers to get right product and services in right time at right place.

OUTLOOK:

Considering the growth potential in the liquid milk market, the company has drawn plans to increase its market share in the existing markets and to enter into new markets there by doubling revenues in dairy business in the next 3 years. To achieve this object, company is undertaking major expansion in dairy business by inverting over Rs20 crores during 2006-07 and over Rs10 crores during the current year to strengthen the milk procurement.

BRANCHES OF HFIL: HFIL has 3 wings. They are

Dairy Retail Agribusiness

DAIRY: It is the major wing among all. The dairy products manufactured by HFIL are Milk, curd, butter, ghee, flavored milk, paneer, doodhpeda, ice cream.

RETAIL: In the retail sector HFIL has outlets namely Fresh@. In those stores the products sold are vegetables, milk& milk products, grocery, pulses, fruits etc. In Hyderabad 19 retail shops are there. In Bangalore& Chennai, 3&4 respectively are there. Totally there are 26 retail shops are there. Fresh@ is a unique chain of retail stores, designed to meet the needs of the modern Indian consumer. The store rediscovers the taste of nature every day making grocery shopping a never before experience. The unique& distinctive feature of Fresh@ is that it offers the widest range of fresh fruits and vegetables which are directly handpicked from the farms. Freshness lies in their merchandise and the customers are always welcomed with fresh fruits and vegetables no matter what time they walk in.

AGRI BUSINESS: In this business HFIL employees will go to farmers and have a deal with them. Those farmers will sell their goods like vegetables, pulses to HFIL only. And HFIL will transport the goods to retail outlets. The agricultural professors will examine which area is suitable to import vegetables from and also examine the vegetables, pulses and fruits in the lab. And finally they report to the Head-Agribusiness. Representatives as per the instructions given by the agri professors will approach the farmers directly and make a deal with them. It is the process of registering the farmers.

INTRODUCTION TO BUDGET AND BUDGETARYCONTROL 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 motivate the staff associated, to coordinate the activities of different departments and to control the performance of various persons operating at different levels. Budgets may be divided into two basic classes. Capital and operating budgets. Capital budget are directed towards proposed expenditure for new projects and often require special financing.

DEFINITIONS OF BUDGET:

According to Institute of Charted Management Accountants, England

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. According to ICMA, England, a budget is, a financial and/or quantitative statement, prepared and approved prior to a defined period of time, of the policy to be pursed during the period for the purpose of attaining a given objective. It is also defined as, a blue print of projected plan of an action of a business for a definite period of time.

BUDGETARY CONTROL:
No system of planning can be successful without having an effective and efficient system of control. Budgeting is closely connected with control. The exercise of control in the organization with the help of budgets is known as budgetary control. The process of budgetary control includes. Establishment of budget for each function and section of the organization. Executive responsibility in order to perform the specific tasks so that objectives of the enterprise may be attained. 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. Taking suitable remedial action to achieve the desired objective if there is a variation of the actual performance from the budgeted performance. 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 According to the J.Betty: services According to the CIMA, London, Budgetary control is the establishment of budgets relating to responsibilities of executives to the requirement of a policy, and the continuous comparison of actual with budged results, either to secure by individual action the objective of that policy or to provide a basis for revision. 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. A system which uses budgets as a means of

planning and controlling all aspects of producing and / or selling commodities and

ESSENTIAL FEATURES OF A BUDGETARY:

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 can not replace management in decision making. Budgeting involves a heavy expenditure, which small concerns cannot afford. 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.

SOBJECTIVES OF BUDGETARY CONTROL: PLANNING

 CO-ORDINATION MOTIVATION CONTROL APPROVED PLAN COMMUNICATION PLANNING: A budget is a plan of the policy to be pursued during the defined period of time to attain a given objective. The budgetary control will force management at all the activities to be done during the future periods. A budget as a plan of action achieves the following purposes:

Action is guided by well thought out plan because a budget is prepared after a careful sturdy and research. The budget serves as a mechanism through which. Managements objectives and policies are affected. It is a bridge through which communication is establishment between the top management and the operatives who are to implement the policies of the top management.

The most profitable course of action is selected from the various available alternatives.

CO-ORDINATION: The budgetary control co-ordinates the various activities of the firm and secures co-operation of all concerned so that the common objective of the firm may be successfully achieved. It forces executives to think and think as a group. It co-coordinating the policies, plans and actions. An organization without a budgetary control is like a ship sailing in a chartered sea. A budget gives direction to the business and imparts meaning and significance to its achievement by making comparison of actual performance and budgeted performance. MOTIVATION:

It employees have actively participated in budget preparation and if they are convinced that their personal interests are closely associated with the success of organizational plan, budgets provide motivation in the form of goals to be achieved. The budgets will motivate the workers, depends purely on how the workers have been mentally and physically involved with the process of budgeting. CONTROL: Control consists of the action necessary to ensure the performance of the organization conforms to the plans and objectives. Control of performance is possible with predetermined standards which are laid down in a budget. Thus, budgetary control makes control possible by continuous comparison of actual performance with that of the budget so as to report the variations from the budget to the management of corrective action. Thus, budgeting system integrates key managerial functions as it links top

managements planning function with the control function performed at all levels in the managerial hierarchy. But the efficiency of the budget as a planning and control device depends upon the activity in which it is being used. A more accurate budget can be developed for those activities where direct relationship exists between inputs and outputs. The relationship between inputs and outputs becomes the basis for developing budgets and exercising control. APPROVED PLAN: A mater budget provides an approved summary of results to be expected from proposed plan of operations. It concerns all functions of organization and serves as a guide to executives and departmental heads responsible for various departmental objectives.

COMMUNICATION: The employees of an organization should know organizational aims, objectives of subunits (budget centers) and the part that they have to play for their attainment. Budget effectively communicates this information to employees. Beside, budges keep different

sections of the organizational informed about the contribute of different subunits in the attainment of overall organizational objectives. 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 CONROL: ORGANIZATION FOR BUDGETING BUDGET MANUAL FIXATION OF BUDGET PERIOD BUDGETARY CONTROLLER ROLLING (CONTINUES) BUDGET Annual Vs Continues budgeting system PRINCIPAL BUDGET (LIMITING) FACTOR

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: 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. Thus, it is a written document which guides the executives in preparing various budgets. Budgets are to be drawn keeping in view the objectives of the organization given in the budget manual. 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: Introducing and brief explanation of the objects, benefits and principles of budgetary control.

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.

Length of budget periods and control periods should be clearly stated. A method of accounting and control of expenditure. 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.

The entire process of budgeting programme including the time table for periodical reporting. A schedule should be drawn for this. Purpose, specimen form and number of copies to be used for each report and statement. Budget centers involved should also be stated clearly. Outline of main budgets and their accounting relationships. 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 budget 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. But in case of industries with heavy capital 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) For control purposes, short-term budgets-monthly or even weekly budget-should be prepared for watching progress of actual performance against targets. Short-term budgets are prepared to see that actual performance is proceeding according to the budgets and early corrective action may be taken if there is any pitfall. The responsibility for preparation and implementation of the budgets may be fixed as under.

BUDGETARY CONTROLLER: Although the chief executive l finally responsible for the budgetary program. 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 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.

PRINCIPAL BUDGET (LIMITING) FACTOR:

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 the governing factor which is a major constraint on all the operational activities of the organization, so this factor is taken into consideration to determine whether the budgets are capable of attainment. It is essential to locate the limiting factor may be any one of the following: Is there sufficient demand for the product? (Customer demand)Will a required quality and quantity of materials be available? (Availability of raw material) Is the plant capacity sufficient to cope up with the expected sales? (Plant capacity)Is the required type of labor available? (Available of labor) Is cash position sufficient to finance the expected volume of sales? (Cash position)Are there any Government restrictions? (Government restrictions) For example, a concern has the capacity to produce 50,000 units of particular item per year. But only 30, 000 units can be sold in the market. In this case, low demand for the product is the limiting factor. Therefore, sales budget should be prepared first and other functional budgets such as production budget, labor budget, plant utilization budget, cash budget etc. should be prepared in accordance with this case plant capacity is limited. Therefore, production budget should be prepared first and other budgets should follow the production budget. Thus, the budget relating to limiting factor should be prepared first and the other budgets should be prepared in the light of that factor. All budgets should be co-coordinated keeping in view the principal budget factor if the budgetary control is to achieve the desired results.

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 Sales Budget including selling and Distribution Cost Budget Production Budget Material Budget Labor and Personnel Budget Manufacturing Overheads Administration Cost Budget Plant Utilization Budget Capital Expenditure Budget Research and Development Cash Budget PREPARED BY Sales Manager Cost Budget Production Manager Purchase Manager Personnel Manager Production Manager Finance Manager Production Manager Chief Executive R&D Manager 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. Every effort should be made to ensure that its figures are as accurate as possible because this is usually the starting budget (sales being limiting factor on which all the other budgets are built up). 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:

Past Sales Figures and Trends. Salesmens Estimation. Plant Capacity. Availability of Raw Material and other Supplies. General Trade Prospects. Orders in Hand. Seasonal Fluctuations. Financial Aspect. Adequate Return on Capital Employed. Competition. Miscellaneous Considerations.

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 level of production needed to meet the sales program. Monthly production targets should be fixed and it should be seen that production is kept more or less at Uniform level throughout the year. The material labor and plant requirements should be ascertained to have the desired production to meet the sales program. The sales and the production are inter-dependant because production budget is governed by the sales budget and the sales budget is largely determined by the production capacity and by production costs.

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 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 purchase Budget has to be approved by the budget committee. After approval it becomes the 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. If there is increase in production not anticipated while preparing the purchase budget and purchase of larger quantities of materials becomes necessary. If accumulation of stock becomes necessary to avoid shortage of materials. If overstocking is desired to take advantage of lower prices and there is fear that price will increase in near future. The purchase manger should get additional sanctions from the higher authorities for making the additional purchases not covered by the purchase budget.

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 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. If standard costing system is not being followed in the organization, the information of labour cost may be obtained from past records or estimated cost. Sometimes another budget known as Manpower budget is prepared. This budget gives the requirements of direct and indirect labour necessary to meet the program set out in the sales, manufacturing, maintenance, research and development and capital expenditure budgets. The labor terms are expressed of rupee value, number of labour hours, number and grade of workers etc. this budget makes provision for shift and overtime work and for the effective training for new workers on labour cost.

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. Variable expenses are estimated on the basis of the budgeted output because these expenses are bound to change with the change in output. The Cost Accountant prepares this budget on the basis of figures available in the manufacturing overhead ledger or the head of the workshop may be asked to give estimates for the manufacturing expenses. A good method is to combine the estimates of the Cost Accountant and the shop executive. 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. Although fixed expenses remain constant and are not related to sale volume in the sort run, they are dependent upon sales in the long run. With a small change in output, they do not change. However, if there is persistent fall in output, administration expenses will have to be reduced by discharging the services of some members of the staff and taking other economy measures. On the other hand, with persistent increase in output or business activity, administration expenses will increase but they may lag behind business activity.

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 is 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. Long term expenses. As advertisement are spread over more than one period. Selling and distribution overheads are divided into fixed and variable category with reference to volume of sales. Separate budgets are prepared for variable and fixed items of selling and distribution overheads. Certain items of selling and distribution costs as cost of transport department are included in the departmental production cost budget from control point of view rather that including in selling and distribution costs budget.

PLANT UTILIZATION BUDGET:

This budget lays down the requirements of plant capacity to carry out the production as per the production programmed. 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.

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. A research and development budget is prepared taking into consideration the research projects in hand and the new research projects in hand and the new search and development projects to be taken up. Thus this budget provides an estimate of the expenditure to be incurred on research and development during the budget period. After fixation of the research and development cost budget, the research executive fixes priorities for the various research and development projects and submits research and development project authorization forms to the budget committee. The projects are finally approved by the senior executive. Before giving the approval, the expenditure on research and development is matched against the benefits likely to be availed of from the new project; after the approval of the budget, a close watch is kept on the expenditure so that it may not exceed budget provisions. It is also seen that extent of progress made is commensurate with the expenditure incurred.

CASH (FINANCIAL) BUDGET

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

Receipts and payments method The adjusted profit and loss method The balance sheet method 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 total of estimated cash payments are deducted to find out of the closing balance.

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 a liabilities.

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. The master budget is prepared by the budget committee on the basis of cocoordinated functional budgets and becomes the target for the company during the budget period when it is finally approved by the committee. This budget summaries functional budget to produce a budgeted Profit and Loss Account and a Budget Balance Sheet as at the end of the budget period.(Classifications of two types, fixed budget and flexible budget) 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 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. It is hardly of any use as a mechanism of budgetary control because it does not make any distinction between fixed, variable and semi-variable costs and provides for no adjustment in the budget fixed as result of change in cost due to change in level of activity. It is also not helpful at all in the fixation of price and submission of tenders.

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. This, a flexible budget gives different budgeted costs for different levels of activity. 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.

Either where the level of activity during the year varies from period, 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. 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:

A Current budget can be defined a budget which is related to the current conditions and is prepared for use over a short period of time. This budget is more useful than a basic budget, as a target of lays down will be corrected to current conditions. LONG-TERM BUDGET: A Long-term budget can be defined as a budget which is prepared for periods longer than a year. These budgets help in business forecasting and forward planning. Capital Expenditure Budget and Research and Development Budget are examples of longterm budgets. SHORT- TERM BUDGET: This budget is defined as a budget which is prepared for period less than year and is very useful to lower levels of management for control purposes. Such budgets are prepared for those activities the trend in which is difficult to foresee over longer periods. Cash budget and material budget are examples of short term budget. PERFORMANCE BUDGET: Performance Budgeting has its origin in U.S.A. After Second World War it tries to rectify some of the shortcoming in the traditional budget. In the traditional budget amount are earmarked for the objects of expenditures such as salaries, travel, office expenses, grant in aid etc. In such system of budgeting the money concept was given more prominence i.e. estimating or projecting rupee value for the various accounting heads or classification of revenue and cost. Such system of budgeting was more popularly used in government department and many business enterprises. But is such system of budgeting control of performance in terms of physical units or the related costs cannot be achieved. Performance oriented budgets are established in such a manner that each item of expenditure related to a specific responsibility centre is closely linked with the performance

of that centre. The basic issue involved in the fixation of performance budgets is that of developing work programmers and performance expectation by assigned responsibility, necessary for the attainment of goals and objectives of the enterprise, it involves establishment of well defined centers of responsibilities, establishment for each responsibility centre-a programmed of target performance e in physical units, forecasting the amount of expenditure required to meet the physic al plan laid down and evaluation of performance.

ZERO BASED BUDGETS: This budge is the preparation of budget starting from Zero or from a clean state. As a new technique it was proposed by Patter Peal of Texas Instruments Inc., U.S.A. This technique was introduced in the budgeting in the state of Georgia by Mr. Jimmy Carter who was then the Government of that state. ZBB was tried in federal budgeting as a means of controlling state expenditures. The use of zero-based budgeting as a managerial tool has become increasingly popular since the early 1970s It is steadily gaining acceptance e in the business world because it is providing it utility as a tool integrating the managerial function of planning and control. ZBB is not based on the incremental approach and previous years figures are not adopted as a base. Rather, zero is taken as a base aw the name goes. Taking zero as a base, a budget is developed on the basis of likely activities for the future period. In ZBB, by declining the budget from the past, the past mistakes are not repeated. Funds required for any for the next budget period should be obtained by presenting a convincing case. Funds will not be available as a matter of course.

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 It ensures effective utilization of men, materials, machines and money Everyone working in the concern knows what exactly to do because It ensures that individual responsibilities are clearly defined and that the brings about efficiency in result. because production is planned according to the availability of these items. budgetary control laid emphasis on the staff organization. required authority commensurate with the responsibility is delegated so that buck passing ay is prevented when the budgeted results are not achieved. Budgetary control takes the help of different levels of management in the Budget finally approved represents the judgment of the entire organization Management by exception is possible because the comparison of actual and preparations of the budget. and not merely that of an individual or a group of individuals. Thus, it ensures team work. budgeted results points out weak spots so that remedial action is taken against weak spots which are not in conformity with the budgeted performance. 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: Budgetary control creates conditions for setting up a system of standard

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:

bad labor relations Inaccurate record-keeping. Departmental conflict arises due to: dispute over resources allocation 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.

DATA ANALYSIS AND INTERPRETATION CALCULATION OF REVENUE RECEIPTS BUDGET (Rs) S.No 1. 2. 3. DESCRIPTION Sales and other receipts Other Income Increase in Inventory Total BUDGETED xxx xxx xxx Xxx ACTUALS xxx xxx xxx xxx VARIANCE xxx xxx xxx xxx

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2007-2008 (Rs) S.No DESCRIPTION Sales and other receipts Other Income 2. 3. Increase in Inventory BUDGETED 60,66,25,179 35,96,102 (-) 1,59,33,057 ACTUALS 55,14,77,436 32,69,184 (-) 1,44,84,597 3,26,918 (-) 14,48,460 VARIANCE

1.

5,51,47,743

Total

59,42,88,224

54,02,62,023

5,40,26,201

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. Which 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.

CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR 20082009 (Rs)

S. No. 1. 2. 3.

DESCRIPTION Materials Consumed Consumable stores Employee Remuneration & Benefits Administrative &Operation Expenses

BUDGETED 25,16,39,707 2,05,89,260 32,40,003

ACTUALS 22,87,63,370 1,87,17,509 29,45,458

VARIANCE 2,28,76,337 18,71,751 2,94,545

4.

Manufacturing Expenses Depreciation

8,78,97,229

7,99,06,572

79,90,657

2,74,36,923 5. 1,78,56,564 6.

2,49,42,658 24,94,265 1,62,33,240 16,23,324

Total

40,86,59,686

37,15,08,807

3,71,50,879

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2007-2008 (Rs)

S.No

DESCRIPTION Sales and other receipts Other Income

BUDGETED 40,68,80,342 28,00,738 (-) 7,807

ACTUALS 36,98,91,220 25,46,126 (-) 7,098

VARIANCE 3,69,89,122 2,54,612 (-) 709

1. 2. 3.

Increase in Inventory

Total

40,96,73,273

37,24,30,248

3,72,43,025

In this year, the budgeted are above the actuals. Material consumed 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.

CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR 20082009

(Rs)

S. No. 1. 2. 3.

DESCRIPTION Materials Consumed Consumable stores Employee Remuneration & Benefits Administrative &Operation Expenses

BUDGETED 56,21,68,072 4,77,76,051 58,97,375

ACTUALS 51,10,61,883 4,34,32,773 53,61,250

VARIANCE 5,11,06,189 43,43,278 5,36,125

4.

Manufacturing Expenses Depreciation

5,60,64,572

5,09,67,793

50,96,779

5.

9,98,08,181 2,39,11,697

9,07,34,710 90,73,471 2,17,37,907 21,73,790

6.

Total

79,56,25,948

72,32,96,316

7,23,29,632

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2008-2009 (Rs)

S.No

DESCRIPTION Sales and other receipts Other Income

BUDGETED 79,43,88,636 28,95,385 (-) 2,73,515

ACTUALS 72,21,71,487 26,32,169 (-) 2,48,650

VARIANCE 7,22,17,149 2,63,216 (-) 24,865

1. . 2. 3.

Increase in Inventory

Total

79,70,10,506

72,45,55,006

7,24,55,500

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.

CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR 20092010 (Rs)

S. No. 1. 2. 3.

DESCRIPTION Materials Consumed Consumable stores Employee Remuneration & Benefits

BUDGETED 32,76,69,430 2,34,74,752 1,00,08,138

ACTUALS 29,78,81,300 2,13,40,684 90,98,308

VARIANCE 2,97,88,130 21,34,060 9,09,830

2,40,36,950 4. Administrative &Operation Expenses 7,64,27,751 5. Manufacturing Expenses 2,27,69,641 6. Depreciation 20,69,967 8,40,70,526 2,06,99,674 76,42,775 2,64,40,645 24,03,695

Total

49,44,33,132

44,94,84,667

4,49,48,465

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2009-2010 (Rs) S.No DESCRIPTION Sales and other receipts Other Income 2. 3. Increase in Inventory BUDGETED 49,73,20,694 31,48,358 (-) 36,71,613 ACTUALS 45,21,09,721 28,62,144 (-) 33,37,830 VARIANCE 4,52,10,973 2,86,214 (-) 3,33,783

1.

Total

49,67,97,439

45,16,34,035

4,51,63,404

This year budgets and actuals estimates are below compared to the 2005-2006 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.

CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR 20102011 (Rs)

S. No. 1. 2. 3.

DESCRIPTION Materials Consumed Consumable stores Employee Remuneration & Benefits Administrative &Operation Expenses

BUDGETED 54,62,62,961 95,94,838 1,25,35,153 8,48,91,273

ACTUALS 49,66,02,692 87,22,580 1,13,95,594

VARIANCE 4,96,60,269 8,72,258 11,39,559

7,71,73,885 13,48,25,637 . 12,25,68,761 2,28,97,612 78,17,388

4.

Manufacturing Expenses Depreciation

5. 2,08,16,011 6. 20,81,601 1,22,56,876

Total

81,11,087,474

73,72,79,523

7,38,27,951

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2010-2011 (Rs)

S.No

DESCRIPTION Sales and other receipts Other Income

BUDGETED 79,52,53,505 32,10,311 (-) 1,53,54,455

ACTUALS 72,29,57,732 29,18,465 (-) 1,39,58,596

VARIANCE 7,22,95,773 2,91,846 (- )13,95,859

1. 2. 3.

Increase in Inventory

Total

78,31,09,361

71,19,17,601

7,11,91,760

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 actuals, with minimum difference. Increase in inventory total five years values is negative.

MATERIAL CONSUMED

YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

BUDGETED 41,06,22,773 25,16,39,707 56,21,68,072 32,76,69,430 54,62,62,961

ACTUALS 37,32,93,430 22,87,63,370 51,10,61,883 29,78,81,300 49,66,02,692

By observing the above graph the materiel consumption is fluctuating from 2006-2010. So the company needs effective budget technique to get targeted actual.

CONSUMABLE STORES YEAR 2006-2007 2007-2008 BUDGETED 3,72,07,068 2,05,89,206 ACTUALS 3,38,24,607 1,87,17,509

2008-2009 2009-2010 2010-2011

4,77,76,051 2,34,74,752 95,94,838

4,34,32,773 2,13,40,684 87,22,580

By observing the above graph the consumable stores is fluctuating from 2006-2010. The value is decreased from 3, 38, 24,607 in 2006 to 87, and 22,580 in 2010 so the company needs effective budget techniques to get targeted actual.

EMPLOYEE REMUNERATION & BENEFITS

YEAR 2006-2007 2007-2008 2008-2009 BUDGETED 10,22,353 32,40,003 58,97,375 ACTUALS 9,29,412 29,45,458 53,61,250

2009-2010 2010-2011

1,00,08,138 1,25,35,153

90,98,308 1,13,95,594

By observing the above graph the employee remuneration and benefits are fluctuating from 2005 to 2009. There is an increase in the values from 9, 29,412 in 2006 to 1, 13, and 95,594 in 2010. So the company should follow the same technique and also improve to get targeted actual.

ADMINISTRATIVE & OPERATION EXPENSES

YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 BUDGETED 10,01,60,814 8,78,97,229 5,60,64,572 2,64,40,645 8,48,91,273 ACTUALS 9,10,55,285 7,99,06,572 5,09,67,793 2,40,36,950 7,71,73,885

By observing the above graph the administrative and operation expenses are fluctuating from 2006 to 2010. there is an decrease in the values from 9,10,55,285 in 2006 to 7,71,73,885 in 2010 so the company need effective budget techniques to get targeted actual.

MANUFATURING EXPENSES
YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 BUDGETED 2,95,12,360 2,74,36,923 9,98,08,181 8,40,70,526 13,48,25,637 ACTUALS 2,68,29,419 2,49,42,658 9,07,34,710 7,64,27,751 12,25,68,761

By observing the above graph the manufacturing expenses are fluctuating from 2006-2010 there is a increase in the values from 2,68,29,419 in 2006 to 12,25,68,761 in 2010. So the company should follow the same technique and also improve to get targeted actual.

DEPRECIATION
YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 BUDGETED 1,47,38,772 1,78,56,564 2,39,11,697 2,27,69,641 2,28,97,612 ACTUALS 1,33,98,884 1,62,33,240 2,17,37,907 2,06,99,674 2,08,16,011

By observing the above graph the depreciation values are fluctuating from 2006-2010. There is an increase in the values from 1, 33, 98,884 in 2006 to 16,011 2010 so the company need effective budget techniques to get targeted actual.

SALES AND OTHER RECEIPTS

YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 BUDGETED 60,66,25,179 40,68,80,342 79,43,88,636 49,73,20,694 79,52,53,505 ACTUALS 55,14,77,436 36,98,91,220 72,21,71,487 45,21,09,721 72,29,57,732

By observing the above graph the sales and other receipts are fluctuating from 2006-2010.there is an increase in the values from 55,14,77,436 in 2006 to 72,29,57,732 in 2010. There is an increase in the actual so the company need effective budget techniques to increase the sale of targeted actual.

OTHER INCOME YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 BUDGETED 35,96,102 28,00,738 28,95,385 31,48,358 32,10,311 ACTUALS 32,69,184 25,46,126 26,32,169 28,62,144 29,18,465

By observing the above graph the other incomes are also fluctuating from 20062010 there is a decrease in the value 32,69,184 in 2006 to 29,18,465 in 2010 so the company need effective budget techniques to get targeted actual.

INCREASE IN INVENTORY YEAR 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 BUDGETED (-)1,59,33,057 (-)7,807 (-)2,73,515 (-)36,71,613 (-)1,53,54,455 ACTUALS (-)1,44,84,597 (-)7,098 (-)2,48,650 (-)33,37,830 (-)1,39,58,596

By observing the above graph the increase in inventory values. The values are in negative. The company should concertina on this to improve the increasing in the inventory.

FINDINGS

The budget and budgetary control of HERITAGE. 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 budgeters. .In the 2006-2011 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 manufacturing expenses in 2008-2008 is due to high production of manufacturing expenses as well as the sales is also high in the year of 2008-2009 compared to other year.

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. Pre audit 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 HERITAGE 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

CONCLUSIONS Since, all the production units in HREITAGE. Will run perpetually through out 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.

BIBLIOGRAPHY Books referred:

Financial Management: M.Y.Khan & Jain, Second edition, published by TATA McGraw HILL publishing company Financial Management: M.Y. Khan & P. K. Jain, Fourth edition, published by TATA McGraw HILL.

Financial Management: Prof. Satish Inamdar, published by Symbiosis center for distance learning, Pune. Financial Management; I. M. Pandy, Second edition, published by TATA McGraw HILL publishing company. Financial Management : Prasannachandra Management Accounting and control S.N.Maheswari

WEBSITE:

www.heritage.com www.yahoofinance.com www.google.com