INTRODUCTION

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 techni ues for planning and control. A budget fi!es a target in terms of rupees or uantities 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. $deas 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. %apital and operating budgets. %apital budget are directed towards proposed e!penditure for new projects and often re uire special financing. &he operating budgets are directed towards achieving short'term operational goals of the organization for instance, production or profit goals in a business firm. (perating budgets may be sub'divided into various departmental of functional budgets.

NEED FOR THE STUDY

. $ntroduction) A brief description of budgeting, objectives and scope of the study, research methodology is placed in unit one. &heoretical frame work) &his unit reflects the objectives, advantages and limitations &he data of *uari %ements %ement +imited, have been collected mainly from secondary sources viz., Form the concerned officers of the *uari %ements %ement +imited *uari %ements %ement +imited journals. Accounting books, records. ,ey books of concerned title. -tatistical records *uari %ements %ement +imited library.

OBJECTIVES OF STUDY
&o provide the material frame work of budget and budgetary control &o describe the profit of the organization as a backdrop for undertaking a study of budgetary control system. &o analyze the budgetary system in practice in *uari %ement %ement +imited with particular reference to their objectives and phases of organizational and re' appropriation. $n addition to the analysis of the conventional budgetary system in practice in *uari %ement +imited. &he study aims at evaluation and modification to the current budgetary system with reference to the various types of budgets. &he scope in the formulation of performance budget is also studied.

SCOPE OF THE STUDY

&he budgetary control system in *uari for %ements each considers generation the

and transmission line projects as independent cost centers. (perations and .anagement Budget

&his system prepares

of the cost centers as per the

re uirements of the costing system. &he budget for the investment center is the sum of the budgets of the cost centers. -eparate budgets are prepared for revenue activities other than (perations management, and /esearch 0evelopment, budgets are phased %onsultancy into monthly %ontracts. &o or uarterly facilitate targets.

&he actual performance is analyzed against this budgeted performance in order to take cor rective remedial actions if variances any e!ist. &he projection of internal resources over a period of 1 to 21 years and updating 1 years plans of the company is also done.

RESEARCH METHODOLOGY
&he /esearch .ethodology deals with how the study was carried out. &his consists of several stages wherein the process proceeds through various stages to finally attain the objective of the study. 3ence, for any project the objective or aim of the project is to be known and the objective of the project is to be selected. &he organization in which the project is to be carried out is to be selected. &he profile of the organization is collected from various journals, monthly magazines, from the employees and widely forms $nternet.

DATA SOURCE: primary data secondary data

LIMITATIONS:
4stimates are used as basis for budget plan and estimates are based mostly on available facts and best managerial judgment Budgetary control cannot reduce the managerial function to a formula. $t is only a managerial. &ool which increase effectiveness of managerial control. &he use of budget may be to restricted use of resources. Budgets an often taken as limits. 4fforts may therefore not be made to e!ceed the performance beyond the budgeted targets. Fre uent changes may be called for in budgets due to first changing industrial climate. $n order that a system may be successful, ade uate budgets education should be imparted at least through the formative period. -ufficient training programs should be arranged to make employees give positive response to budgetary activities. &he study is the limited up to the date and information provided by *uari %ements %ement +imited and its annual reports.

COMPANY PROFILE Z !"# $%&%'( !') I(!*$%&%'(#+ (,% '%- .#')#'/ 0("%'/(,
*uari cement is now fully owned by the $talcementi group, the fifth largest cement producer in the world and the biggest in the .editerranean region. 5ith net sales of five billion 4uros in 6771 and a capacity of 87 million tones, $talcementi has a strong presence in over 29 countries. :ow in $ndia, with its inherent strengths, $talcementi is all $talcementi set to give the building industry, cement that;s truly international. $talcementi believes in customer satisfaction through continuous uality improvement. &his belief reflects in the group;s <uality .anagement system that compiles with $-(9772)6777 standards. &his system covers all the processes, across all the group companies, to ensure that the product delivered to costumers is nothing short of world class. &he e!port market is *uari;s another key focus area. $n fact, in the year 6771'677=, the company;s innovative marketing strategies have earned it;s the reputation of being the leading e!porter of cement in -outh $ndia. /ecognizing *uari;s noteworthy efforts in the e!ports front is the fact that, -ri >ishnu %ement +imited has won the prestigious %A?4@$+ certificate of merit for the year 6771'7=. 5hile technology is just one of its strengths, there are many other factors that contribute e ually to *uari;s success. &hese include superior work force and de'centralized uality assurance teams, which ensure every bag of cement that leaves the plant matches customers; e!pectations. &he *uari Agro +imited "*A%+# was conceptualized on 26th .ay, 29=8 with main object of manufacturing, distributing and marketing of fertilizer and other agriculture inputs. *uari cements is a division of *uari %ement +imited, a company prompted by the house of Birla and multination giant A-@, having its registered office at jai ,issan office at jai kissan bhawan, *uari :agar, Boa. *uari cement is running under the flagship of *uari Agro chemicals +imited. *uari cement is strategically located =,ms away from Cerraguntla town of ,amalapuram &aluk in ,adapa, Andhra ?radesh. /ailway line has been laid connecting the Cerraguntla station. *uari cement formerly known as &e!maco %ement, taken over by *uari Agro %hemicals limited in year 299D. &he plant was modernized and upgraded to increase the

production capacity of 2177 &?0 to 1777 &?0. $n 299D *uari Agro %hemicals +imited took over &e!maco %ement on a lease basis and later in 2991 February 8 th it ac uired it for amount of /s.2E8.8F crores. &e!maco +imited commenced its production in 29F1 with an installed capacity of 217 &?0. By the introduction of best technology, the capacity enhanced to 1177 &?0. By the Ac uisition of >ishnu cements the annuals capacity of the plant has gone up to E.1 million tones. *uari Broups have identified cement as one of the core business to grow. $t has therefore, been decided to constitute a separate corporate entity and hire off cement business to it. &o accelerate the growth and achieve capacity addition uickly, it decided to from a joint >enture with $tal cement group was identified to be suitable partner for pursuing growth. *uari and $talcementi group have agreed to form a 17)17 joint venture. $talcementi group is the largest producer and distributor of cement in 4urope and one of the leaders in 5orld .arket place. &he group operates in 2E countries including Belgium, %anada, France, Breece, $taly, .oracco, -pain, &urkey and A.-. with recent ac uisitions, in Bulgaria, ,azakhastan and &hailand. -(A/%4 (F /A5.A&4/$A+) &he core raw materials re uired for manufacture of *uari %ement plant are +imestone, $ron core bau!ite and gypsum. &he +ime stone is being e!cavated from the plant which in the leased area another vital called coal is supplied by -ingareni %ollieries %o +imited and 5estern %oal fields by surface transport to the plant. &he re uired water for the process is being met from bore well located in the plant. &he re uired water for the process is being met from bore well located in the plant site. *uari %ement manufactures both DE and 1E Brade and -uper fine and offers superior uality products monitoring at each stage of production process with help of computerized control system. ,4C F4A&A/4- (F *AA/$ %4.4:&- ?/(%4-- &4%3:(+(BC) %omplete homogenization of limestone is achieved by stacking the limestone in stockpiles with the used of stackers and reclaiming it through reclaimers. &he optimum ratio of raw mi! is attained by the use of @'/ay Analyzer and Automatic 5eigh Feeders, which are liked to the centralized %omputer %ontrol /oom.

 -orting it in %ontinuous Fluidized -ilo attains reduced variability in kiln feed and complete homogenization of raw meal. &his ensures that every grain of cement is of consistent uality. &he totally computerized monitoring systems enable uality clinkerisation. $t dictates the optimum retention time in the precalciner and the kiln 4 uipped with a si!'stage double stream preheated cyclone system, the precalciner only adds to the uality. &he modern closed circuit grinding units have a high efficiency separator that produces finer particles of cement hydrates, this yields cement matri! with a lower pore diameter. &his in turn gives concrete of high density and low permeability. A0>A:&AB4 (F *AA/$ %4.4:&) 5ith a superior and wide range of cement catering to every conceivable building need, *AA/$ %4.4:& is today a formidable player in the cement market. 3ere are just a few reasons why *uari %ement is the choice of millions of $ndia. >ery low free lime content and high proportion of silicates, providing silicate chlorine and sulphur. +owest magnesia content ensures reduced tensile cracks. (wing to greater fineness *AA/$ %4.4:&, concrete obtained is dense and highly impermeable. 3ence, it is free from segregation, honeycombing and sand rum. &his prevents the passage of air and water "the two chief agents of corrosion# through the hardened concrete. &he later re uirements for zuari cement are less because of very low lime content. &his leads to low heat of hydration and drying shrinkage, as a result, cracks don;t appear in the concrete. %aptive power plant with diesel gensets takes care of F7G of the total power re uirement state'of'the'art wagon tippler efficiently handles good uality coal, which is the homozinized with stacker and gels of high impermeability, makes *AA/$ %4.4:& e!tremely resistant to acids, alkalis,

13

>ision &o be a world class local business building a better and sustainable future for all our stakeholders. .ission &o create value in the building materials sector through the innovative and sustainable use of natural resources for the benefit of our communities and clients. >alues Five values lie at the heart of our Broup. &hese values not only define us but also act as a guide for our daily activities. /esponsibility (ur long term commitment to sustainability seeks tocombine profitable economic performance with protecting the environment and improving the ualityof life for present and future generations. $ntegrity 5e place ethical behavior at the heart of all our businesses worldwide. 5e earn the trust of our partners in business and in the community through accountability and consistent corporate governance. (ur daily commitment is to act with respect, honesty and transparency.

4fficiency 5e strive for operational e!cellence by combining the technical e!pertise and cost management necessary to be a globally effective and efficient building materials

11

manufacturer. 5e add value by delivering consistently high uality products and services customised to each local market around the world.

$nnovation 5e believe in the importance of innovation not only in the development of new products, applications and services, but also in our management approach. 5e must embrace change and be open to new ideas in order to attract the best talents. 0iversity 0iversity is a source of energy and value that fuels our growth. 5e aim to create an environment of trust and belonging where differences add value and where everyone feels part of our world. For sustainable globalization to succeed we must capture and redistribute local knowledge and e!perience for the benefit of the whole Bro

O " 45*#$#%0
$n 6727 $talcementi Broup presented a new set of policies) a HmotherI -ustainability policy tackling all the management issues from which si! other policies derive including -afety, 3uman /ights, 4nergy, 4nvironment, -ocial $nitatiatives and 3ealth. &hese policies are the main reference for the definition of guidelines and management processes that, consistently with the G"5 460 7!* %0, support and guide all the $talcementi Broup people in their everyday activities.

Create value with the highest standards of business integrity, protecting the environment, improving life at work and engaging with local communities.

12

4liminate occupational-upport international Build relationship with our injuries and accident throughproclaimed human rights as stakeholders based on mutual effective managementinalienable rights of all commitment, active partnership, systems individuals, inherent dignity, trust, openness and long'term and visible leadership. freedom and e uality of all cooperation -afety) a way of living human beings

?romote the health and the.ove toward a low'carbon well'being of workers andeconomy providing effective eliminate occupationallarge'scale responses to illness climate change

?revent, minimize and remediate the environmental impact of our activities. ?romote environmental' driven innovation and sustainable construction

13

INDUSTRY PROFILE
&he F1'year'old $ndian cement industry is one of the cardinal and basic infrastructure cement which enjoys core sector status and play a crucial role in the economic development and growth of a country. Being a core sector this industry was subject to price and distribution controls almost uninterruptedly from world war'$$. 5hen government of $ndia announced the partial decontrol of price and distribution as the market price of cement began to raise response to decontrol manufacturing cement became increasingly attractive and the industry e!perienced substantial e!pansion. As the supply in response to the 29F6 partial decontrol was significant in .arch 29F9, price and distribution control were finally dispensed with. $t was one of the first major cement in the country to be so deregulated. (>4/>$45 (F &34 $:0A-&/C

&he word cement means any substance applied for sticking things. But cement is the' most vital and important material for modem construction as a binding agent. $n the ancient times, clay, bricks and stones have been used for construction work. &he /omans were using a binding or a cementing material that would harden under water. &he first systematic effort was made by -.4A&$(: who under took the erection of a new lighthouse in 281=. 3e observed that the production obtained by burning limestone was the best cementing material for work under water.

14

After lifty years A%A&, a Fresh chemist, produced hydraulic) cement by burning finely ground clay used in the form of a paste. %ement invented by J(-4?3 A-$K0$: in 2F6'2. -ince hardened cement paste resembled ?ortland stone found in 4ngland he named it s ?ortland cement, a name ?ortland %ement, a name. ?uriland mm'.i wills he;s nubile lured in A.-.A. in 2981. in $ndia was produced for the rust +ime in 29D7 by -outh $ndia cement limited, madras. &his unit had a capacity of E7 tonnes per day, was based on lime from sea. By 292E, however three units started their operations with a combined installed capacity of 81777 tonnes per annum. $n 292D indigenous production fees for short of domestic demand necessitating an $mport of 2,=1,86E tonnes. -hipment difficulties and foreign trade relation during the first world war acted as a catalyst for the development of indigenous industry and by 296D the total installed capacity grew to 1,19,F77 tonnes per annum. $n 29=E all the cement companies with the e!ception of -(:4 > A++4C ?(/&+A:0 %4.4:& %(.?A:C +$.$&40 merged to form the A--(%$A&40 %4.4:& %(.?A:$4- +$.$&40. &his has more facilitated a cost reduction as well as uniformity in uality. By 29D8 the installed capacity of theK industry raised to 6.6 million tonnes per annum. After partition 1 of the cement producing units in the country went to ?akistan and total installed capacity of 2F units that remained in $ndia was 2.1 million tonnes per annum. &his increased to E.F million tonnes by 2917'12. $n the three decades between 2917'29F7, the capacity e!pansion was between 8'F million tonnes per decade. &he target set in respect of additional capacity generation was released with impetus given by the partial decontrol announced in 29F6 several units locked up project for e!pansion of capacity and modernization which contributed towards increased production.

15

DEFINITION OF CEMENT
%ement may is defined as a mi!ture of calcium silicate and aluminates, which have the prosperity of setting and hardening under water. &he amount of silica winch is present on each crust are sufficient to combine with calcium o!ide to form the corresponding calcium silicate and aluminates.

%+A--$F$%A&$(: (F %4.4:&
C%&%'( #0 58 3 (94%0+ 1: P ;;5*!'(#$ $%&%'( 2: N!( "% $%&%'( !') 3: P5"(*!') $%&%'(:

?A**(+A:&$% %4.4:&)
I( $5'0#0(0 58 ! &#<( "% 58 0#*#$!(%0 58 $!*$# & !') !* &#' &: I( 0,5-0 (,% ,9)"! *#$ 4"54%"(#%0 -,%' #( #0 #' (,% 85"& 58 45-)%" !') .%#'/ &#<%) -#(, 0 #(!.*% 4"545"(#5' 58 *#&%: T,% "!(% 58 ,!")%'#'/ #0 & $, 0*5-%" !') (,% $5&4"%,%'0#7% 0("%'/(, )%7%*54%) #0 !.5 ( ,!*8 58 P5"(*!') $%&%'(: I( #0 85 ') &%"% "%0#0(!'( (5 (,% $,%&#$!* !$(#5' (,!' 5(,%"0:

:A&A/A+ %4.4:&)'
:T,#0 #0 '!( "% 5$$ ""#'/ &!(%"#!*: I( #0 5.(!#'%) 8"5& $%&%'( "5$=0: T,%0% $%&%'( "5$=0 !"% 1!9#'/ *#&%0(5'%60 $5'(!#'#'/ 0#*#$!(%0 !') !* &#'!(%0 58 $!*$# &: T,% 0%**#'/ 4"54%"(9 58 (,#0 $%&%'( #0 &5"% (,!' (,% P5"(*!') $%&%'( . ( (,% $5&4"%,%'0#7% #0 ,!*8 58 #(:

16

$talcementi Broup history Founded in 2F=D, $talcementi was uoted for the first time on the stock markets, at the .ilan -tock 4!change, in 2961, under the name of H-ocietal Bergamasca per la Fabrication del %emento e della %alce $draulicaI and has been operating since 2968 under the name of $talcementi -pa. &hanks to a careful plan of investments and take'overs of other cement producers, the company e!panded, uickly reaching a strong position on the market and becoming the leading cement manufacturer in $taly. After several ac uisitions abroad, in 2996 $talcementi achieved important international status with its take'over of %iments FranLais, one of the main global cement producer. $n 2998 $talcementi consolidated its verticalisation strategy with the ac uisition of %alcestruzzi, thus becoming $talian leader in the ready'mi!ed concrete sector. $n .arch 2998, all the international companies of the Broup gathered under one single corporate identity. -ince 299F $talcementi Broup has been pursuing its internationalisation strategy by ac uiring new cement works in Bulgaria, ,azakhstan, &hailand, .orocco, $ndia, 4gypt and the Anited -tates.

17

(ur .anagement) the (ffice of the %hairman &he %hairman of the company, in the respect of the duties conferred upon him by the Board of 0irectors and in collaboration with %4(, %(( and %0( ' with whom he constitutes the (ffice of the %hairman ' develops proposals for the Board of 0irectors of $talcementi and %iments FranLais regarding investments, financial ac uisitions and important organizational transformations. &he (ffice of the %hairman is a non'statutory body with coordination duties that does not modify the responsibilities and powers of the functions involved.

Giampiero Pesenti

Chairman
Curriculum vitae

Carlo Pesenti Chief Executive Officer

Curriculum vitae

Giovanni attista !errario Chief Operating Officer

Curriculum vitae

"ves#$en% &anot Chief 'evelopment Officer

Curriculum vitae

11

CHAPTER>3

12

LITERATURE REVIE?
&he management is efficient if it is able to accomplish the objective of the enterprise. $t is effective when it accomplishes the objectives with minimum effort and cost in order to attain long'range efficiency and effectiveness management must chat out its course in advance. A systematic approach to facilitate effective management performance is profit planning and control or budgeting. Budgeting is therefore an integral part of management in a way, a budgetary control system has been described as a historical combination of a Hgoal setting machine for increasing an enterprises profits and a goal achieving machine for facilitating organizational co ordination and planning while achieving the budgeted targetsI.

MEANING OF BUDGET:
$t is a financial and uantitative statement, prepared and approved prior to a defined period of time of policy to be pursued during that period for purpose of attaining a given objective. $t may include income, e!penditure and employment capital. $n other words is a pre'determined detailed plan of action developed and distributed as a guide to current operations and as a partial basis for the subse uent evaluation of performance.

MEANING OF BUDGETING:
&he process of planning all flows of financial resources into with in and from an entity during some specified future period. $t includes providing for the detailed allocation of e!pected available future resources to projects, functions, responsibilities and time periods. From above definition it is clear that budgeting is the actual act of preparing the budget. $t is the process of evolving the final statement. Budget is the end product of budgeting.

23

MEANING OF BUDGETORY CONTROL:

$t is the process of establishing of departmental budgets relating the responsibilities of e!ecutives to the re uirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of the policy a firm basis for its revision. First of all budgets are prepared and then actual results are the comparison of budgeted and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time. &he budgetary control is continuous process, which helps in planning and co ordination. $t provides a method of control too. A budget is a means and budgetary control is the end result. $n the word of J.A -olt Hbudgetary control is the system of management control and accounting in which all operations are forecast and so as possible planned ahead and actual results compared with the forecast and the planned ones.

ESSENTIALS OF BUDGETARY CONTROL:

Budgeting, or the process of preparing the budget, is the starting point for budgetary control 0istribution of budgets pertaining to each function to all the relevant section within organization. %ollection of actual data pertaining to till budgeted activities. %ontinuous comparison of actual performance with budgeted performance. $nitiation of corrective action to ensure that actual performance is in line with budgeted performance /evision of budgeted if it is felt that the budgets prepared are no longer relevant on account of unforeseen developments. &he primary objective of budgetary control;s to help the management is systematic planning and in controlling the operations of the enterprise. &he primary objective can be met only of there is proper communication and coordination amongst different within the organization. &hus the objectives can be stated as)

1: PLANNING:
Businesses re uire planning to ensure efficient and ma!imum use of their resources. &he first step in planning is to define the broad aims and objectives of the business. &hen, strategies to achieve the desired goals are formulated and tentative schedule of eh proposed

21

combinations of the various factors of production, which is the most profitable for the defined period. Budget influences strategies that need to be followed by the originations. $t cultivates forced planning aiming managers.

2: CO>ORDINATION:
%o'ordination is managerial functions under which all factors of production and all departmental activities are balanced and integrated achieve the objectives of the organization. Budgeting provides the basis for individual in all department to e!change ides on how best the organizations objectives can be realized. 4!ecutives are forced ot think of the relationship between their department and the company as a whole. &his removes unconscious bases against other departments. $t also helps to identify weaknesses in the organization structure.

3: COMMUNICATIONS:
All people in the organization must know the objectives, policies and performances of the organizations. &hey must have a clear understanding of their part in the organizations goals. &his is made possible by ensuring their participation in the budgeting process.

22

4: CONTROLS AND PERFORMANCE EVALUTION: %ontrol ensures control by continuous comparison of actual performance with the budgeted performance. >ariances are highlighted and corrective action can be initiated. Budget;s also from the basis of performance evaluation in an organization as they reflect realistic estimates of acceptable and e!pected performance.

BUDGET+ BUDGETING AND BUDGETARY CONTROL:

A budget is B+A4 ?/$:& of a plan e!pressed in a uantitative terms. Budgeting is a techni ue for formulating budgets. Budgetary control relates to the principles, procedures, and practice of achieving given objectives thorough budgets. From the above definitions we can differentiated the three terms as budgets are the individuals objectives of a department, etc, where as budgeting may be said to be the act of building budget. Budgetary control embraces all and in addition includes the science of planning the budgets to effect on overall management tool for the business planning and control.

ESSENTIALS OF BUDGETARY CONTROL:

&he proper organization is essential for the successful preparation, maintenance and administration of budgets. A budgetary committee is formed which comprises the departmental heads of various departments. All the functional heads are entrusted with the responsibility if ensuring proper implementation of their respective departmental budgets. &he chief e!ecutive is the overall in charge of budgetary system. 3e constitutes a budget committee for preparing realistic budgets. A budget officer is the convener of the budget committee who co'ordinates the budgets of different departments. &he managers of different departments are made responsible for their departmental budgets.

BUDGET OFFICER:

23

&he chief e!ecutive appoints budget officer. -uch budget officer also called as Hbudget controller or budget directorI. 3is rank should be e ual to other functional managers. &he budget officer does not have the direct responsibility of preparing the budgets. &he various functional managers prepare the budgets. 3is role is that of a supervisor. &he budget officer has the specific duty of administering the budget. 3e is responsible for timely completion of budgeting activity by various departments and for co'ordination between them so the t there is a proper link between them. 3e is empowered to scrutinize the budgets prepared by different functional heads and to make changes in them. $f the situation so demands. &he budget officer works as a coordinator among different department. 3e continuously monitors the actual performance of different departments. 3e determines the deviations in the budgets and takes necessary steps to rectify the deficiencies, if any. 3e also informs the top management about the performance of different department. &he budget officer will be able to carry out his work only if is conversant with the working of all the departments he must have technical knowledge of the business and should also possess accounting knowledge.

3: BUDGET COMMITTEE:
A budget committee is formed to assist the budget officer. &he heads of all the important department;s are made members of this committee. &he committee is responsible for preparation and e!ecution of budgets. &he members of this committee put up the case of their respective departments and help the committee to take collective decisions, if necessary. &he budget committee is responsible for reviewing the budgets prepared by various functional heads. %o ordinate all the budgets and approve the final budgets, the budget officer acts as coordinator of this committee. All the functional heads are entrusted with the responsibility of ensuring proper of ensuring proper implementation of their respective final departmental budgets.

4: BUDGETS CENTERS:

24

A budget centers is that part of the organization for which the budget is prepared. A budget center may be a department, section of a department or any other part of the department. $deally, the head of every center should be a member of the budget committee. 3owever, it must be ensured that each budget center at least has an indirect representation in the budget committee. &he establishment of budget centers is essential for covering all parts of the organization becomes easy. 5hen different centers are establishment. &he budget centers are also necessary for cost control purposes.

5: BUDGET MANUAL:
a# A budget manual is a document that spells out the duties and responsible of the various e!ecutives concerned it specifies among various functional areas. A budget manual covers the following matters. b# A budget manual clearly defines the objectives of budgetary control system. $t also gives the benefits and principles of this system. c# &he duties and responsibilities of various persons dealing with preparation and e!ec ton of budgets are also given in a budget manual. $t enables the management to know the persons dealing with various aspects to budgets and provides clarity on their duties and responsibilities, d# $t gives information about the sanctioning authorities of various budgets. &he financial powers of different managers are given in the manual for enabling he spending amount on various e!penses. e# A proper table for budgets including the sending of performance reports is drawn so that every work starts in time and systematic control is e!ercise. f# &he specimen forms and number of copies to be listed for budget repots is also stated. Budget involved should be clearly stated. g# &he length of various budget periods and control points is clearly given. h# &he procedure to the followed in the entire system is clearly stated. i# A method of accounting to be used for various e!penditures is also stated in the manual.

25

&he budget manual helps in documentation the role of every employee, his duties, responsibilities the ways of undertaking various tasks etc. thus it also in reducing ambiguity at any point of time.

6: BUDGET PERIOD:
A budget period is the length of time for which a budget is prepared. $t depends upon a number of factors. &he choice of a budget period depends upon the following considerations. &he types of budget "longMshort# &he nature of demand for the products. &he timings for the availability of the finance. &he economic situations of the cycles. All the above mentioned factors are taken into account while fi!ing the period of budgets. $n this budgeting process the financial manager has to take the financial decision on the budgets. &he financial manager usually responsible for organizing this budget, he must perform the following functions. &o decide the general policies and guidelines. &o officer technical advice &o suggest changes &o receive and review individual budget estimates &o reconcile divergent views &o co'ordinate budgeting activities. &o approve budgets with or without revisions. &o scrutinize control reports later on &o scrutinize budget repots later on &o disseminate these guide lines.

26

CONTINUOUS BUDGETING SYSTEM:

A continuous budgeting system is a method of having two different budget periods with in the same budget. &he purpose of having this system is to have greater control in terms of operational activities without losing sight is to have greater control in terms of it results in incorporating the effect of changes in the short term on the long'term targets of the organization.

DETERMINATION OF @EY FACTOR:

&he budgets are prepared for all functional areas. &hese budgets are interring dependent and inter'related. A proper co'ordination among different budgets in necessary for budgetary control to be successful. &he constraints on some budgets may have an effect on other budgets too. A factor which influences all other budgets is known as Hkey factor or principal factorI. &he key factor may not necessity remain the same. &he raw materials supply may be limited at one time but it may be easily available at another time. -imilarly, other factors may also improve at different times. &he key factor highlights are limitations of the enterprise. &his will enable the management to improve the working of these departments where scope for improvement e!ists.

REAUISITES FOR A SUCCESSFUL BUDGETARY CONTROL SYSTEM

For making a budgetary control system successful re uisites are re uired.

1: CLARIFYING OBJECTIVES:
&he budgets are used to realize objectives of the business. &he objective must be clearly spelt out to that budgets are properly prepared. $n the absence of clear goals, the budgets will also be unrealistic.

2: PROPER DELEGATION OF AUTHORITY AND RESPONSIBILITY:

27

Budget preparation and control is done are every level of management. 4ven though budgets are finalized at top level but involvement of persons from lower levels of management is essential for their success. &his necessitates proper delegation of authority and responsibility.

3: PROPER COMMUNICATION SYSTEM:

An effective system of communication is re uired for a successful budgetary control. &he flow of information regarding budgets should be uick so that these are implemented. &he upward communication will help in knowing the difficulties in implementation of budgets. &he performance reports of various levels will help top management in budgetary control.

4: BUDGET EDUCATION:
&he employees should be educated about the benefit of budgeting system. &hey should be the benefits of budgeting system they should be educating about their roles in the success of this system. Budgetary control may not be taken only as a control device by the employees but it should be used as a tool to improve their efficiency.

5: FLEBIBILITY:
Fle!ibility in budgets is re uired to make them suitable under changed circumstances. Budgets are prepared for the future, which is always uncertain, even though budgets are prepared by considering the future possibilities but still some adjustment. Fle!ibility makes the budgets more appropriate and realistic.

6: MOTIVATION:
Budgets are to be implemented by human beings. &heir successful implementation will depend upon the interest shown by the employees. All persons should be motivated to improve their working so that budgeting is successful. A proper system of motivation should be introduced for making this system a success.

21

TYPES OF BUDGETS:

22

1: LONG >TERM BUDGETS:

&he long'term budgets prepared for a long period of five to ten years. &hey are concerned with planning the operations of a firm over a considerably long period of time. &he financial HcontrollerI e!clusively for the top management usually prepares long'term budgets. &hese budgets are very useful in terms of physical units "i.e. uantities# or percentages, since accrued values may be difficult to forecast over such long'period. %apital e!penditure, research and development budgets, etc, are e!amples of long'term budgets.

2: SHORT TERM BUDGETS:

-hort'term budgets are budgets prepared for a short period of one to two year. &hey are prepared for those activities the trend in which cannot be for seen easily over long periods. &hese budgets are very useful incase of consumer goods cement such as sugar, cotton, te!tiles, etc. they are generally prepared in terms of physical units "i.e.. uantities# as well as monetary units "i.e. values# materials budget. 4ach budget etc, are e!ample of short' term budget. &hey are useful to lower level of management for control purpose.

3: CURRENT BUDGETS:
%urrent budget is a budget, which is established for use over a short period of time and is related to current conditions. &hus current budgets are essentially short term budgets adjusted to current "i.e., present or prevailing# condition or circumstances. &hey are prepared

33

for a very short period. -ay, a uarter or a month. &hey related to current activities of the budgets.

4: INTERIM BUDGETS:
$nterim budgets are budgets, which are prepared in between two budget periods. &hese budgets may get integrated with the budget of the following period.

CLASSIFICATION OF BUDGETS ACCORDING TO CONTENT:

Budgets may be classified into budgets in physical terms and into budgets in monetary terms.

AC BUDGETS IN PHYSICAL TERMS:

Budgets in physical terms are budgeted that budget in terms uantities only. &hey do not include corresponding rupee value. +ong'term budgets are usually prepared in physical terms. 4!amples of such budgets are production budgets, material budget etcN

BC BUDGETS IN MONETARY TERMS:

Budgets in monetary terms are budgets that budget in terms of uantities as well as their corresponding rupee value, sales budget, purchase budget, etc are e!ample of such budgets. Budgets such as cash budget, capital e!penditure budget, etc that may not have physical uantities also from part of budgets in monetary terms.

CLASSIFICATION OF BUDGETS ACCORDING TO FUNCTION:

Budgets can be classified into) 2. operating budgets 6. financial budgets E. master budgets

1C OPERATING BUDGET:

31

&hese budgets relate to different activities or operations of a firm. &he number of such budgets depends upon the size and nature of the business, the commonly used operating budgets are) 2# -ales budgets 6# ?urchase budgets E# /aw material budgets D# +abour budgets 1# Factory utilization budget =# .anufacturing e!penses or works overhead budget 8# Administrative and selling e!penses budget etc. &he operating budget for a firm may be constructed in terms of programmes or responsibility areas, and hence may consist of) ?rogramme budget /esponsibility budget AC PROGRAMME BUDGET: $t consists of e!pected revenues and costs of various products or projects that are &ermed as the major programmes of the firm, such a budget can be prepared for each product line or project showing revenues, cost and the relative profitability of the various in locating areas where efforts may be re uired to reduce costs and increase revenues. &hey are also useful in determining imbalance and inade uacies in programmes so that corrective action may be taken in future. BC RESPONSIBILITY BUDGETS: 5here the operating budget of a firm is constructed in terms of responsibility Areas, such a budget show the plan in terms of persons responsible for achieving them. $t is used by the management as a control them. $t is used by the management as a control device to evaluate the performance of e!ecutives who are in charge of various cost centers. &heir performance is compared to the targets "budgets#, set for them and proper action is taken for adverse results.

32

/esponsibility areas may be classified under three broad categories) %ost Me!pense center ?rofit center $nvestment center

2C FINANACIAL BUDGETS:
Financial budgets are concerned with cash receipts and disbursements, working %apital, financial position and results of business operations. &he commonly used financial budgets include cash budget, working capital budget and income statement budget, statement of retained earnings budget, budgeted balance sheet or position statement budget.

3C MASTER BUDGETS:
&he master budget is the summary budget incorporating its functional budgets. All &he operational and financial budgets are integrated into the master budget. &he budget officer for the benefit of the top level management prepares this budget. &his budget is used to coordinate the activities of various functional departments. $t is also used as an effective control device.

CLASSIFICATION ON THE BASIS OF FLEBIBILITY:

AC FIBED BUDGET: According to $%.A +ondon a fi!ed budget is a budget which is designed to /emain unchanged irrespective of the level of activity actually attained it is based on a fi!ed volume of activity and shows one volume of output and related cost. $t is not adjusted according to the actual level of activity attained. A fi!ed budget is useful only when the actual level of activity corresponds with the budgeted level of activity. But this generally does not happen as such a fi!ed budgets is not useful for managerial purposes. BC FLEBIBILE VARIABLE SLIDING SCALE OR CONTROL TYPE BUDGETS: According to $%.A +ondon a fle!ible budget is a budget which is designed to %hange in accordance with the level of activity actually attained. &hus a fle!ible budget changes according to the change in the level of activity. $n other words it provides the budgeted costs at any level of activity.

33

Business activity cannot be accurately predicted on account of uncertainties of Business environment. A fle!ible budget contains several estimates for different assumed circumstances instead of just one estimate, it provides for automatic adjustments with changes in the volume of activity. 3ence, a situations operating in an unpredictable environment.

ZERO BASED BUDGETING:

*ero'based budgeting is the latest techni ue of budgeting and it has increased use as a managerial tool. &his techni ue was first used in America in 29=6, by the former president America, Jimmy %arter. As the name suggests, it is starting from a HscratchI, the normal techni ue of budgeting is to use previous years cost levels as a base for preparing this year;s budget. &his method carries previous years inefficiencies to the present year because we taken last year because we taken last year as a guide, and decide Hwhat is to be done this year when this much was the performance of the last yearI. $n zero based budgeting every year is taken as a new year and previous year is not taken as a base, the budget for this year will have to be justified according to present situation, zero is taken as a base and likely future activities are decided according to present situations. $n zero base budgeting a manager is to justify why he wants to spend. &he performance of spending on various activities will depend upon their justification and priority for spending will have to be proved that an activity is essential and the amounts asked for are really reasonable taking into account the volume of activity. &he budgeting process is used in the performance budgeting for the construction of phase. 5hich includes pre'commission activities. Besides meeting the essential re uirements of managerial control. &he budgeting e!ercise also covers the long'term capital budgeting, which is presented in the from of annual plan.

34

OBJECTIVES OF THE BUDGETARY SYSTEM:

&o prepare annual budgets in such a manner those managers at various levels in the organization carry out periodical e!ercise in respect of each contact or responsibility center for physical planning and matching resources broke up into monthly targets or cash flows. &o introduce and operate responsible for achievement of specified targets with the resources allocated for the purpose. &o bring about effective co'ordination of all activities of the organization of all activities of the organization and to gear up service divisions to meet effectively the re uirement of projects.

BUDGET PERIOD AND PHASING:

&he budget period or annual budgets should correspond with the financial year. &he budget should be drawn up for the ensuring financial year in the form of budget estimates financial year in the form of /evised 4stimates "/.4# in addition, the budget are to be reviewed on monthly basis by project review teams, in the light of actual e!penditure and projections in the budget period. Budgets should indicate monthly phasing of e!penditure and targets for the first and uarterly phasing for the second half of the year. At the time of review of the budget estimates to frame revised estimates the uarterly phasing should be broken up into monthly phasing. 5hile drawing up the actual budget in (ctober every year, the long'term capital budget for ongoing and new schemes should be formulated as a part of the e!ercise for preparation of Annual plan. &he long term capital budget should indicate for a period of si! years following the budget period project wise annual phasing of the capital e!penditure and physical schedules resource based network.

BUDGET HEADS:
For uniform accounting, it is essential that costs are collected for each system of the factory tough this may involve splitting up of payments against contracts which embrace more than one system. Allocation of the cost as system wise affords a sound basis for cost accounting, inter'firm comparisons and provides valuable inputs to data bank. Budget

35

provisions are related to project estimated and monitoring of actual e!penditure where as control cables for part control and instrumentation system. Factory piping which include pipelines, for ash water mains, compressed air system and civil works piping. Au!iliary pumps for water treatment plant and civil works system. $f there are, any contracts not covered in the budget heads provision for such contracts should be shown against the appropriate system head by adding code number.

5 TYPES OF BUDGETS IN ZUARI CEMENTS CEMENT LIMITED:

According to the nature e!penditure budget are classified as under 0irect capital outlay on works &echnical consultancy $ncident e!penditure during construction 4mployee cost

O(,%" %0(!.*#0,&%'( %<4%'0%0:

&raining and recruitment ?reliminary e!penses .isc. brought'out assets &ownship budget &hese comprises of salaries, wages, allowance, contribution to ?F and other funds and welfare e!penses such as +$%, .edical reimbursement, canteen subsidy etc., and provision for areas of salaryM0.A.

OFFICE AND OTHER EBPENSES:

4!penses incidental to construction and capital works not traceable directly to incidental e!penditure, during contribution e uipments, vehicle running e!pense, office rent. %ost of drawings, traveling e!penses, printing O stationery, communication e!penses, advertisement for tenders etc., are major items in this category.

TRIANING RECRUITMENT D OTHER DEFFERED REVENUE EBPENDITURE:

36

&he first part of the budget consist of e!penses for training e!ecutives, and non'e!ecutive trainees, rent for training halls and e!penses for management development courses. &he second part consists of e!penses for recruitment such as advertisement for recruitment, interview e!penses for to candidate etc., the third part combines preliminary e!penses including share registration lees and research and development e!penses.

MISCELLANEOUS BOUGHT OUT PASSESS:

>ehicles, furniture and fi!tures e uipments, hospital and medical e uipment, miscellaneous assesses town ship figure in this budget.

REVIE? OF PROJECT BUDGET: MONTHLY REVIE?:

At monthly intervals, the budgets should be reviewed by project review committee "?/%#. ?roject budget should report actual e!penditure against budget heads. 5orks heads and corporate budget by the 8th of the month following the reporting month. &he monthly review should be e!amined by project review team "?/&#, who should record reasons for any aviations and action proposed for e!pending works in the minutes of the meetings reasons for any variations in the case of budget heads e!ceeding 27G of the budget estimates revised estimates or which ever is lower /s.1 lakhs should be analyzed and reported upon.

AUATERLY REVIE?:
?/& should conduct a uarterly budget review with a view to projecting anticipated e!penditure during the year against approved budget estimatesM revised estimates. As time is essence of such review, only a uick estimate of anticipated e!penditure for individual budget heads involving provisions e!ceeding for individual budget heads involving provisions e!ceeding /s 17 lakhs in each case should be made and reported upon in minutes of ?/&. For this purpose, project budget should furnish all the relevant data to general manager "project# and planning and systems by the 27th of the month following the uarter project budget committee should review the actual e!penditure and assess anticipated e!penditure contract co ordinationMengineers in charge the assessments of anticipated e!penditure should be

37

furnished by the project budget committee to general manager "project# by the E7 th of the month following the uarter under review.

BUDGET OF SERVICE DIVISION E CORPORATE BUDGETS:

A review of budgets of service and corporate divisions should be conducted at uarterly intervals by corporate budget committee "%-;%#. for this purpose, corporate accounts should report actual e!penditure up to the end of the uarter by the 27th of the month following uarter to corporate budget and budget co'ordination of the remaining period of the year should be sent to corporate budget should be sent to corporate budget should put up a consolidated report division wise and project wise to corporate budget committee "%B%# by the 21th of the may, August, :ovember and February every year.

OBJECTIVES OF THE CURRENT BUDGETARY CONTROL SYSTEM IN ZUARI CEMENTS CEMENT LIMITED:
$n current to corporate budgetary control system operating phase has been compiled to achieve the following objectives. &o control actual performance with reference to standards M norms adopted in the budget, ascertain the deviations analyze and establish the reasons. &o identify constraints in generation and tamely action for estimation of constraints. &o monitor the generation of internal resources so as to ensure availability of ade uate funds. &o prepare revenue budget so as to forecasting the periodical profitability of the organization. &o develop standards M norms of performance in the various areas of operation and maintenance based on the e!perience. &o involve managers at various in the process of developing performance budget so as to introduce the concept of responsibility accounting and participate management. &o ensure effective co'ordinate planning of all activities so the all the inputs and services necessary for achieving the physical targets are available at appropriate time.

31

 &o create cost consciousness among the managers responsible for decision making. &o provide data regarding operational norms and costs for the purpose of formulating tariff. &o provide data a basis for assessment of working capital re uirements. &o control the working capital particularly book debts, spears and other items or inventory. &o improve profitability and internal resources generation.

SCOPE OF THE PERFORMANCE BUDGET:

&he budget for operation and maintenance activities will be called performance budget operation. &his, in effect means that all financial targets in the budget will be based on performance targets in physical terms. &he current budgetary control system operation phase envisages generation and transmission line projects as independents investment centers. $t becomes applicable to a project in the year in which it plans to commercialize its first generation unit. 3owever, the budgeting for e!penses "net of revenue# from the date of synchronization to the date of commercial generation "i.e. during trail run# is to be taken case of in the capital budget of the respective project. -imilarly, in the case of transmission line project, the system becomes applicable from the year in the date commercial generation of the first unit of generating project, with which this line is associated, which ever is later. For subse uent lines, the ( O . will be prepared from the energisation. &he sum totals of budgets of the cost centers will be the budget for the investment center. 3ow ever, the budget for the profit center will be worked out by apportioning the revenue and cost of various cost centers to individual;s profits centers bases on specified norms.

32

&he performance budget operation will consists of following budgets along with the supporting schedules A. Budget balance sheet B. Budget profit and loss account %. /evenue budget $n addition, separate budgets for revenue activities other than operation for research and development consultancy contracts etc. &he e!penses in respect of developmental e!penditure for improvements, additions, replacement, renewals, balancing facilities etc., are of capital nature and will be budgeted for in the construction budget of budgetary control system construction phase. &o facilitate management control the system also envisages, phasing of these budgets into monthlyM uarterly targets. &he actual performance then will be reasons for variations will be analyzed and established for taking corrective remedial actions. &he scope also includes projections of internal resources for a period ranging from 1 to 21 years and updating of 1years plan as well as perspective plan of the company.

STAGES IN THE FORMULATION OF PERFORMANCE BUDGET:

&he system provides for a two stages formulation for Hperformance budget'operationI the stages are given below.

INITIAL PROPOSAL:
$n the initial proposal, the project is re uired to indicate yearly targets. $n he addition, to furnishing basic information like synchronization and commercial generation dates %onstraints on coal operation at less than the designed specification, calorific value of raw material and lime stone, material consumption in physical terms for items whose consumption value in /s.1 lakhs or more, planned shut down for a maintenance and overhauling and norm for various operation parameters provided for design specification and in the tariff agreements to the corporate budget committee.

43

$n the initial proposals is planned to be submitted after considering these factors and keeping in view the perspective plan of the organization, fi!es as well as norms for various operating parameters. &hese targets and norms are then communicated to all stations and transmissions line offices in the last week of July to be used for formulating detailed budget in the firm of final proposal.

FINAL PROPOSAL)
Budgeted balance sheet, budgeted profit O loss account and budgets in the form of cash budget along with the proposal will consist of detailed supporting schedules for each of the investment center M cost center. &his final proposal needs to be submitted to corporate center with in E weeks of receiving approval for initial proposal. &he final proposal, after approval by board, will become the basis of monitoring performance for cost centers and investment centers. &he fre uency and e!tent review and monitoring will be done is under) i. &he monitoring of actual performance against budgeted targets for investment center M profit center on monthly basis and for cost centers on corrective actions. ii. &he review of performance budget on profitability. &he first step in the preparation of performance budget, ( O . is formulation of maintenance and overhauling schedules for Boiler and to which generation, then considering the grid demand, the availability or inputs and factory problems. &he utilization of capacity will be worked out on month'month basis for the budget period the gross generation targets can be worked and accordingly. uarterly basis to assess the anticipated uarterly for remedial M

NEBT GENERATION:
&he sales value will be determined from generation au!. %onsumption# uantum of net generation "i.e. gross

AUBILIARY CONSUMPTION E CONSUMPTION BY UTILITES:

41

&he cement consumption by each of the cost centers for individuals unit au!iliaries, station au!iliaries as well as transformer losses are to be estimated separately based on designed specifications and added in order to workout total au!iliary consumption rather than fi!ing a overall percentage. -imilarly consumption by utilities will also need to be indicated by concerned cost centers M departments like township and construction department. &his will be valued at cost net generation to arrive at the sales values for owns consumptions.

CHEMICAL CONSUMPTION:
&he chemical are used by many cost centers for treatment of water. &he consumption of chemicals will be correlated with volume of water treated and certain norms will have to be developed for different type of chemicals and different types of treatment. Based on these norms, each of the cost centers will indicate consumption of chemical in uantitative as well as financial terms. &he cost center wise re uirement will be consolidated to arrive at total chemicals consumption to be charged to profit and loss account. &he valuation of chemical will be done at current prices only.

EMPLOYEE COST:
&he basis employee cost will be approved manpower budget effective for respective years of budget period. &he estimation of employee cost is to be done for each grade considering mid'point of the scale as basis pay and after adding various allowance like 0.A., 3./.A., %.%.AI project allowance etc., as admissible in respective grades. &his is to be worked D9 out or each of the budget period based on e!isting strength "at the time of estimation# in each grade and additions during each uarter "taking 87G satisfaction for additions#. &he provisions for +&%, medical reimbursement, ?F and other welfare e!penses are to be made based on trend of e!penses in previous years and taking into account polices changes, if any. &he details of welfare e!penses like liveries and uniforms, safety e!penses, accident compensation, games O sports, canteen subsidy etc., are to list out as per chart of account. &he provisions for incentive, bonus and payments of one time nature are to be shown separately based on total employee cost for e!ecutives, supervisors and non'supervisors and

42

total man power in these categories, separate rates of cost per employee will be worked out for each of these categories as under. 2. -alaries and allowance 6. %ontribution to ?F and other funds E. 5elfare e!penses &he cost center of employee cost will be worked out based on these rates separately for e!ecutives, supervisors and non'supervisors. &his will again be consolidated separately for operations. .aintenance and common service function. &he employee cost of common function will be appropriated between construction and ( O . budgets in the ratio of capital e!penditure and sales during the respective years.

REPAIRS D MAINTANANCE:
$n line, with costing system following three activities can represent major classification of repairs and maintenance. 2. .ajor overhaul 6. ?reventive maintenance E. Break down maintenance :ormally budgeting will be done for the former two) under each activity separate estimates will be prepared for consumption of materials and maintenance jobs. &his estimation will be done at each of the sub cost center wise details are re uired to be mentioned. &he consumption material for repairs and maintenance will be classified into spares, lubricants, loose tools and plants, consumables and others. &he cost center wise total separately for three activities will be added to arrive at summary of material consumption and maintenance jobs, which will be reflected in the profit O loss account. &he material consumption especially of spares can be estimated based on the e!pected life of various consumption M spears in the installed e uipment the fre uency of breakdowns in the past and the re uirement for prevented maintenance and major overhauls. &he actual life of components may be different from that indicated in the manufacturer;s specification. &herefore, it is very difficult t estimate re uirements of spares. But this new station it will be

43

advisable to collect such information from old stations that have gained e!perience in this field. :ormally maintenance of e uipment through contractors should be avoided. But in certain areas, if the e!pertise and in house capability or sufficient man power is not available, maintenance jobs can be got done through contractors. -uch contracts will need to be listed out separately. $f any owner supply items are covered in such contracts the cost of these items will be included in the material cost.

FACTORY D GENERAL OVERHEADS:

All the items of e!penditures under this head will be estimated based on past trend with due adjustment for policy changes. &he estimates will be given by cost center needs for items identified with respective cost centers. &he total administrative cost of service cost centers will be allocated between construction and ( O . in the ration of capital e!penditure and sales during the respective years.

DEPRECIATION:
&his is to be charged as per 4- act from the year following the year in which assets have been capitalized. &his will be done separately by each of the cost centers on the basis of capitalized value and rates of depreciation furnished by site finance and account for different categories of assets. %ost center'wise depreciation will be added at total depreciation for the investment center.

INTEREST ON FIBED CAPITAL:

As per e!isting accounting policy, the interest is to be charged to profit O loss account based on the loan content in the capitalized assets restricted to total accrued interest on the actual loans. For budgeting purposes, interest will be worked on e uated loan content or e uated loan which ever is less.

EAUATED LOAN CONTENT:

44

4 uated loan content is to taken as 17G if total capital cost and adjusted for number of operating months in respective years. $n case of both generating factory and transmission lines with associated factory, the cost for each profit center will be taker as per actual or anticipated capital cost. &he e uated loan content is to be individual unit;s transmission lines separately for each of the phases M stages. &he total capital cost will be taken as proposed in the performance budget construction.

CHAPTER>4

45

THE ZUARI CEMENT LIMITED REVENUE BUDGET

&AB+4'$
Budgeted estimated Actual for the -.:o 1 S!*%0 F#<%) $50( "%$57%"9 V!"#!.*% $50( "%$57%"9 F %* 4"#$% !)F 0(&%'(0 "%$57%"9 O-' C5'0 &4(#5' T5(!* 58 :1 2516 2 3 A7%"!/% I'(%'0#7%0 O(,%" #'$5&% Brand &otal "2P6PE# 132 56 6=8D 251:6 13:2 5:6 6=8.D 2362 21 42 612= 236:2 2:1 4:2 612.= 132 13:2 141 14:1 ?articulars for the 6722'27 Amount 724 143 123 123 /s.M.t 72:4 14:3 12:3 12:3 year 6722'27 Amount 611 743 163 163 /s.M.t 61:1 74:3 16:3 16:3

46

INTERPRETATION:
&he data pertaining to the generation and consumption of cement at *uari %ement +imited have been obtained from the year 6722'27 and represented in &able'2. &he aspect included are total generation of cement in "crores /s# and utilization for au!iliary consumption, /aw material consumption and +ime stone respectively. 0uring the year 6722'27 the sales, fi!ed cost, variable cost, fuel price, own consumption was decreased. 5hen the estimated Budgeted, so sales consumption is 6E=.9G respectively. 0uring the year 6722'27 the average intensives are decreased 9.FG, the other income also decreased D.9G respectively. Finally, with regard to the result in /evenue budget of *uari %ement cement limited, totally decreased 612.=G in the year 6722'27 respectively.

47

&34 *AA/$ +$.$&40

(perational 4!penditure Budget For the year

&able'$$
-l.:o ?articulars Budget estimated for the 2311>13 Amount 1 V!"#!.*% C50( R!- &!(%"#!* L#&% S(5'% &otal of 2 2 O4%"!(#7% &!#'(%'!'$% $50( C,%&#$!* D ?!(%" R%4!#"0 D &!#'(%'!'$% $50( 133 213 323 S(!(#5'!"9 D G%'%"!* E<4%'0%0 R%.!(% S,!"% 58 54%"!(#'/ %<4%'0%0 &otal of 6 3 F#'!'$% $,!"/%0 D%4"%$#!(#5' I'(%"%0( 5' 8#<%) $!4#(!* &otal E Brand &otal "2P6PE# 42 11 =7 28DD 4:2 1:1 =.7 28.DD 15 23 E1 292= 1:5 2:3 E.1 292.= 65 11 1 2=FD 13:3 21:3 32:3 6:5 1:1 3:1 2=F.D 153 333 353 13 13 13 97E 15:3 33:3 35:3 1:3 1:3 1:3 97.E 423 453 F87 42:3 45:3 F8.7 453 473 967 45:3 47:3 96.7 /s.M.t Actual for the year 2311>13 Amount /s.M.t

41

$:&4/?/4&A&$(:)
(bserved from the above table that the (perational 4!penditure budget of *uari %ement %ement +imited in the year 6722'27. $n components, the /aw consumption D8G also increased. $n operating O maintenances cost components, chemicals O water, repair O maintenance, employee cost, stationary O general e!penses, rebate and share of other e!penses is all are fluctuating with the e!penses of the year 6722'27. 3owever the total operating maintenance costs are 97.EG decreasing respectively. $n finance charges depreciation and interest on fi!ed capital, has been included, the total finance charges recording decreasing of E.1G in the year 6722'27 respectively. Finally with regard to the operational e!penditure budget of *uari %ement %ement +imited the total profit has increase with 292.=G during the year 6722'27. &he overall budgets results of *uari %ement %ement +imited is earning more profits. the year 6722'27 variable cost material consumption D1G increased and the lime stone

42

4very organization has pre'determined set of objectives and goals, but reaching those objectives and goals only by proper planning and e!ecuting of the plans economically. &he *uari %ement %ement +imited is objectives of planning promoting and organizing an integrated development of %ement %ompany. &he corporation mission of *uari %ement %ement is to make available and uality cement in Qincreasingly large uantities, the company will spear head the process of accelerated development of cement sector by e!pedition sly &he organization needs the capable personalities as management to lead the organization successfully, the management makes the plans and implement of these plans are e!pressed in terms of budget and budgetary control. &he *uari cement %ement +imited has budget process in two stages. (ne is the capital e!penditure budget and another is operating maintenance budget, the capital e!penditure budget shows the list of capital projects selected for investment along with their estimated costs, operating O maintenance budget refers to the repairs O maintenance budgets, the special budgets are rarely used in the organization like long' term budgets, research O development budget and budget for consultancy. &he *uari %ement cement +td. is to make available and uality cement efficient utilization of resources and implementation of sophisticated technology and cement generation and also creating ambience of %ollective working of its employees.

53

-ABB4-&$(:-)
?lanning has become the primary function of management most of the planning relates to individual situations and individual proposals. Budgets are nothing but the e!pressions, largely in financial terms, budgetary control has, therefore become and essential tool of management for controlling and ma!imizing profits. &he company objectives of the organization and how they can be achieved through budgetary control. &ime'tables for ail stages of budgeting follows. 0eports, statements, forms and other record to be maintained. %ontinuous performance. comparison of actual performance with budgeted

51

THE ZUARI CEMENTCEMENT LIMITED REVENUE BUDGET TABLE>I

B )/%(%) %0(#&!(%) 85" (,% 2313>2311

SL:NO

PARTICULAR

A$( !* 85" (,% 9%!" 2313>2311

S!*%0 Fi!ed cost recovery >ariable cost recovery 86D FD7 86.D FD.7 =2F 8D7 =2.F 8D.7

Fuel price adjustment recovery

F67

F6.7

F=E

F=.E

(wn consumption T5(!* 58 1 2 3 A7%"!/% #'(%'0#7%0 O(,%" #'$5&% GRAND TOTAL G1H2H3C

2E6 612= 276 1= 2674

2E.6 612.= 27.6 1.= 267:4

2DF 6E=9 9F D9 2516

2D.F 6E=.9 9.F D.9 251:6

52

INTERPRETATION
&he data pertaining to the generation and consumption of cement at *uari %ement %ement limited have been obtained from the year 6727'6722 and represented in table '2. &he aspect included are total generation of cement in "crores /s# and utilization for au!iliary consumption, raw material consumption and line stone respectively. 0uring the year 6727'6722 the sales, fi!ed costs, variable cost, fuel price, own %onsumption was decreased. 5hen the estimated budgeted so sales consumption is 6E=.9G respectively. 0uring the year 6727'6722 the average intensive are decreased 9.FG the other $ncome also decreased D.9G respectively. Finally with regard to the result in revenue budget of *uari %ements cement limited totally decreased 612.=G in the year 6727'6722 respectively.

53

THE ZUARI CEMENTCEMENT LIMITED

OPERATIONAL EBPENDITURE BUDGET FOR THE YEAR 2313>2311

TABLE I II
R0 #' $5"%"0 BUDGETED PARTICULAR ESTIMATED FOR THE 2313>2311 AMOUNT 1 VARIABLE COST /aw .aterial +ime stone T5(!* 58 1 2 OPERATIVE MAINTENANCE COST %hemical water /epair O maintenance 4mployee cost -tationary general e!penses /ebate -hareofoperating e!penses T5(!* >2 3 FINANCE CHARGES 0eprecation $nterest on fi!ed capital T5(!* 58 I 3 GRAND TOTAL G1H2H3C D6 2F 63 1744 D.6 2.F 6:3 17:44 21 67 35 1216 2.1 6.7 3:5 121:6 2E7 6F7 E67 =1 22 F 1614 2E.7 6F.7 E6.7 =.1 2.2 7.F 161:4 217 E77 E17 F7 2E 27 233 21.7 E7.7 E1.7 F.7 2.E 2.7 23:3 D67 D17 173 D6.7 D1.7 17:3 D17 D87 223 D1.7 D8.7 22:3 RSEMT

SL: NO

ACTUAL FOR THE YEAR AMOUNT 2313>2311 SEMT

54

INTERPRETATION
(bserved from the above table that the operational e!penditure budget of *uari %ements cement limited in the year 6727'6722. $n the year 6727'6722 variable cost components the raw material consumption D1G increased and the line stone consumption D8G also increased. $n operating O maintenances cost components chemical O water, repair O .aintenance, employee cost, stationary O general e!penses, rebate and share of other e!penses is all are fluctuating with the e!penses of the year 6727'6722. 3owever the total operating maintenance costs are 97.EG decreasing respectively. $n finance charges depreciation and interest on fi!ed capital, has been included &he total finance charges recording decreasing of E.1G in the year 6727'6722 respectively. Finally with regard to the operational e!penditure budget of *uari %ements %ement limited the total profit has increase with 292.=G during the year 6727'6722 &he overall budgets results of *uari %ements cement limited is earning .ore profits.

55

%A-3 F+(5 -&A&4.4:& F(/ &34 For the year ended E2st .arch, 6722 /s. %ash Flow from (perations Activities :et ?rofit before ta! Adjustments for) 0epreciation +ossM?rofit on fi!ed Assets sold M discarded "net# +oss on sale of long term investments $ncome from long term investments "other than trade# $nterest paid M payable on loans etc. ?rovision for doubtful debts M advances M deposits written back ?rovision for doubtful debts M deposits "net# 0ebtsMAdvancesM 0eposits written off +ong &erm $nvestments "other than trade# written off +iabilities no longer re uired written back Anrealized loss M gain on foreign currency fluctuation "net# ?rovision for diminution in value of investments (perating profit before working capital changes Adjustments forQ $nventories &rade and other receivables &rade ?ayables %ash generated from operations 0irect ta!es "paid#Mrefund "net# :et cash from operating activities

"D,92,D=,FF2#

'

'

"2,62,=9,81,EED# "F7,28,D7,E98#

"9E,D9,F7,=82#

CHAPTER>5
56

CONCLUSIONS
4very organization has pre'determined set of objectives and goals, but reaching those objectives and goals only by proper planning and e!ecuting of the plans economically. &he *uari %ements %ement +imited is objectives of planning promoting and organizing an integrated development of %ement %ompany. &he corporation mission of *uari %ements %ement is to make available and uality cement in increasingly large uantities, the company will spear head the process of accelerated development of cement sector by e!peditiously. &he organization needs the capable personalities as management to lead the organization successfully, the management makes the plans and implement of these plan are e!pressed in terms of budget and budgetary control. &he *uari %ements %ement +imited has budget process in two stages. (ne is the capital e!penditure budget and another is operating maintenance budget, the capital e!penditure budget shows the list of capital projects selected for investment along with their estimated cost, operating O maintenance budget refers to the repairs O maintenance budgets, the special budgets are rarely used in the organization like long'term budgets, research O development budget and budget for consultancy. &he *uari %ements %ement +td. $s to make available and uality cement efficient resources and implementation of sophisticated technology and cement generation and also creating ambience of collective working of its employees.

57

SUGGESTIONS

?lanning has become the primary function of management most of the planning relates to individual and individual proposals. Budgets are nothing but his e!pressions, largely in financial terms, budgetary control has, therefore become and essential tool of management for controlling and ma!imizing profits. &he company objectives of the organization and how they can be achieved through budgetary control &ime tables for all stages of budgeting follow /eports, statements, forms and other record to be maintained %ontinuous comparison of actual performance with budgeted performance.

51

CHAPTER>6

52

BIBLIOGRAPHY
FINANCIAL ACCOUNTING > RPTRIVEDI

FINANCIAL MANAGEMENT > I:M:PANDEY

11(, ANNUAL REPORT OF ZUARI CEMENT CEMENT LIMITED

FUNDAMENTAL OF FINANCIAL MANAGEMENT PRASANNA CHANDRA

DETAILED PROJECT REPORT OF ZUARI CEMENT CEMENT LIMITED

63