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MEANING OF BUDGET
A budget is the monetary or quantitative
presentation of business plans and policies to
be pursued in the future period of time.
ACC. TO I.C.M.A;LONDON
A budget is a financial statement prepared prior
to a predetermined period of time of the policy
to be pursued during that period for the
purpose of attaining given objectives.
MEANING OF BUDGETING
MEANING OF BUDGETORY
CONTROL
ACC. TO J. BATTY
Budgetory control is a system which uses
budget as a means of planning and
controlling all aspects of producing and/or
selling commodities or services.
Contd..
OBJECTIVES OF
BUDGETORY CONTROL
1. To Ensure Planning For Future
2. To Co-ordinate The Activities Of Different
Department
3. To Operate Various Cost Centers And Departments
With Efficieney And Economy.
4. Elimination Of Wastes And Increase In Profitability.
5. To Anticipate Capital Expenditure For Future.
ADVANTAGES OF
BUDGETORY CONTROL
Maximization Of Profit.
Co-ordination.
Specific Aim.
Tools For Measuring Performance.
Optimum Utilisation Of Resources(economy)
Determining Weakness.
Corrective Action.
Consciousness.
Reduce Costs.
Introduction Of Incentive Scheme.
DISADVANTAGE OF
BUDGETORY CONTROL
Uncertain Future.
Revision Required.
Discourage Efficient Persons.
Problem Of Co-ordination.
Conflict Among Different Departments.
Depend Upon Support Of Top Management.
It Requires Too Much Time And Cost.
Clarifying objectives
Delegation of authority & responsibility
Proper communication system
Budget education
Participation of all employees
Flexibility
Motivation
Installation / Essentials Of
Budgetory Control.
Preparation
Of Budget Manual
CREATION OF BUDGET
CENTERS
ARRANGEMENT OF ADEQUATE
ACCOUNTING RECORDS
PREPERATION OF
ORGANISATIONAL CHART
BUDGET COMMITTEE
BUDGET DIRECTOR OR CONTROLLER
PRODUCTION
MANAGER
[PRODUCTION
PRODUCTION
BUDGET
& PLANT
UTILISATION
BUDGET
PLANTBUDGET]
SALES
MANAGER
S
A
[] SSALES &
A
ADVERTISEMENT
COST
L BUDGET
E
FINANCE
MANAGER
RECEIPT &
PAYMENY
BUDGET
ACCOUNTS
MANAGER
COST
BUDGET
R&D
MANAGER
R&D
BUDGET
ESTABLISHMENT OF BUDGET
COMMITTEE
PREPERATION OF BUDGET
MANUAL
DETERMINATION OF BUDGET
PERIOD
DETERMINATION OF KEY
FACTOR
DETERMINATION OF LEVEL
OF ACTIVITY
BUDGET REPORT
Types of
Budgets
TYPES OF BUDGETS.
I.
1.
2. SHORT-TERM BUDGET:
these budgets are prepared generally for a period of 1 to
5 yrs. these are always prepared in monetary units and
are more precise than long-term budgets.
3. CURRENT BUDGET:
these budgets are prepared for a period of one month
to twelve month. the main objective of this budget is
to make adjustments in short-term budgets
according to current conditions.
II.
1.
2.
FLEXIBLE BUDGET
Rigidity
Conditions
Fixed Budget
Flexible Budget
A flexible budget
A fixed budget
remains the same is recast to suit
Irrespective of the the change
changed situation. circumstances.
It assumes that
conditions will
remain constant
This budget is
changed if level of
activity varies.
Basis
Fixed budget
Cost
In this cost are not
classification classified acc.
to their nature
Forecasting Forecasting of
accurate result is
difficult
Cost cannot be
Cost
ascertainment ascertained due to
change circumstances
Flexible budget
The cost are studied
as per their nature
like fixed variable.
It helps in making
accurate forecasts.
Cost can easily be
ascertained
2.FUNCTIONAL BUDGETS:
they are also known as departmental budgets
or subsidiary budgets. all those budgets are
placed in this category which are prepared
either on the basis of functions or departments
in a business concern.the general
FUNCTIONAL BUDGETS
OPERATING BUDGETS
FINANCIALBUDGETS
SALES BUDGET
CASH BUDGET
PRODUCTION
BUDGET
CAPITAL
EXPENDITURE
BUDGET
COST BUDGET
SALES BUDGET
PRODUCTION BUDGET
COST BUDGET
CASH BUDGET
PERFORMANCE BUDGETING
Programme Budgeting
Prospective in outlook
Connotes planning
ZERO-BASE BUDGETING
Introduction:ZBB is a new technique designed to revitalize budgeting.
This technique was first used by the U.S. Department of
Agriculture as long back as in 1961. In our country, the
institute of Chartered Accountants of India and the Institute
of Costs and Works Accountants of India have conducted
seminars to acquaint people with the ZBB technique.
However the system has not yet been implemented in real
terms in our country.
Contd
Meaning of ZBB
The technique of ZBB suggests that an organization should
not only make decision about the proposed new
programmes but it should also, from time to time, review
the appropriateness of the existing programmes.
ZBB as the term suggests, examines a responsibility from
scratch. The reviewer proceeds on the assumption that
nothing is to be allowed because it was being done or
allowed in past.
Thus, it means writing on a clean slate.
Definition of ZBB
An operating planning and budgeting process which requires
each manager to justify his entire budget requests in detail
from scratch. Each manager states why he should spend any
money at all. This approach requires that all activities be
identified as decision packages which would be evaluated by
systematic analysis ranked in order of importance
Process of ZBB
Advantages of ZBB
Contd
Limitations of ZBB
Implementation Problems
Decision Packages Formulation Problems
Ranking Decision Packages
Cost Problems