Accounting Management

Budgetary Control & Cost Accounting

BUDGET
Budget: A formal statement of the financial resources set aside for carrying out specific activities in a given period of time.
It helps to co-ordinate the activities of the Organisation. An example would be an advertising budget or sales force budget.

 A budget is a comprehensive and coordinated plan, expressed in financial terms, for the operations and resources of the firm for some specified period in the future. Budget programs are designed to carry out a variety of functions like, planning activities, implementing plans, communicating, motivating and authorizing actions. A budget is a written plan for the future. A complete budget for a firm is often called the master budget.

Essentials Of A Budget
It is prepared in advance and is based on future plan of action.
It relates to a future period and is based on objectives to be attained. It is a statement expressed in monetary or physical unit prepared for the formulation of policy.

BUDGETING
Establishing a planned level of expenditures, usually at a fairly detailed level. A company may plan and maintain a budget on either an accrual or a cash basis.

BUDGETARY CONTROL
Budgetary Control is defined as "the establishment of budgets, relating the responsibilities of executives to the requirements of a policy, and the continuous comparison of actual with budgeted results either to secure by individual action the objective of that policy or to provide a base for its revision.

FEATURES:
a. Objectives: Determining the objectives to be achieved, over the budget period, and the policy(ies) that might be adopted for the achievement of these ends. b. Activities: Determining the variety of activities that should be undertaken for achievement of the objectives. c. Plans: Drawing up a plan or a scheme of operation in respect of each class of activity, in physical a well as monetary terms for the full budget period and its parts. d. Performance Evaluation: Laying out a system of comparison of actual performance by each person section or department with the relevant budget and determination of causes for the discrepancies, if any.

e. Control Action: Ensuring that when the plans are not achieved, corrective action are taken; and when corrective actions are not possible, ensuring that the plans are revised and objective achieved

Objectives Of Budgetary Control

Budget manual
Responsibility for budgeting: Budget committee

Fixation of budget period Determination of key factors Making of forecasts Approval from top management

Cost Accounting
Cost accounting is the process of determining and accumulating the cost of product or activity. It is a process of accounting for the incurrence and the control of cost. It also covers classification, analysis, and interpretation of cost. In other words, it is a system of accounting, which provides the information about the ascertainment, and control of costs of products, or services. It measures the operating efficiency of the enterprise.

Objectives
1. Determining selling price,
2. Controlling cost 3. Providing information for decision-making 4. Ascertaining costing profit 5. Facilitating preparation of financial and other statements.