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| budget (Photo credit: 401(K) 2013) |
Budgeting&
Budgetary Control
Meaning of Budget:
A budget is a plan
expressed in quantitative, usually monetary terms, covering a specific period
of time, usually one year. In other words, a budget is a systematic plan for
the utilization of manpower and material resources.
In a business organization
a budget represents an estimate of future costs and revenues.
Budgets may be divided into two basic classes;
1.Capital Budgets and 2.Operating Budgets.
Capital budgets are
directed towards proposed expenditures for new projects and often require
special financing.
The operating budgets are
directed towards achieving short-term operational goals of the organization,
for instance, production or profit goals in a business firm. Operating budgets
may be sub-divided into various departmental or functional budgets.
Budgeting:
Budgeting refers to the
process of preparing the budget. It involves a detailed study of business
environment clearly grasping the management objectives, the available resources
of the enterprise and capacity of the enterprise.
Budgetary control:
Budgetary control is the process of
preparation of budgets for various activities and comparing the budgeted
figures for arriving at deviations if any, which are to be eliminated in
future.
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
(i) preparation of various budgets
(ii) continuous comparison of actual performance
with budgetary performance and
(iii) revision of budgets in the light of
changed circumstances.
A system of budgetary
control should not become rigid. There should be enough scope for flexibility
to provide for individual initiative and drive. Budgetary control is an
important device for making the organization more efficient on all fronts. It
is an important tool for controlling costs and achieving the overall
objectives.