Budget - Meaning, Definition and Objectives
- 2. MEANING A budget is a plan of financial terms or non financial term. It is prepared for a define period of time. It is a planned estimate of future business conditions such as the sales.
- 3. DEFINITION 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 pursued during the period for the purpose of attaining a gives objective. It also defined as, “a blue print of a projected plan of action of a business for a definite period of time”. According to the definition , the essential features of a budget are.
- 4. ADVANTAGES o Budgetary control defines the objectives and policies of the undertaking as a whole. o It is an effective method of the activities of various department of a business unit. o It secures proper the co-ordination among the activities of various departments.
- 5. LIMITATIONS • Accuracy in budgeting comes through experience 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 in decision making. • Budgeting involves heavy expenditure, which small concerns cannot afford.
- 6. THE MAIN STEPS IN BUDGETARY CONTROL. Establishment of the budgets for the each section of the organization. Recording of actual performance. Continuous comparison of the actual performance with the budget.
- 7. To define the goal of the enterprise. To provide long and short period plans for the attaining these goals. To co-ordinate the activities of different department To operate various cost centers and department with efficiency and economy. To eliminate waste and increase the profitability. To centralize the control system. OBJECTIVES OF BUDGETARY CONTROL
- 8. The main function of budget controller Arranging for all the meeting of the budget committee. Issuing instruction to various department. Receiving and checking the budget estimate. Suggesting revisions. Preparing the summary budget and place all budget before the committee. Co-ordinating all work.
- 9. The following steps should be taken in a sound system of budgetary control. 1. Organisation chart 2. Budget centre 3. Budget committee 4. Budget manual 5. Budget period 6. Key factor