Sunday 13 January 2019

Budgetary control, Objectives, Merits

In other words, budgetary control is a process for managers to set financial and performance goals with budgets, compare the actual results, and adjust performance, as it is needed.

What is Budget?

Numerical statement expressing the plans , policies an goals of an organization for a definite period in the future.

According to CIMA, “A budget is a financial or quantitative statement prepared prior to a defined period of time , of the policy to be pursed during that period for the purpose of attaining a given objective”.

What is Budgetary control?

It is applied to a system of management accounting control by which all operations and output are foretasted far ahead as possible and actual results when known are compared with the budget estimates.

According to J.Batty “A system which uses budgets as a means of planning and controlling all aspects of producing and selling commodities and service”

  • Budgeting is a forward planning.

  • It basically serves as a tool for management control.

What can be objectives?

  • To forecast and plan for future to avoid losses and to maximize the product.

  • Help the concern in planning the activities both physical and financial

  • To bring about co ordination between different functions of the enterprise

  • The control actual actions by ensuring that actual are in tune with targets.

Budgeting and Planning

Planning normally deals with Long term and short goals and operations. The goals can be for the entire organization or department wise or group wise or segment wise to achieve the maximum results and operational efficiency.
In budgeting , planning means preparations of budget in respect of sales, advertisement, production, materials cost, labor cost, expenses, financial plans.

Budgeting and coordination

  • Deals with the combined efforts of all the people.

  • Individual and collective wisdom should be consider.

  • Each member of management should have perfect and clear cut knowledge.

  • There must be continuity to co ordination.

Budgeting and control

Controls signifies such systematic efforts which help the management to know whether actual performance is in line with predetermined goal, policy and plans.

It is basically a measurement tool.

Summary of Objectives

  • To coordinate the various divisions of a business.

  • Operate most efficiently.

  • To help in controlling cash

  • Centralize management control


  1. It forces basic policies to initiatives.

  2. The budgetary control aims at the maximization of profit.

  3. Reduction in cost and elimination in efficiencies.

  4. It brings to light the in efficiencies and weakness on comparing actual performance with the budget.

  5. Budgetary control facilitates an integral and planned forecast of the future.

  6. Financial crisis can be avoid, since budget provides advance information.

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