Budgetary control techniques

This presentation discusses about budgetary control techniques in Principles of Management

1. BUDGETARY CONTROL
TECHNIQUES
R.Arun Kumar, AP/Mech, RIT

2. BUDGET:
AccordingtoBrownandHoward,‘Abudgetisapre–determined
statementofmanagementpolicywhichprovidesastandardfor
comparisonwithactualresultsduringagivenperiod’.
R.Arun Kumar, AP/Mech, RIT

3. BUDGETARY CONTROL :
Budgetarycontrolistheprocessofdeterminingvarious
budgetsforthebusinessunitinfuture.
Itisalsocalledassystemofcontrollingcoststhroughbudget
preparation.
R.Arun Kumar, AP/Mech, RIT

4. OBJECTIVES OFBUDGETARY CONTROL :
1.Helpstoplanandcontroltheincomeandexpenditureofthe
organization.
R.Arun Kumar, AP/Mech, RIT

5. OBJECTIVES OFBUDGETARY CONTROL :
2.Maximizestheprofitfortheorganization.
R.Arun Kumar, AP/Mech, RIT

6. OBJECTIVES OFBUDGETARY CONTROL :
3.Providesadequatecapitalforworking.
R.Arun Kumar, AP/Mech, RIT

7. OBJECTIVES OFBUDGETARY CONTROL :
4.Coordinatestheactivitiesofdifferentunitsinanorganization.
R.Arun Kumar, AP/Mech, RIT

8. OBJECTIVES OFBUDGETARY CONTROL :
5.Helpstoevaluatetheperformance.
R.Arun Kumar, AP/Mech, RIT

9. OBJECTIVES OFBUDGETARY CONTROL :
6.Decentralizestheresponsibilities.
R.Arun Kumar, AP/Mech, RIT

10. CLASSIFICATIONS OFBUDGET:
1.Classificationbasedonfunction:
1a)Salesbudget:
Itistheestimateofexpectedsalesduringabudgetperiod.
Thefactorstobeconsideredareplantcapacity,pastsales
data.
R.Arun Kumar, AP/Mech, RIT

11. CLASSIFICATIONS OFBUDGET:
1.Classificationbasedonfunction:
1b)Productionbudget:
Productionbudgetisaforecastoftheoutputfortheperiod
analyzed.
Thefactorstobeconsideredareplantcapacity,resource
availability,salesrequirements.
R.Arun Kumar, AP/Mech, RIT

12. CLASSIFICATIONS OFBUDGET:
1.Classificationbasedonfunction:
1c)Labourbudget:
Itistheforecastofrequirementsofdirectlabouressentialto
meettheproductiontargets.
R.Arun Kumar, AP/Mech, RIT

13. CLASSIFICATIONS OFBUDGET:
1.Classificationbasedonfunction:
1d)Capitalexpenditurebudget:
Itincludesalltheinitialinvestmentcostoftheorganization.
R.Arun Kumar, AP/Mech, RIT

14. CLASSIFICATIONS OFBUDGET:
1.Classificationbasedonfunction:
1e)Researchanddevelopmentbudget:
Focusesonbudgetrequiredtodevelopnewproducts.
R.Arun Kumar, AP/Mech, RIT

15. CLASSIFICATIONS OFBUDGET:
1.Classificationbasedonfunction:
1f)Profitbudget:
Profitbudgetisalsocalledasmasterbudget.
R.Arun Kumar, AP/Mech, RIT

16. CLASSIFICATIONS OFBUDGET:
2.Classificationbasedontime:
2a)Longtermbudget:
Periodoftimeforlongtermbudgetsare5to10years.
R.Arun Kumar, AP/Mech, RIT

17. CLASSIFICATIONS OFBUDGET:
2.Classificationbasedontime:
2b)Shorttermbudget:
Periodoftimeforshorttermbudgetsarelessthan5years.
R.Arun Kumar, AP/Mech, RIT

18. CLASSIFICATIONS OFBUDGET:
2.Classificationbasedontime:
2c)Currentbudget:
Includesthebudgetexpensefordaytodayactivities.
R.Arun Kumar, AP/Mech, RIT

19. CLASSIFICATIONS OFBUDGET:
3.Classificationbasedonrigidity:
3a)Fixedbudget:
Budgetexpensesthatarepredefinedarecalledasfixedbudget.
R.Arun Kumar, AP/Mech, RIT

20. CLASSIFICATIONS OFBUDGET:
3.Classificationbasedonrigidity:
3b)Flexiblebudget:
Budgetexpensesthattendstovaryarecalledasflexiblebudget.
R.Arun Kumar, AP/Mech, RIT

21. BUDGETARY CONTROL TECHNIQUES :
1.Planning–programmebudgetarysystems(PPBS):
Analyzingthebasicobjectivesofpoliciesandactivityofeach
programmeintheorganization.
Measuringthetotalcostandchoosingthebestalternative.
R.Arun Kumar, AP/Mech, RIT

22. BUDGETARY CONTROL TECHNIQUES :
2.Zero–basedbudgeting:
Inthismethod,everynextyearbudgetismadeonnilbase.
Theexpectedincomewillbeequaltotheexpectedexpenses.
Thisprocessinvolvesthreesteps:Scheduling,prioritizingand
resourceallocation.
R.Arun Kumar, AP/Mech, RIT

23. BUDGETARY CONTROL TECHNIQUES :
3.Varianceanalysis:
Estimatedbudgetoftheorganizationexpenditurewillbe
comparedwithactualaccountingfigurestomeasurethe
variance.
R.Arun Kumar, AP/Mech, RIT

24. BUDGETARY CONTROL TECHNIQUES :
4.Responsibilityaccounting:
Theorganizationisclassifiedascostcentre,profitcentreand
investmentcentre.
Basedonthisclassificationemployeewillbeassignedwitha
target.
Onthebasisofachievementhe/shewillberewarded.
R.Arun Kumar, AP/Mech, RIT

25. BUDGETARY CONTROL TECHNIQUES :
5.Fundadjustment:
Topmanagementwillbealteringthefundallocationbasedon
therequirement.
R.Arun Kumar, AP/Mech, RIT

26. BUDGETARY CONTROL TECHNIQUES :
6.HRaccounting:
Itdealswithhumanresourcecontrol.
InvestmentonHRisalongterminvestmentforany
organization.
e.g.:traininganddevelopmentprogramme,disciplinary
programs.
R.Arun Kumar, AP/Mech, RIT