ESSENTIALS OF EFFECTIVE BUDGETARY CONTROL IN MANAGEMENT ACCOUNTING

ESSENTIALS OF EFFECTIVE BUDGETARY CONTROL IN MANAGEMENT ACCOUNTING

1. ESSENTIALS OF EFFECTIVE
BUDGETARY CONTROL SYSTEM
MADE BY
CHARAN KAUR – 260
SECTION D

2. WELL DEFINED OBJECTIVES : THE GOALS OF ANY
SYSTEM TO B LAID DOWN MUST BE CLEAR, SPECIFIC AND
WELL DEFINED. BUDGETS CAN BE PREPARED AND
IMPLEMENTED EFFECTIVELY ONLY WHEN THE OBJECTIVES
ARE PINPOINTED.
ACHIEVABLE GOODS : THE GOALS SET MUST BE
CAPABLE OF BEING ATTAINED. THEY SHOULD BE REALISTIC
AND NOT ILLUSORY
OPTIMIZATION OF PROFIT : THE ULTIMATE GOAL OF
ANY SYSTEM DESIGNED AND PUT INTO OPERATION BY THE
MANAGEMENT MUST AIM AT OPTIMIZATION OF PROFIT
AND NOT ITS MAXIMIZATION.

3. SUPPORT OF ALL CONCERNED : RIGHT FROM TOP TO
BOTTOM, EVERYONE MUST BE QUIET AND FORTHCOMING
TO THE SYSTEM IN ORDER TO ATTAIN THE BUDGETARY
TARGETS
CONJUNCTION WITH STANDARD COSTING :
BUDGETARY CONTROL SHOULD BE APPLIED AS FAR AS
POSSIBLE IN CONJUNCTION WITH THE SYSTEM OF
STANDARD COSTING. THE TWO SYSTEM PUT TOGETHER
YEILD BETTER RESULTS.
PARTICIPATIVE MANAGEMENT : COORDINATION
AMONG DIFFERENT LEVEL OF MANAGEMENT IS NECESSARY.
IT IS ESSENTIAL THAT IN PREPARATION AN EXECUTIVE
BOTH, ALL CONCERNED PARTICIPATE. RECOGNITION OF
PEOPLE IS MUST.

4. BUDGET EDUCATION : THOSE WHO ARE AFFECTED AND
ARE TO BE HELD RESPONSIBLE FOR OFF PERFORMANCE
MUST BE PROPERLY EDUCATED ABOUT THE TARGETS AND
CONSEQUENCES OF FAILURES TO ACHIEVE THEM TOGETHER
WITH ADVANTAGES WHICH SHALL ACCURE WHO ALL FOR
FAVORABLE PERFORMANCE.
TIMELY REPORTING : THE ACTUAL PERFORMANCES AND
DEVIATIONS OF BUDGETS FROM THEM MUST BE REGULARLY
REPORTED TO HIGHER AUTHORITIES SO THAT NECESSARY
FOLLOW UP ACTIONS MUST BE TAKEN IN TIME.
COST BENEFIT ANALYSIS : NO SYSTEM SHALL BE
SUCCESSFUL IF ITS COST EXCEEDS THE BENEFITS. HENCE
EFFECTIVENESS OF BUDGETARY CONTROL SYSTEM DEMANDS
THAT ITS COST MUST BE CONTAINED WITHIN THE
PARAMETERS OF ITS BENEFIT.