Ans. Budgeting is a process, which includes two important functions: Budget and Budgetary control. Budget is a planning function and budgetary control is a controlling system or technique. A manager looks to the future, searches for alternative courses of action and predetermines a course of action to be taken in relation to known events and the possibilities of future problems. Thus, the budget will do this work for the activities of a business enterprise. I.C.M.A., London defines the budget as “Budget is financial and/or quantitative statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given object”.
At
the same time, controlling is the process of measuring current performances and
guiding them towards some predetermined goals. The essence of control lies in
checking existing actions against some desired results determined in the
planning process. Thus, the budgetary control is a tool of control to achieve
the budgeted goals. I.C.M.A., London defines budgetary control as, “Budgetary
control is the establishment of budgets relating to the responsibilities of
executives to the requirement of a policy and the continuous comparison of
actual with budgeted results either to secure by individual action the
objectives of that policy or to provide a basis for its revision.”
In
nutshell, Budgetary control is a system and a technique which uses budgets as a
means of controlling all aspects of the business and is designed to assist
management in the allocation of responsibility and authority, in the
measurement of actual performance, in the analysis of variations between
budgeted and actual results and to develop basis of measurement, in the light
of experience gained and results achieved, with which to evaluate
performance and efficiency of the operations. Thus, a budget is a means and
budgetary control is the end result.
No comments:
Post a Comment