RE: Budgeting and budgetary control: full report
||BUDGET AND BUDGETARY CONROL
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Budget is essential in every walk of our life – national, domestic and Business. A budget is prepared to have effective utilization of funds and for the realization of objective as efficiently as possible. Budgeting is a powerful tool to the management for performing its functions i.e., formulation plans, coordination activities and controlling operations etc., efficiently. For efficient and effective management planning and control are tow highly essential functions. Budget and budgetary control provide a set of basic techniques for planning and control.
Definitions of Budget:
According to Institute of Charted Management Accountants, England “ A plan quantified in monetary term prepared and approved prior to a defined period of time usually showing planned income to be generated and / or to be incurred during that period and the capital to be employed to attain a given objective.”
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 pursed during the period for the purpose of attaining a given objective.”
It is also defined as, “a blue print of projected plan of a action of a business for a definite period of time.”
No system of planning can be successful without having an effective and efficient system of control. Budgeting is closely connected with control. The exercise of control in the organization with the help of budgets is known as budgetary control. The process of budgetary control includes.
1. Establishment of budget for each function and section of the organization.
2. Executive responsibility in order to perform the specific tasks so that objectives of the enterprise may be attained.
3. Continues comparison of the actual performance with that of the budget and placing the responsibility of executives for failure to achieve the desired result a given in the budget.
4. Taking suitable remedial action to achieve the desired objective if there is a variation of the actual performance from the budgeted performance.
5. Revision of budgets in the light of changed circumstances.
In this case study. The budgeting control of the LG ELECTRONICS is analyzed in this study. The required data has been collected from primary data and such as annual reports were taken. And reasons for variances were analyzed. The variances between the revised estimates and actuals were computed. And finally suggestions and conclusion.
Firstly, the revenue budget estimates for the past five years were taken.
Secondly, the variance between the revised estimates and actuals were computed.
Thirdly, the reasons for variances were analyzed and measures were taken. Graphs are given regarding variances of sales, total cost of production, sales quantity and inventory, and interpretation.
BUDGET, BUDGETING AND BUDGETING CONTROL
Row land and William in their book entitled Budgeting for management control has given the difference between budge, budgeting and budgetary control as follows:
“Budgets are the individual objectives of a department etc where as budgeting may be said to be the act of building budgets. Budgetary control embraces all this and in addition includes the science of planning the budgets themselves and the utilization of such budgets to effect on overall management tool for the business planning and control”. Thus, a budget is a financial plan and budgetary control results from the administration of the financial plan.