Budget: Numerous definitions of a budget have been formulated. But common to all is the essential idea that budget is a written plan covering projected activities of a firm for a definite period of time, expressed in quantitative terms. According to I.C.M.A, England Terminology, a budget is “a financial or quantitative statement, prepared and approved prior to a defined period of time, of the policy to be pursued during the period for the purpose of attaining a given objective”.
This definition reveals the following characteristics of a budget:
1) A budget is expressed in quantity or money or both.
2) A budget is prepared in advance of the period of the policy formulated by the management.
Definition of Budgetary Control:
Meaning: Budgetary control is a system of planning and controlling costs. It is a process of continuous comparison of actual performances and costs with that of budgets. ICMA, London, defines budgetary control as “the establishment of budgets relating to responsibilities of executives to the requirement of a policy and 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”.
Budget, Budgeting, Budgetary Control:
“Budget is the target or the objective of each section of an organization”. Budgeting is the process of preparing the budgets. Budgetary control is the technique and process of fixing the targets, preparing the budgets and using them as an effective tool of planning and control. It is rightly said that budget is a means and budgetary control is the end result. Budgets lay down the policies and plans for the future and budgetary control compares actual performance with the budgets and exercise control over activities and cost of the organization.
Essential Features of Budgetary control:
Based on the analysis of the above definition, the following features can be listed:
i) Establishment of budget for each function of the organization.
ii) Continuous comparison of actual performances with the budgeted activities.
iii) Analysis of variance from budget.
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