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  • 1. International Journal of Management (IJM), ISSN INTERNATIONAL JOURNAL 0976 – MANAGEMENT (IJM) OF 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME IJM ISSN 0976-6502 (Print) ISSN 0976-6510 (Online) Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME: Journal Impact Factor (2014): 3.2150 (Calculated by GISI) ©IAEME AN EVALUATION OF BUDGETARY CONTROL AT BHIMA CO-OPERATIVES SUGAR INDUSTRY LTD, IN PUNE Prof. Megha Mehta Asst Prof., Sai Sinhgad Business School, Pune ABSTRACT Research was conducted with special reference to Budgeting, Budgetary Control and Performance Evaluation system of BHIMA CO-OPERATIVES SUGAR INDUSTRIES LTD with the view to ascertain the role that the budget plays in the company and how the key factors of the budget engage its uses in their daily operational activities. Budget as a profit planning device sets standard of performance of managers, while budgetary control is a tool implored by management to keep track of actual performance to ensure budgeted standards are met This research paper basically focuses on to the budgetary control .Budget is a technique which quantifies management expectations regarding future income, cash flows, and financial position. It represents approaches to the achievement of company goals and mission. Capital and Revenue are the two major factors which is required to be evaluated and from its respective budget, comparison of actual performance with standard performance has been done. Hence, appropriate action plan is established for controlling purpose. Transforming business and profit are conventional and fundamental part of every corporate. Budget is a roadmap to achieve its predefined plan and it is one of strategy to accomplish it. Keywords: Budget, Management, Profit, Strategy, Performance Evaluation. REVIEW OF LITERATURE According to an Article published in the European Journal of Economics. Ishola Rufus Akintoye (2008) “Budget and Budgetary Control for Improved Performance: A Consideration for Selected Food and Beverages Companies in Nigeria”); „Budget And „Budgeting are concepts traceable to the bible days, precisely the days of Joseph in Egypt. It was reported that „nothing was given out of the treasure without a written order . History has it that Joseph budgeted and stored grains which lasted the Egyptians throughout the seven years of famine. 13Budgets were first ‟ ‟ ‟ 54
  • 2. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME introduced in the 1920s as a tool to manage costs and cash-flows in large industrial organizations. Johnson (1996), states that it was the 1960s that Companies began to use budgets to dictate what people needed to do. In the 1970s Performance improvement was based on meeting financial targets rather than Effectiveness, companies then faced problems in the 1980s when they were not Willing to spend money on innovations in order to stay with the rigid budgets, they Were no longer concerned about how customers were being treated; only meeting Sales targets became essential. Budgeting in business organization is formally associated with the advent of industrial capitalism for the industrial revolution of the eighteenth century, which presented a challenge for industrial management. Glautier and Under (1987) state that „the emergence of scientific management Philosophy with its emphasis on detailed info as a basis for taking decision provided a tremendous impetus for the development of management accounting and indeed Budgeting techniques . However, budgeting at the early stage of its development was concerned with Preparing and presenting credible information to legitimize accountability and to permit correct performance evaluation and consequently, rewards. Over the years, the function and focus of budgeting has shifted considerably and businesOrganization become more complex and their environment becomes dynamic Coupled with the emergence trend, the term budget and budgeting have been differently defined and examined by various scholars in several ways. 14 Omolehinwa (1989) defined a budget as a plan of dominant individuals Organization expressed in monetary terms and subject to the constraints imposed by The participants and the environments, indicating how the available resources may be Utilized, to achieve whatever the dominant individuals agreed to be the organization’s priorities. ‟ ‟ OBJECTIVES OF THE STUDY 1) 2) 3) To study the existing budgetary controls methods & practices at Bhima Co-operatives Sugar Industries Ltd. To understand the financial position of company through capital budget and revenue budget. To compare the budgeted figures with actual figures & comparison of budgets for 2 years. RESEARCH METHODOLOGY Primary Source The information of the budgets were obtained from departmental heads. Discussion with Cost Accountant regarding preparation of budgets Secondary source This type of data were collected from Office Records Files & manuals Annual Reports & Prospectus INTRODUCTION Budgeting has come to be accepted as an efficient method of short-term planning and control. It is Employed, no doubt, in large business houses, but even the small businesses are using it at least in some informal manner. Through the budgets, a business wants to know clearly as to what it proposes to do during an accounting period or a part thereof. The technique of budgeting is an important application of management accounting. Probably, the greatest aid to good management 55
  • 3. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME that has ever been devised is the use of budgets and budgetary control. It is a versatile tool and has helped managers cope with many Problems including inflation. Objectives of Budgetary Control Budgetary Control is planned to assist the management for policy formulation, planning, controlling and co-ordinating the general objectives of budgetary control and can be stated in the following ways: Planning: A budget is a plan of action. Budgeting ensures a detailed plan of action for a business over a period of time. Control: Control is necessary to ensure that plans and objectives are being achieved. Control follows planning and co-ordination. No control performance is possible without predetermined standards. Thus, budgetary control makes control possible by continuous measures against predetermined targets. If there is any variation between the budgeted performance and the actual performance, the same is subject to analysis and corrective action. The use of budgets in controlling operations is known as budgetary control.Such control takes place by means of budget reports that compare actual results with planned objectives. Budgetary control consists of: a. Preparing periodic budget reports that compare actual results with planned objectives. b. Analyzing the differences to determine their causes. c. Taking appropriate corrective action. d. Modifying future plans, if necessary. A study has been conducted on the “BUDGETARY CONTROL” which is most probably adopted in Bhima Co-operatives Sugar Industries Ltd. COMPANYPROFILE: LOCATION: Bhima Co-operatives Sugar Industries Ltd. Factory: Madhukarnagar – Patas, Taluka Daund, District – Pune ESTABLISHED IN: 22-12-1976 REGISTERED NO: P.N.A/PRG/A-2 WEEKLY HOLIDAY: Sunday CHAIRMAN: Dr. Rahul subash kol VICE CHAIRMAN: Annat kursnaraj Thorat AREA OF OPERATION: Maharashtra MEMBERS: kiran Bhagwat, Sampatroa Authlee, Annashaebh Shitole, Narayan Gawali, Gopinath Bhundee, 56
  • 4. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME VISION: TO provide quality sugar to society and export it in international market. CAPITAL BUDGET Receipts 2011-12 2012-13 A) PAID UP CAPITAL 50.00 40.00 B)ISSUED SHARE CAPITAL C) GOVERNMENT SHARE 2) SHORT TERM LOAN A) MAHARSHTRA STATE BANK 125.00 100.00 180.18 0.00 2,230.62 0.00 1,338.37 0.00 250.00 0.00 B) PROVISIONS 1) MAHARSHTRA STATE BANK 2) PUNE ZILLA COOPERATIVE BANK Payments 2011-12 1) TERMS LOAN REPAYMENT A) PUNE ZILLA COOPERATIVE BANK 1) SHARE CAPITAL B) PUNE ZILLA COOPERATIVE BANK C) PUNE ZILLA COOPERATIVE BANK (Rs in lakhs) B) PUNE ZILLA COOPERATIVE BANK(S.M.P.) C) PUNE ZILLA COOPERATIVE BANK(LOAN) D) MAHARSHTRA STATE BANK(LOAN) E) PUNE ZILLA COOPERATIVE BANK(LOAN) F) MAHARSHTRA STATE BANK(LOAN) G) MAHARSHTRA STATE BANK(LOAN) 2) PROJECT ESTABLISHMENT EXPENSES A)OPERATIONAL STAFF EXPENSES 2012-13 334.37 334.37 660.31 0.00 261.73 269.73 162.67 162.67 0.00 267.69 0.00 446.12 283.20 377.60 250.00 0.00 5,000.00 0.00 99.03 0.00 B)INSPECTION & TESTING 159.34 0.00 3)MACHINERY/TOOLS/ FURNITURE/VEHICLES 10.00 25.00 700.00 800.00 4) BUILDINGS OTHERS CONSTRUCTIONS 10.00 15.00 4) Surplus 5)Capital 1,541.48 298.26 782.16 168.02 TOTAL… 6,972.28 1,890.1 6.972.2 1,890.1 3) Deprecation fund TOTAL… AND CIVIL FINDINGS From payment side: Following expenses are not fully paid off which is as follows: a. Outstanding Rs.660.31 lakhs of pune Zillah co-operative bank (s.m.p). b. Repayment of Pune Zillah co-operative bank & State Bank of Maharashtra has increased from previous year. c. Establishment expenses for the both terms remain unpaid. d. Expenses for vehicle’s/furniture/machinery/tools/were increased from 10.00 lakhs to 25.00lakhs. Similarly, building and other civil construction expenses were increase from 10.00lakhs to 15.00 lakhs. 57
  • 5. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME REVENUE BUDGET REVENUE RECEIPTS 1) INCOME FROM SUGAR 2011-12 2,39,384.45 2012-13 23,136.13 REVENUE PAYMENTS 1) TRANSPORT EXPENSES 2) SALES 1,91,451 3,114 A) SUGARCANE SORTING VEHICLE EXPENSES 5)SUGAR BAGS 7) OTHER INCOME A) INTEREST B) DIVIDEND 32.00 26.00 0.40 20.00 0.50 25.00 C) OTHER INCOME 300.00 250.00 B) FARMER PAYMENTS C) FARMER ROAD REPAIRS D) SUGARCANE PURCHASE CESS 2) EXPENSES FOR MANUFACTURING A) ENGINEER DEPARTMENT AND REPAIRS & MAINTENANCE B) OTHER EXPENSES C) WAGES AND SALARY D) OTHER EXPENSES 2) LABOUR 3) POWER 4) WATER 5) VEHICLES 6) BAGS BELLING 7) TRANSPORTATION 3) INTEREST PAID ON LOAN A) CAPITAL LOAN B) WORKING CAPITAL LOAN C) DEPOSIT FROM MEMBERS 4) BANK COMMISSION 5) GENERAL ACCOUNT 6) PROVIDEND FUND 7) TRAVELLING EXPENSES 8) RENT, RATES & TAXES 9) TELEPHONE,POSTAGE 10) PRINTING & STATIONERY 11) GOVERNMENT CHECKING FEES 12) MISCELLEOUNS EXPENSES REPAIRS, DIESEL,PETROL,ETC. DONATIONS INSURANCE MAINTENANCE LEGAL CHARGES ADVERTISEMENT EXPENSES MEETING EXPENSES SALES PROMOTION ANNUAL GENERAL MEETING OTHER EXPENSES COMPUTER EXPENSES EMPLOYEE WELFARE & UNIFORM EXPENSES 13) OTHER 1) BONUS 2) EDUCATION FUND 14) DEPRECIATION EXPENSES 15) LAST YEAR EXPENSES 16) SUGAR EXPECTATION RATE TOTAL….. 32,207.02 26,551.63 16) EXPECTED PROFIT TOTAL…. 58 2011-12 AND 2012-13 4,385.83 3,440.00 285.25 250.00 545.45 290.30 260.00 0.00 900.00 920.00 700.00 550.00 710.00 560.00 8.00 50.00 25.00 5.00 15.00 4.00 9.00 52.00 27.00 4.50 16.00 4.50 400.00 1,400.00 110.00 3.00 320.00 160.00 4.00 4.00 7.00 15.00 16.00 290.00 1,890.42 110.00 3.00 330.00 170.00 4.50 5.00 7.50 16.00 18.00 13.00 36.00 40.00 30.00 15.00 5.00 2.00 1.00 6.00 250.00 8.00 16.00 13.50 32.00 35.00 32.00 16.00 6.00 2.50 1.00 6.50 260.00 9.50 17.00 250.00 0.75 700.00 1,083.66 19,091.26 280.00 0.75 800.00 0.00 15,200.00 457.82 32,207.02 782.16 26,551.63
  • 6. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME REVENUE BUDGET a. b. c. d. Incomes from sugar has been decreased from in current year as compared to previous year. Sales of sugar are decrease from 1, 91, 451 lakhs to 3114.00 lakhs. Decline of 50% of profit is observed. Other income: Interest received is appreciated from 0.40 lakhs to 0.50 lakhs. Similarly dividend is appreciated from 20.00 lakhs to 25.00 lakhs. e. Other income has been decreased from 300.00 lakhs to 250.00 lakhs. REVENUE PAYMENT 1) Transportation and sugarcane expenses reveals the following changes: a) Cultivating and vehicles expenses has been decrease from 4,385.53 lakhs to 3,440.00 lakhs. b) Farmer salaries increases from 285.25 to 290.30 lakhs. c) Repairs of roads belongs to farmers , increases from 250.00 to 260.lakhs 2) Expenses for manufacturing: a) 20% sharp increase in expenses for engineering department. b) Repairs, maintenance & other expenses too increase from 7.90 to 7.90 lakhs. c) Wages & salaries of workers increase from 550.00 to 560 Lakhs. d) Other expenses :( increasing trends) e) Labour, power, water, selling, transportation are also increasing. 3) Interest paid on loan: a) Capital loan decrease from 400.00 to 290.00 lakhs. b) Working capital loan increase from 1, 40.00 to 1,890.42 lakhs. c) No change is observed in deposits from member’s fund. 11.00 lakhs is constant in both years. 4) Similarly bank commissions are also in stable position. 5) General & other salary expenses are increased from 320.00 to 330.00 lakhs. 6) Provident fund & interest on it increase from 160.00 to 170.00 lakhs. Similarly, travelling expenses increases from 4.00 to 4.50 lakhs. 7) Rent, rates, & taxes are increased from 4.00 to 5.00 lakhs. Similarly, telephone, postage, printing & stationery, government checking expenses were increasing respectively. 8) Miscellaneous expenses: Following are the expenses observed in increasing/decreasing trends a) 13.00 to 13.50 lakhs for vehicles repairs & diesel petrol expenses b) 36.00 to 32.00 lakhs for donations & other expenses c) 40.00 to 35.00 lakhs for insurance expenses. d) 15.00 to 16.00 lakhs for legal charges. e) 30.00 to 32.00 lakhs for buildings, repairs & maintenance’s. 59
  • 7. International Journal of Management (IJM), ISSN 0976 – 6502(Print), ISSN 0976 - 6510(Online), Volume 5, Issue 2, February (2014), pp. 54-60 © IAEME f) g) h) i) j) k) 5.00 to 6.00 lakhs for advertise expenses. 2.00 to 2.50 lakhs for meeting expenses. 6.00 to 6.50 lakhs for annual general meeting expenses. 250.00 to 260. Lakhs for other expenses. 8.00 to 9.50 lakhs for computer expenses. 16.00 to 17.00 lakhs for employee welfare expenses. 9) Others: (increase/decreasing trends) a) 250.00 to 280. 00 for payment of bonus. b) No change is observed in education funds expenses. c) 700.00 to 800.00 lakhs increases from deprecation funds. d) Last year expenses remain unpaid. CONCLUSION From the study it can be concluded that budgetary control is treated as one of the best technique for minimizing cost & maximizing profits in Bhima Co-operatives Sugar Industries Ltd. Budgetary control technique helps in profit making or smooth functioning of the business. It coordinates all the departments like finance, Marketing, Production in the company. It makes the decentralization of authority in the organization which helps organization goal within stipulated period of time. Budgetary control acts as a safety for an organization because it helps to identify business risk & necessary steps can be taken to avoid the risk. Budgetary control techniques help to know how the available monetary resources can be utilized effectively. After analyzing the budgets of Bhima Cooperatives Sugar Industries Ltd, We infer that expenses in 2012 were increased as compared to the year 2011. So the company has to take some remedial measures in order to improve the firm’s performance & profitability position. SUGGESTIONS • • • • • Accurate position of the business cannot be estimated. It arises due to inflationary pressure & change in government policies all these affect the budgeting performance. The company should have close watch on the market which helps to make new strategies. The company should have proper coordination between finance & marketing department in order to improve their performance. They can carry out some promotional activities, so as to increase its sales & beat the competition. REFERENCES [1] Debowski, S. (2006). Knowledge management. Sydney: John Wiley. [2] Deisenberg, J. (2000). Moving past the information age: Getting started with knowledge Management. The Public Manager, 29(2), 52. [3] Kent, A. (Ed.). (1990). Encyclopedia of library and information science. Boca Raton, FL: CRC Press. [4] Kohut, J. D. (1974). Allocating the book budget: A model. College and Research Libraries, 35(3), 192-9. [5] Koontz, H.; O'Donnell, C.; & Weihrich, H. (1980). Management. New York: M. 60