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  1. 1. Presented By: Arvinder Gill Ekta Jindal Harmeet Singh Isha Arora M.B.A-IB Topic : Cost Control Techniques – Budgetary Control
  2. 2. <ul><li>“ It is a powerful tool of management for performing its functions efficiently” </li></ul><ul><li>Fixes targets in terms of Money </li></ul><ul><li>Related to both management and accounting functions </li></ul>
  3. 3. Budget Forecast Relates to Planned events Concerned with Probable events Planned Separately for each accounting Period Cover a long period Comprises the Whole Business unit Cover a Limited Function Tool of Control Does not connote any sense of control Starts when Forecast ends Fun. Of Forecast ends with Forecast of likely Events Made in respect of spheres related to Business Made in several other spheres which may not connected with budgeting process
  4. 4. <ul><li>CIMA London Defines : </li></ul><ul><li>“ The establishment of budgets relating to the responsibilities of executives to the requirements of the policies & the continuous comparison of actual with budgeted results either to secure the individual action the objectives of that policy or to provide a firm basis for its revision” </li></ul>
  5. 5. <ul><li>It is planned to assist the management in the allocation of responsibilities & authority to aid in making estimates & plan for the future. </li></ul><ul><li>Planning </li></ul><ul><li>Co-ordination </li></ul><ul><li>Control </li></ul>
  6. 6. <ul><li>Clarifying Objectives </li></ul><ul><li>Proper Delegation of Authority & Responsibility </li></ul><ul><li>Proper Communication Channel </li></ul><ul><li>Budget Education </li></ul><ul><li>Flexibility </li></ul><ul><li>Motivation </li></ul>
  7. 8. <ul><li>To Receive, revise & Approve Budget </li></ul><ul><li>To Receive report According to Schedule </li></ul><ul><li>To Pinpoint the responsibility </li></ul><ul><li>To participate the discussion </li></ul>
  8. 9. <ul><li>To Create coordination </li></ul><ul><li>To Revise & amend the Budget </li></ul><ul><li>To Prepare budget programmes </li></ul><ul><li>To prepare summary budgets </li></ul><ul><li>To Revise Budget According to Direction </li></ul><ul><li>To Collect actual Cost and Compare it </li></ul>
  9. 10. <ul><li>Classification according to Period </li></ul><ul><li>Classification on the basis of Function </li></ul><ul><li>Classification on the basis of Capacity </li></ul><ul><li>Classification on the basis of Condition </li></ul>
  10. 11. <ul><li>Long Term Budgets: </li></ul><ul><li>The budgets which are prepared to depict long term planning's of the business. </li></ul><ul><li>E.g. Capital expenditure, R&D, Long term finances. </li></ul>
  11. 12. <ul><li>Short Term Budgets: </li></ul><ul><li>T hese are generally for 1 or 2 years and are in the form of monetary terms. </li></ul><ul><li>E.g. Sugar, cotton, textiles etc. </li></ul><ul><li>Current Budget. </li></ul><ul><li>The budget relate to the current activities of the business. It is generally for months and weeks. </li></ul>
  12. 13. <ul><li>Functional Budget: </li></ul><ul><li>It is a budget which relates too any of the functions of an undertaking. E.g. Sales, Production, R&D, cash etc. </li></ul><ul><li>Sales Budget </li></ul><ul><li>Production Budget </li></ul><ul><li>Cost of Production Budget </li></ul><ul><li>Purchase Budget </li></ul><ul><li>Personnel Budget </li></ul>
  13. 14. <ul><li>Sales Budget: It is a detailed schedule showing the expected sales for the budget period. </li></ul><ul><li>The sales manager should take into consideration the following factors. </li></ul><ul><li>Past sales figures and trends </li></ul><ul><li>Salesman estimate </li></ul><ul><li>Plant capacity </li></ul><ul><li>Availability of raw material </li></ul><ul><li>Seasonal Fluctuations </li></ul><ul><li>Financial aspect </li></ul>
  14. 15. <ul><li>Production budget: </li></ul><ul><li>Forecasts quantity of production that must be produced during each budget period. </li></ul><ul><li>Cost of Production Budget: </li></ul><ul><li>it relates to obtaining the cost of procuring the output. </li></ul><ul><li>Purchase Budget: </li></ul><ul><li>It forecasts the quantity and value of purchases required for production. </li></ul>
  15. 16. <ul><li>“ It is a summary budget incorporating all functional budgets in capsule form made for the purpose of presenting in one report, the highlights of the budget forecast.” </li></ul>
  16. 17. <ul><li>Summarization </li></ul><ul><li>Accuracy </li></ul><ul><li>Profit Estimation </li></ul><ul><li>Information of balance sheet </li></ul>
  17. 18. <ul><li>The budget shows planned operations for the  forthcoming  period, including revenues, expenses and related changes in inventory </li></ul>
  18. 19. Point Of Distinction Fixed Budget Flexible Budget 1. Flexibility Inflexible Flexible 2. Condition Remain Static Designed to Change 3. Classification Of Cost Not Classified Classified 4. Comparison Comparison is not Done Correctly Realistic 5. Forecasting Difficult to Forecast Shows Clear Picture
  19. 20. <ul><li>Maximization of Profit </li></ul><ul><li>Co-ordination </li></ul><ul><li>Tool for Measuring </li></ul><ul><li>Performance </li></ul><ul><li>Cost Reduction </li></ul>
  20. 21. <ul><li>Opposition against the very  spirit of budgeting </li></ul><ul><li>Budgeting and changing  economy </li></ul><ul><li>Time factor </li></ul><ul><li>Co-operation required </li></ul>