Management Accounting

1. MANAGEMENTACCOUNTING
BUDGETARY
CONTROL
GALGOTIA UNIVERSITY
Prepared for

2. TODAY'S
DISCUSSION
Budgetary Control;
Classification of Budget
according to -
* Time,
* Flexibility,
* Purpose and
* Functions
OVERVIEW

3. BUDGET
Budget is a pre-
determined
detailed plan of
action developed
and distributed as a
guide to current
operations and as a
partial basis
for subsequent
evaluation of
performance.
BUDGETARY
CONTROL

4. CLASSIFICATIONOF
BUDGET
TIME
FUNCTION
PURPOSE
FLEXIBILITY

5. Classification
Accordingto
Time
SHORT-TERM
BUDGET
This budget covers a budget
period of year or shorter. Such
budget are often broken down to
shorter period of 6 months, 3
months and possibly even each
month.
LONG-TERM BUDGET
These budgets cover period of one,
three, five and even more years
depends on nature of business.
The responsibility of preparation of
the long-term budgets generally
rests with top level management.

6. Classification
Accordingto
Time
CURRENT BUDGET
These budgets cover a very short
period say a month or a quarter.
They are essentially short-term
budgets adjusted to current
conditions or prevailing
circumstances.
ROLLING BUDGET
companies prepare budget for a
year in advance. A new budget is
prepared after the end of each
month or quarter for a full year
ahead. The figures for the next
month or quarter are added.

7. CLASSIFICATION
ACCORDINGTO
FUNCTIONS
SALES BUDGET
The budget essentially is a forecast of sales to
be achieved in a budget period. The Sales
Manager should be made responsible for the
preparation and execution of this budget.
PRODUCTION BUDGET
This budget provides an estimate of the total
volume of production product wise with the
scheduling of operations and estimation of the
closing inventory.
COST OF PRODUCTION
BUDGET
It includes materials, labour and overheads
and therefore, separate budgets for each of
these items will be prepared:
Material Budget
Direct labour Budget
Factory Overhead Budget
Administrative overhead Budget
Selling & Distribution Overhead Budget

8. CLASSIFICATION
ACCORDINGTO
FUNCTION
CASH BUDGET
A cash budget is a forecast of the cash position
by time periods for a specific duration of time.
Cash forecast may be made for a short period
or along duration. It tells about the working
capital required and available at different
periods.
RESEARCH AND
DEVELOPMENT BUDGET
R & D costs are to be incurred so that the
products or the methods of production do not
become out of date. It forecasts all such
expenses which are related to development of
new products, change in product design,
improvement in methods of production, etc

9. MASTER BUDGET
The CIMA London defines master
budget as “the summary budget,
incorporating its component
functional budgets, which is finally
approved, adopted and employed.”
Thus, it is a summary budget which
incorporates all other budgets. It set
out all plans of operations for all
departments in considerable detail for
the budget period.

10. OPERATING BUDGET
After preparing the budgets for
different elements of cost seperately as
also the sales budget, the budget
which outlines the total cost of
production and budgeted profit may
be prepared. The budget shows
planned operations for the forthcoming
period, including revenues, expenses
and related changes in inventory.
CLASSIFICATION
ACCORDING TO
PURPOSE

11. PROGRAM ME BUDGET
A budget set for a plan or program me
of action of the organization is known
as a program me budget. It helps the
management in assessing the
economies of various programmes.
RESPONSIBILITY BUDGET
It is the budget which identifies the
revenues and costs, with the individual
responsible for their incurrence. Such a
budget is an excellent control device,
since it identifies with individual only
such revenues and costs which are
controllable by him.
CLASSIFICATION
ACCORDING TO
PURPOSE

12. FINANCIAL BUDGET
It is concerned with the financial
implications of the operating budget. It
includes preparation of cash budget,
Projected Income Statement and
Projected Statement of Changes in
Financial Statement.
CLASSIFICATION
ACCORDING TO
PURPOSE

13. Z E R O B A S E B U D G E T I N G ( Z B B )
ACCORDING TO CIMA LONDON ZBB IS A
METHOD OF BUDGETING WHEREBY ALL
ACTIVITIES ARE RE-EVALUATED EACH
TIME A BUDGET IS SET. DISCRETE LEVELS
OF EACH ACTIVITY ARE VALUED AND A
COMBINATION CHOSEN TO MATCH THE
FUNDS AVAILABLE.

14. ORGANIZATION FOR
BUDGETARY
CONTROL/ STEPS FOR
BUDGETARY CONTROL
In order to introduce budgetary control
system, the following are essential to be
considered for a sound and efficient
organization. The important aspects to
be considered are:
1. Organization Chart
2. Budget Center
3. Budget Officer
4. Budget Committee
5. Budget Manual
6. Budget Period
7. Key Factor

15. Made by:- Venus Rana
Batch - B
B.com(Hons.)