3. Budgeting is a formal process of financial
planning using estimated financial and
accounting data. THE INSTITUTE OF COST
AND MANAGEMENT ACCOUNTANTS (UK)
defines a budget as “ a financial and/or
quantitative statement, prepared and
approved prior to a defined period of time, of
the policy to be pursued during that period
for the purpose of attaining a given objective.
It may include income, expenditure and
employment of capital.”
4. According to the National Association of
Accountants (USA),”Forecasting is a process of
predicting or estimating a future happening.”
Budgeting is a process of preparing budgets
and further control aspects are involved in its
procedure.
Both terms have some similarities, for
examples, both relate to future events and
involve prediction of something.
5. Budgetary control is a means of control in
which the actual state of affairs is compared
with the budget so that appropriate action may
be taken with regards to any deviations before
it is too late.
Briefly, the use of a budget to control a firm’s
activities is known as budgetary control.
6. To provide an organised procedure of planning.
To coordinate all the activities of various
departments.
To control the cost.
8. FIXED BUDGETING:- The budget which is
designed to remain unchanged irrespective of
the level of activity attained.
FLEXIBLE BUDGETING:- The budget that is
prepared for a range , that is, for more than
one level of activity. It is a set of alternative
budgets.
9. Budgeting is needed in organizations to perform
the following functions:-
◦ Planning,
◦ Coordination,
◦ Communication, and
◦ Control and performance evaluation.
10. Compels and motivates management.
Valuable means of controlling income and
expenditure.
A tool for managerial policies.
Directing capital.
Encourages productive competition.
11. Not an exact science.
Depends on cooperation of management.
Budgeting process takes time.
Executives feel “ circled in ”.
12. Obtaining estimates of sales, production
levels, expected costs, and availability of
resources from each sub-units / division /
departments .
Coordinating estimates.
Communicating the budget to responsible
managers and the concerned departments.
Implementing the budget plan.
Reporting interim progress towards budgeted
objectives.
13. THE BUDGET COMMITTEE is responsible for
budget direction and execution.
In large companies, the budget committee is
composed of executives incharge of major
functions of the business and includes the
sales manager, HRD manager, finance
manager, the production manager, the chief
engineer, the treasurer and the chief account
officer.
14. Document defining the responsibilities of
persons engaged in a budgetary program and
sets out the routine, the forms and records
required under budgeting.
15. The length of the budget period depends on
the type of business, the length of the
manufacturing cycle from raw material to
finished products, the ease of difficulty of
forecasting future market conditions and
other factors. However, a business enterprise
generally prepares a Short-range budget, and
a Long-range budget.
16. SHORT-RANGE BUDGET LONG-RANGE BUDGET
Covers periods of
three, six or twelve
months depending on
the nature of business.
Wholesale and retail
firms, seasonal firms
adopt short-range
budget.
Covers the period
beyond one years and
not more than five
years.
Big firms like TATA
STEEL , TATA MOTARS ,
adopt long-range
budgets.
17. Every organization sets the budget according
to the nature of the business to gain
maximum profits and incurs minimum losses.
Budgets can be set for long period or short
period . It might be flexible as well as fixed.