A budget is a financial plan for a defined period that estimates future business conditions like sales. It is prepared and approved prior to the period to attain objectives. Budgets define objectives, policies and coordinate activities. They secure proper coordination between departments. Budgeting involves heavy costs so it may not be suitable for small businesses initially due to lack of experience. The main steps in budgetary control are establishing budgets for each organization section, recording actual performance, and continuously comparing actuals to budgets.

1. -By R.Philomina
B.L.Kiruthika
2nd year,B.COM(CA) ‘A’

2. MEANING
 A budget is a plan of financial terms or
non financial term.
 It is prepared for a define period of time.
 It is a planned estimate of future
business conditions such as the sales.

3. DEFINITION
 According to ICMA , England , a budget is “a
financial and / 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 gives objective.
 It also defined as, “a blue print of a projected plan
of action of a business for a definite period of
time”.
 According to the definition , the essential features
of a budget are.

4. ADVANTAGES
o Budgetary control defines the objectives and policies of
the undertaking as a whole.
o It is an effective method of the activities of various
department of a business unit.
o It secures proper the co-ordination among the activities
of various departments.

5. LIMITATIONS
• Accuracy in budgeting comes through experience
hence it should not be relied on too much in the
initial stages .
• Budget is only a management tool it is not a
substitute for management in decision making.
• Budgeting involves heavy expenditure, which small
concerns cannot afford.

6.  THE MAIN STEPS IN BUDGETARY
CONTROL.
 Establishment of the budgets for the each
section of the organization.
 Recording of actual performance.
 Continuous comparison of the actual
performance with the budget.

7.  To define the goal of the enterprise.
 To provide long and short period plans for the attaining
these goals.
 To co-ordinate the activities of different department
 To operate various cost centers and department with
efficiency and economy.
 To eliminate waste and increase the profitability.
 To centralize the control system.
OBJECTIVES OF BUDGETARY
CONTROL

8. The main function of budget controller
 Arranging for all the meeting of the budget
committee.
 Issuing instruction to various department.
 Receiving and checking the budget estimate.
 Suggesting revisions.
 Preparing the summary budget and place all
budget before the committee.
 Co-ordinating all work.

9. The following steps should be taken in
a sound system of budgetary control.
1. Organisation chart
2. Budget centre
3. Budget committee
4. Budget manual
5. Budget period
6. Key factor