The document explains the concept of budgeting as a quantitative future plan and discusses the principal budget factor, which is a key limitation affecting business activity. It outlines different types of budgets, including master, revenue, capital, cash, flexible, and fixed budgets, as well as the purpose and advantages of budgetary control. Budgetary control helps in planning, resource utilization, and ensuring that actual results align with budgeted outcomes.

1. Principal Budget Factor

2. What is budget
 Budget is quantitative future plan of
an enterprise that it aims to achieve
for a defined period
 A financial & other goal of enterprise
What is budgeting
 Budgeting is coordinating the
combined intelligence of an entire
organisation into a plan of action
based on past performance and
governed by rational judgments of
factors that will influence the course
of business in the future

3. What is principal budget factor?
 A key factor or limiting factor which limits the activity at
certain level
 For organisation following may be constraints or limiting
factors
Raw material short supply
Non availability of skilled labours
Government restrictions
Lower demand of product
Shortage of power
Shortage of Machine hours
Shortage of finance

4. Types of Budget
Types of Budget
Based on
nature
Master
budget
Revenue
budget
Capital
budget
Cash
Budget
Based on
Flexibility
Flexible
budget
Fixed
(Static)
budget
Based on
approach
Traditional
Budget
Zero
based
Budget

5. What is budgetary control?
 Budgetary control is the establishment of budgets relating to
the responsibilities of executives of a policy and the
continuous comparison of the actual with the budgeted
results, either to secure by individual action the objective of
the policy or to provide a basis for its revision

6. Objectives of budgetary control
 Providing target and overall aim of organisation
 Determine responsibility of executives
 Providing basis for comparison of actual results
 Ensuring optimum utilisation of resources
 Providing basis for revision or corrective measures
Advantages of budgetary control
 Reduce the cost & overheads
 Helps in planning & formulating various policies
 Maximise the profit and production through optimum use of
resources
 Facilitates corrective actions in case of inefficiency

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