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capital budjeting

capital budjeting

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Published by tulasinad123
capital budjeting
capital budjeting

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Published by: tulasinad123 on Mar 16, 2011
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Railways continue to be the principal mode of transport in India. Muchmore than that, it has become a part and parcel of the country’s socio-economic life,impacting not only its culture and socio-economic activities but also largelyinfluencing our art, history and literature besides unifying the people.Way back in 1853, wheels rolled on rails on 16th April, where the firstever railway train, carrying 400 people in 14 carriages, covered the 21-miledistance between Bombay and Thane in about 75 minutes. The train took off with aregal 21-gun salute to celebrate the occasion. It started as a system to serve thecolonial interests of the foreign master has developed into the main vehicle for socio-economic development of a welfare society.The Indian railways are a government concern as most of the capitalinvested on railways has been provided by the government, either by loans raised by it or from its own surpluses. They are a commercial concern in as much as theyare engaged in manufacturing and in sale of “transport”, thus making profits andmaintaining their own assets and paying dividend to the general revenues on thecapital invested on the railway undertaking.It has become a part and parcel of the country’s socio-economic life, impactingnot only its culture and socio-economic activities but also largely influencing our art, history and literature besides unifying the people.. It started as a system to serve the colonial interests of the foreign master has developed into the main vehicle for socio-economic development of a welfaresociety.
A statement of estimated annual receipt and expenditure whether, on capital or revenue account of central government is prepared by the railway board. In other words it can be said that under (article 112) of constitution of India, the president will call upon astatement from Railways showing the estimated income and the out-lay amount that has tocross the Consolidated Fund of India. These statements are known as 'Budget'.A budget is a detailed plan of operations of some specific future period. It is anestimate prepared in advance of the period to which it' applies. It acts as a business barometer as it is a complete programmer of activities of the business for the periodcovered.According to Gordon and Shilling law budget may be defined as "a predetermineddetailed plan of action developed and distributed as-a guide to current operations and as a partial basis for subsequent evaluation of performance."The Chartered Institute of Management Accountants, London, defines a budget as "afinancial and/ or quantitative statement, prepared prior for a defined period of time, of the policy to pursued during that period for the purpose of attaining a given objective."
Budgetary control is the process of determining various budgeted figures for theenterprise for the future period and then comparing the budgeted figures with the actual performance for calculating variances, if any. First of all budgets are prepared and thenactual results are recorded. The comparison of budgeted and actual figures will enable themanagement to find out description and take remedial measures at a proper time. The budgetary control is a continuous process, which helps in planning and co ordination. It provides a method of control too.
According to J.A. Scott, "it is the system of management control and accounting inwhich all operations are forecasted and so far as possible planned ahead, and the actualresults compared with forecasted and planned ones."
A budget is a blue print of a plan expressed in quantitative--terms. Budgeting is atechnique for formulating budgets. Budgetary control, on the other hand, refers to the principles, procedures and practices of achieving given objectives through budgets.According to Rowland and William have differentiated the three terms as;"Budget are the individual objectives of a department, etc., where as Budgeting may besaid to be the act of building budgets.' Budgetary control embraces all and in additionincludes the science of planning the budgets to affect an overall management tool for the business planning and control."
1.The budget is an act of planning whereas budgetary control is an act of controlling.2.The budget concerns itself with the future. Budgetary control ishowever concerned with the present activities although it is prepared on the basis of data collected from the past budget. But the activities that the budgetary controlinvolves are not limited to that budget only. It is also related to the questions as tohow far the budget can effectively utilized in future.3.The budget fixes the target and budgetary control helps to arrive at that target.

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