EXECUTIVE SUMMARY

As the budget is playing an important role in any organization which asses the actual performance with the budgeted performance .The concept of the Budgeted and way of adaptability, which creates new challenges to industrial sector for surviving in this current competitive edge. It indicates the progress of the concern by way of its sales or profit, market shares, process of the concern etc, all these made me to select the project topic as Budgetary Control system. As budgetary control helps to understand goal of the concern whether it may be short or long term goal.

VTU P.G.CENTER, BELGAUM.

DESIGN OF THE STUDY

OBJECTIVES OF THE STUDY:
To study the existing methods & practices by budgetary control at Shree Renuka Sugars Ltd. To find out any loopholes in the budgetary control system. To suggests the methods to minimize the working system or burden at budgetary control

SCOPE OF THE STUDY:

The scope of the study is restricted only to the costing department and its functions and the concerned departments i.e. production dept, finance dept etc. The scope is to study and understand objective of budgetary control system and different functional budgets, technique used to make budget more effective. So the study is the concerned with the costing department.

VTU P.G.CENTER, BELGAUM.

METHODOLOGY: PRIMARY SOURCE:

The information of the budgetary control where obtained from Departmental heads. Discussion with manager of costing. Budgetary control statement.

SECONDARY SOURCE:
This type means secondary dates are collected from

Office records Files & manual Website of the Shree Renuka Sugars Ltd.

LIMITATIONS:
Considering the scope mentioned above, some or few limitations are arising i.e. the Shree Renuka Sugars Ltd is big organization. This finance & accounts is also big departments. But due to shortage of training period, I am concentrating only on the budgetary control of costing departments.

VTU P.G.CENTER, BELGAUM.

INDUSTRY PROFILE

The Historical Background Of The Indian Sugar Industry:

The sugar industry is proud to be an industry, which spreads the taste of sweetness to the mankind. The history of origin of this industry is as old as the history of main him self. Sugar is generally made from sugarcane and beet. In India, sugar is produced mainly from sugarcane. India had introduced sugarcane all over the worlds and is a leading country in the making sugar from sugarcane. Saint Vishwamitra is known as the research person of the sugarcane in religious literature. We can find the example of sugarcane in Vedic literature also as well as sugarcane. We can also find the reference of sugar and the sugarcane in Patanjalis Mahabashya and the treaty on the grammar of Panini. Greek traveler Niyarchus and Chinese traveler Tai-Sung have mentioned in their travelogue that the people of India used to know the methods of making sugar and juice from sugarcane the great Emperor Alexander also carried sugarcane with him while returning to his country. Thus from different historical references and from some Puranas it can be concluded that method of making sugar from sugarcane was known

VTU P.G.CENTER, BELGAUM.

To the people of Bihar. The historical evidences of sugar industry prospering in ancient India concrete and this has helped to develop and prosper the co-operative sugar movement in India.

National Scenario Of Sugar Industry:

The first sugar mill in the country was set up in 1903 in the United Provinces. There are 566 installed sugar mills, of which 453 were in operation in the year 2002-03 and utilized 194.4 million ton of sugarcane (69% of total cane production) to produce 20.14 million tons of sugar. About 5 lakh workmen are directly employed in the sugar. About 5 lakh workmen are directly employed in the sugar industry besides many in industries, which utilize by-products of sugar industry as raw material. India is the largest consumer and second largest producer of sugar in the world. The Indian sugar industry is the second largest agro-industry located in the rural India. Indian sugar industry has been a focal point for socio-economic development in the rural areas. About 50 million sugarcane farmers and a large number of agricultural laborers are involved in sugarcane cultivation and ancillary activities, constituting 7.5% of the rural population. Besides, the industry provides employment to about 2 million skilled/semi skilled workers and others mostly from the rural areas. The industry not only generates power for its own requirement but surplus power for export to the grid based on by-productBagasse. It also produces ethyl alcohol, which is used for industrial and potable uses, and can be used to the manufacture Ethanol, an ecology friendly and renewable fuel for blending with petrol. The sugar industry in the country uses only sugarcane as input, hence sugar companies have been established in large sugarcane growing states like Uttar Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. In sugar year 2003-04, these six states contribute more than 85%of total sugar production in the country; Uttar Pradesh, Maharashtra, and Karnataka together contribute more than 65%of total production. The government of India licensed new units with an initial capacity of 1250 TCD up to the 1980s and with the revision in minimum economic size to 2500 TCD, the Government issued licenses for setting up of 2500 TCD plants thereafter. The government de-licensed sugar sector in the year of 11.September.1988. The entrepreneurs have been allowed to set up sugar factories of expand the existing sugar

VTU P.G.CENTER, BELGAUM.

factories as per the techno-economic feasibility of the project. However, they are required to maintain a radial distance of 15 kms from the existing sugar factory. After de-licensing, a number of new sugar plants of varying capacities have been set up and the existing plants have substantially increased their capacity. There are 566 installed sugar mills in the country as on March 31st 2005 , with a production capacity of 180 lack MTs of sugar, of which only 453 are working. These mills are located in 18 states of the country.

The sector wise break ups as follows: Table no#1 Sl. No. 1. 2. 3. Total Sector Private Public Co-operative No of factories 189 62 315 566

International Scenario of Sugar Industry:

Sugar is produced in 110 countries. The leading sugarcane producing countries are Brazil, India, Australia, Thailand, China and Cuba. Sugar is extracted from two different raw materials, sugarcane and beet. Both produce identical refined sugar. Sugarcane is grown in semi-tropical regions, and accounts for around two-thirds of world accounts for the balance one third of world production. The Russian Federation, Ukraine and Europe account for around 80 per count of total beet sugar production. In addition to weather conditions, diseases, insects, and quality of soil, international trade agreements and domestic price support programmers affect production of sugarcane and beet.

VTU P.G.CENTER, BELGAUM.

International Sugar Industry:

Demand- Supply:
Brazil and India are the largest sugar producing countries followed by China, USA, Thailand, Australia, Mexico, Pakistan, France and Germany. Global sugar production increased from approximately 125.88 MMT in 1995-1996 to 149.4 MMT in 2002-2003 and then declined to 143.7 MMT in 2003-2004, whereas consumption increased steadily from 118.1 MMT in 1995-1996 to 142.8 MMT in 2003-2004 as shown in below given chart. The word consumption is projected to grow to 160.7 MMT by 2010 and 176.1 MMT by 2015. The worlds largest consumers of sugar are India, China, Brazil, USA, Russia, Mexico, Pakistan, Indonesia, Germany and Egypt. According to USDA Foreign Agriculture Service, the consumption of sugar in Asian countries has increased at a faster rate, as a direct result of increasing population, increasing per capita income and increased availability.
Diagram no#1

VTU P.G.CENTER, BELGAUM.

Contribution of Sugar Industry to Indian Economy:

Sugar industry contributes about Rs.1650 crores to the Central Exchequer as excise duty and other taxes annually. In addition, about Rs.600 crores is realized by the State Governments annually through purchase tax and cess on cane. At the prevailing sugarcane price, the total sugar cane produced in the country value at about Rs.24000 crores per year.

World Sugar Trade:

Word trade in raw sugar is typically around 22 MMT and white sugar around 16 MMT. Brazil is the largest importer, followed by EU, Thailand, Australia and Cuba. The largest importers are Russia, Indonesia, UK, South Korea, Japan, Malaysia, the Middle East, and North Africa.

Sugar Prices:
World sugar prices fell steadily from 1994-1995 till 1998-1999 and have been almost stable at those levels. The trend seems to have now reversed and refined sugar prices have increased by 30% in the last 5 quarters from 9.16 cents per pound in January, 2004 to 12.02 cents in March,2005 (Source: USDA Foreign Agriculture Services).

Sugarcane Availability:
Table showing sugar cane availability in cultivated area:
Table no#2 Year 1980-81 1990-91 2000-01 2002-03 2003-04 2004-05 Cultivated area (%) 2.7 4.3 3.9 3.7 MMT 154 241 296 300 236

Sugarcane occupies about 2.7% of the total cultivated area and it is one of the most important cash crops in the country. The area under sugarcane gradually increased from 2.7 million hectares in 1980-81 to 4.3 million hectares in 2002-03, mainly because of much larger diversion of land from other crops to sugarcane by the farmers for

VTU P.G.CENTER, BELGAUM.

economic reasons. The sugarcane area, however, declined in the year 2003-04 to 3.9 million hectares and to 3.7 million hectares in 2004-05, mainly due to drought and pest attacks. From a level of 154 MMT in 1980-1981, the sugarcane production increased to 241 MMT in 1990-1991 and further to 296 MMT in 2000-2001. Since then, it has been hovering around 300 MMT until last year. In the season 2003-2004, however, sugarcane production declined to 236 MMT mainly due to drought and pest attacks. Not only sugarcane acreage and sugarcane production has been increasing, even drawal of sugarcane by the sugar industry has also been increasing over the years. In India, sugarcane is utilized by sugar mills as well as by traditional sweeteners like guru and khandsari producers. However, the diversion of sugarcane to guru and khandsari is lower in states of Maharashtra and Karnataka, as compared to Northern states like UP. SUGARCANE UTILIZATION
Table no#3 Year 1980-1981 1990-1991 2000-2001 2001-2002 2002-2003 2003-2004 % Sugarcane utilization for White Sugar Guru and Seed, feed and 33.4 50.7 59.7 57.4 68.9 56.1 Khandsari 54.8 37.4 28.8 31.5 20.1 32.5 chewing 11.8 11.8 11.5 11.1 11.1 11.4

Sugar Production:
Most of the sugar in India is manufactured and sold as White Crystal Sugar which is produced by Double Suspiration Process, while the norm in developed

VTU P.G.CENTER, BELGAUM.

and emerging nations is refined sugar, which is produced by the Phosphoflotation Process. Most of the mills in India are not equipped to make refined sugar Mills which are designed to produce refined sugar can manufacture sugar not only from sugarcane but also from raw sugar which can be imported. Therefore, such mills can run their production all the year round, as opposed to single state mills, which are dependent upon the seasonal supply of sugarcane.

Conclusion
India is a largest consumer of sugar in the world and second largest manufacturer of sugar followed by China, USA, Thailand, Germany, and Pakistan. In the sugar industry the top position is Brazil as it is a world largest manufacturer of sugar. As seeing the consumption of sugar the India is having a big market for sugar industry. As it is a large-scale industry it provides large profit for the country and it can also be helpful for development of industrial infrastructure. India is a worlds largest consumer and second largest manufacturing of sugar so the sugar must be cheaper. It can be provide by our sugar industry.

COMPANY PROFILE:

VTU P.G.CENTER, BELGAUM.

10

Background and inception of the company:

Shree Renuka Sugars is an integrated manufacturing company with strategic focus on Sugar and its allied products in Power and Ethanol. The Company's registered office is in Belgaum, Karnataka and Corporate Office is at Mumbai. Its key manufacturing facility is in Munoli, 70 Kms from Belgaum and also operates a leased facility at Ajara, Maharashtra. The company is working on other acquisitions, expansions and lease opportunities to strengthen its existing strong fundamentals and growth prospects.

Milestone of SRLS:
1995-SRSL was incorporated. 1998-Initially it acquired a 1250 tcd sick unit from the AP Govt. 1999-The commissioning and trail production took place. 2002-A distillery and ethanol plant of 60kl per day capacity was added. Crushing capacity per day 3500\TCD (Tonne capacity per day) Recovery 10.5%. Sugar production per day 4000 Quintal Co- Generation- 11.5 Mw

Nature Of Business Carried

VTU P.G.CENTER, BELGAUM.
11

Nature of Business carried SRSL is involved in the activity of manufacturing white crystal sugar products which is the main product. The process of production involve conversion of 1) Raw sugarcane to sugar, 2) Raw sugar into refined sugar Molasses, Bagasses are its by products.

Molasses: Molasses is mainly used for the manufacture of ethyl alcohol (ethanol), Yeast and cattle feed.

Bagasses: Bagasses is usually used as a combustible in the furnaces to produce steam, which in turn is used to generate power; it is also used as raw materials for production of paper and as feedstock for cattle. The company is having rich German technology machines and equipment that are installed in the production area. The power plant machines and Turbines are of Bharath Heavy Electricals Limited and Thriveni made.

VTU P.G.CENTER, BELGAUM.

12

VISION AND MISSION

Vision The companys vision is to become the most efficient processor of sugar and the largest marketer of sugar and ethanol in the country. Shree Renuka Sugars Ltd. aims To expand its installed capacity, achieve end-to-end integration for all its plants to improve margins and reduce business cycle. Achieve greater raw material security. Increase its focus of corporate and high value consumers. To become the most efficient and market driven integrated processor of sugarcane in the world. While enabling the team to grow in a learning and motivating atmosphere, participating in the all round development of community. Delivering consistently on returns to all its shareholders. Bringing over all productivity and efficiency through out the organization, especially by value addition of its by products in sugar effluent waste etc. Producing the best quality sugar to satisfy the domestic and internal norms.

The mission of Shree Renuka Sugars Ltd:

1. To become a provider of world-class sugar products to the Nation. 2. To enhance shareholders wealth by sustained, profitable anal financially sound growth with prudent risk management systems. 3. To fulfill national and social obligations as a responsible corporate citizen. 4. To create an environment, intellectually satisfying and professionally

rewarding to the employees.

VTU P.G.CENTER, BELGAUM.

13

PRODUCT PROFILE
Main Product- White Crystal Sugar: The main product of the sugar manufacturing process is white crystal sugar. This white crystal sugar is manufactured in the following grades: 1) L-30 [Large size sugar] 2) M-30 [Medium size sugar] 3) S1-30 [small size sugar] 4) S2-30 [very small size] By-Products of Sugar Cane: The sugar mill produces many by-products along with sugar. A typical sugarcane comprising of 3000 ton capacity can produce 345 on of sugar, 6000 liters alcohol, 3 tons of yeast, 15 tons of potash fertilizer, 25 ton of press mud fertilizer and 750 KW of power from bagasse. 1. MOLASSES: Molasses is the final effluent obtained in the preparation of sugar by repeated crystallization. Molasses is the brown colored residue after sugar has been tracted from the juice. Molasses still contains some quantity of sugar, but this sugar cannot be extracted by usual technology. It is the end product from a refining process carried out to yield Sugar. Sucrose and invert sugars constitute a major portion (40 to 60%) of Molasses. The yield of Molasses per ton of sugarcane varies in the range of 3.5% to 4.5%. Molasses is mainly used for the manufacture of ethyl alcohol (ethanol), Yeast and cattle feed. SRSL produces alcohol from the molasses left after the extraction of sugarcane juice, which can be used both for potable purpose as well as an industrial chemical. Further this alcohol can be again purified to produce fuel and ethanol that can be blended with petrol. Ethanol is in turn used to produce portable liquor and downstream value added chemical such as acetone, acetic acid, buttonhole, acetic anhydride, etc. Face stiff competition from production through the petrochemical route. The government controls the export of molasses through export licenses issued for every quarter. Molasses and alcohol-based industries were decontrolled in 993 and

VTU P.G.CENTER, BELGAUM.

14

are being controlled by respective state government policies. Nearly 70% of the alcohol produced is consumed by the potable alcohol sector. The molasses prices that used to rule a round 200 per ton during early nineties shot up to Rs 1400 per ton as a result of decontrol of the industry in 1993, but with reduction of import duties in 1995 and bumper crop in 1996, the prices came down to Rs 400 level. The increase in excise duty to specific rate of Rs 500 per ton in 1997 budget lead to sharp increase in Molasses price. 2. BAGASSE: Bagasse is a fibrous residue of cane stalk that is obtained after crushing an extraction of juice. It consists of water, Fiber an relatively small quantities of soluble solids, the composition of bagasse varies based on the variety of sugarcane, Maturity of cane, Method of harvesting and the efficacy of the sugar mill, the usual bagasse composition is given below. Table no#4 CONTENT Moisture Fiber Soluble solids RANGE % 46-52 43-52 2-6

Bagasse is usually used as a combustible in the furnaces to produce steam, which in turn is used to generate power; it is also used as raw materials for production of paper and as feedstock for cattle. By making use of bagasses, sugar mills have been successful in reducing dependence on state electric boards for power supply, for example requirement for FY98 from captive generation from steam turbines. Further this bagasse based cogeneration plant is eligible for carbon credit compensation under the Kyoto protocol. The residue product from distillery operation blended with chemicals is being sold as bio-fertilizers.

3. Power Generation Plant:

VTU P.G.CENTER, BELGAUM.

15

Power plant uses the fiber of the processed sugar cane (bagasse) as fuel to generate electricity in an environmentally responsible manner. An integrated 11.2 M.W. power generates and supplies electricity to the state grid produced from sugar cane waste used to rotate turbines 7 M.W. power is utilized in the plant remaining power is supplied to KPTCL.

Location Of The Unit And Its Subsidiaries

Diagram no#2

VTU P.G.CENTER, BELGAUM.

16

Ownership Pattern:
Shree Renuka Sugar LTD is one of the privatized sugar manufacturing company. Under the entrepreneur of Vidya Murkumbi, established its branches in various part of Karnataka and Maharashtra with the share capital of 200 millions of Indian Rupees.

Board of Director:

Table no#5
Sl. No 1 2 3 4 5 6 7 8 9 10 11 12 Name of the Director Mrs. Vidya M. Murkumbi Mr. Narendra .M. Murkumbi Dr. B. P. Baliga Mr. J. J. Bhagat Mr. Sanjay K. Asher Mr. Nandan V. Yalgi Mr. Robert Taylor Mr. S. M. Kaluti Mr. Jonathan Kingsman Mr. Hrishikesh Parandekar Mr. Surender Kumar Tuteja Mr. Nitin Puranik Nature of Directorship Executive Chairperson Managing Director Non Executive Director Non Executive Director Non Executive Director Whole Time Director Non Executive Director Whole Time Director Non Executive Director Non Executive Director Non Executive Director Whole Time Director

VTU P.G.CENTER, BELGAUM.

17

ORGANIZATION STRUCTURE

Competitors Information:
The main competitors are as follows: Ugar sugar industry Ltd. Crushing capacity-10000 Tcd Recovery-11.5% Sugar production-12000 Qtls (per day) Godavari sugar Ltd. Crushing capacity-3500 TCD Recovery-10.5% Sugar production-4000 Qtls (per day)

Shree Prabulingeshwar sugar works Ltd. Crushing capacity-4500 TCD Recovery-11.2% Sugar production-9000 Qtls (per day)

VTU P.G.CENTER, BELGAUM.

18

SWOT ANALYSIS OF THE COMPANY

STRENGTHS
SRSL LTD is very integrated player in sugar industry. The company processes sugarcane into three co products viz. sugar, ethanol, power. The company has the control on the seasonal affect through producing sugar not only with sugarcane and also raw sugar. The company is having prominent marketing employees who have good knowledge of marketing. It has maintained excellent relationship with farmers. The project of SRSL ltd is eligible for carbon credits based on units of power sold from Munoli co-generation plant.

WEAKNESSES
SRSL is bearing extra cost of exporting the sugar to the foreign countries. Non availability of raw sugar in excess

VTU P.G.CENTER, BELGAUM.

19

OPPORTUNITY
It is going to have a largest sugar refinery unit in India, which enables the co to enjoy better economic scale. The company has easy excess for importing raw sugar and exporting white crystal sugar for foreign countries. SRSL is well equipped with superior technology. Superior utilization of fixed assets is there in plant because of region where it is located.

THREATS
The company has to face the threat of competition from competitors from like Ugar sugar industry Ltd, Gdavari sugar Ltd, Shree Prabuligeshwar sugar works ltd. The sugar pricing policy of the government is also big threat to the company usually the levy prices fixed by the government are very low and fall below the cost of production.

VTU P.G.CENTER, BELGAUM.

20

THEORETICAL FRAMEWORK
INTRODUCTION:
Budgetary control is the important aspect for industry development because budgets provide yard stick against with actual performance. And it always watching the activities of the organization by comparing the different departments performance towards company goals with the help of budgets. It always helps to the top management to take the appropriate decision to motivate and directing their personal towards well set upped plannings and policies of the company. By considering the advantage of the budgetary control the Shree Renuka Sugars Ltd also adapted this system. In Shree Renuka Sugars Ltd they were maintaining the monthly budget with the help of daily reports. The daily reports must contain the item like production efficiency, sugar cane utilization, man power requirement, consumption of electricity, wages etc. With this the budgetary control manager prepares a monthly profitability statement of a particular month & submitted that one of the appropriate authority like production manager. By this statement or submitted report, they will take correct decision about the organizational activities. A study has been conducted on the BUDGETARY CONTROL which is most probably adopted in the Shree Renuka Sugars Ltd organization. Budgetary control i.e. a most powerful tool to the management for performing its function i.e. formulating plans, coordinating activities and controlling operations etc, effectively as well as effectively. Now a day, the number of companies are compete with each other for the survival in the present market. whether it may be other sugars industries .but no one company can compete without proper planning. So the Cost-Budgetary control may help them to make proper decision in the number of various fields. Budgetary control is applied to a system of management & accounting control by which all operations & output are forecasted as for ahead as possible. And actual results are known that are compared without budget estimates.

VTU P.G.CENTER, BELGAUM.

21

The budgetary system integrates key managerial functions as it links top managements planning function with the control function performed at all the levels in the managerial hierarchy. A more accurate budget can be developed for those activates where direct relationship exists between inputs & outputs. These input, output are base for developing budgets & exercising control.

STATEMENT OF THE STUDY

The budgetary control is good aspects for an organization. It will help the promoters to promote their company towards profit maximization or sales maximization. Budgetary control is acts as a watchdog, because it always watching the actual & wake the comparison of cost between the actual & budgeted. This will help the promoters to access their company capacity & take proper control over activities by adapting appropriate planning, co-ordination & control number of separate budgets may be prepared like Sales budget, Production budget, Direct labour budget etc. This will help the management to assess how much cost estimated & what its actual. On the basis of this gives the statement that whether the budgetary control is favorable or unfavorable. By this they will take necessary steps. Therefore this study is undertaken in the field of Budgetary Control adapted in the Shree Renuka Sugars Ltd. Budgetary control is applied to system of management and accounting control by which all operations and output are forecasted as for as possible and actual results when Known are compared with budget estimates. An estimate is predetermination of future events either on the basis of simple guesswork or following scientific principles. Then also with forecast is necessary, which is the base for budget & is an essential part of the budgeting system. A budget is a detailed statement of forecast resulting from joint action of a number of planned operations conducted with normal efficiency. But without proper forecasting, the budget should not be prepared. So forecast is an assessment of probable future events.

VTU P.G.CENTER, BELGAUM.

22

Budgets are the individual objectives of a department act. Whereas budgeting may be said to be the act of building budgets. Budgetary control embraces all this and in addition includes the science of planning the budgets themselves and the utilization of such budgets to affect an overall management tool for the business planning and control. Thus, a budget is financial plan & budgetary control results from the administration of financial plan. Budget is related to a definite future period. And it fixes a target in terms of Rupees or quantities against which the actual performance is measured. An organization without a budgetary control is like a ship sailing in a chartered sea.

VTU P.G.CENTER, BELGAUM.

23

OBJECTIVES OF BUDGETARY CONTROL:

Budgetary control has the following main objects: To provide an organized procedure for planning. It provides a detailed plan of Action for business over a definite period of time. To coordinate all the activates of various department of a business firm in such a manner that the maximum profit will be achieved for the minimum use of resources. To provide a means of determining the responsibility for all deviations from the plan (budget), and to supply information on the basis of which necessary corrective action may be taken. Thus, budgetary control has the objective of controlling cost. GENERAL OBJECTIVES OF BUDGETARY CONTROL ARE AS FOLLOWS:

1) Planning:
A budget is a plan of the policy to be pursed during the defined period of timed to attain a given objectives. The budgetary control will force management at all levels to plan in time all the activities to be done during the future periods. A budgeted as a plan of action achieves the following purposes. Action is guided by well thought out plan because a budget is prepared after a careful study and research. The budget serves as a mechanism through which managements objectives and polices are affected. It is bridge through which communication is established. The most profitable course of plan is selected. Budget is a complete formulation of the policy of the undertaking to be pursed for the purpose of attaining a given objectives.

VTU P.G.CENTER, BELGAUM.

24

2). Co-Ordination:
The common objectives of the firm may be successfully achieved by the way of budgetary control because it stimulates the co-operation of all concerns with the coordinates the various activities.

3). Communication:
It is necessary in an efficient organization that all people be informed about the objectives, polices, programmers and performance. This is made possible through their Participant in the budgeting process. Budgets inform each manager of what others have agreed to do. They also inform managers of the resources available objects and targets. Thus the budgeting system integrates key managerial functions as it links top managements planning function with the function performed at all the levels in the managerial hierarchy. But the efficiency of the budget as a planning and control device depends upon the activity in which it is being used. A more accurate budget can be develop for those activities where direct relationship between inputs and outputs. The basis for developing budgets and exercising control.

CONCEPT OF BUDGETING:
One of the primary objects of cost accounting is to provide information to business management for planning and control. Budgeting act as a toll of both planning and control. Budgeting is a formal process of financial planning using estimated and accounting data.

VTU P.G.CENTER, BELGAUM.

25

DEFINITION OF THE BUDGET:

The Institute of Cost and Management. Accounts (UK) defines A budget as a a financial and/or quantities statement, prepaid and approved prior to a defined period of time, of the policy to be pursed during that period for the purpose of attaining a given object. It may include income, expenditure and the payment of capital.

RELATION BETWEEN BUDGETING AND FORECASTING:

Budgeting and forecasting are used interchangeably According to the national association of accountants (USA)forecasting is a process of predicating or estimating a future happening, Forecasting is an essential part of the budgeting process. Forecasting is estimating future events and their effects on the budget. Forecasting comes to an end after mere estimating. Budgeting is a process of preparing budgets and further control aspects are involved in its procedure.

ESSENTIALS OF BUDGET:
It is prepared in advance based on a future plan of action. It relates to a future period and based on objective to be attained. It is a statement expressed in monetary and for physical units prepared for the implementation of policy formulated by the management.

CONTROL AND PERFORMANCE EVALUATION: Budgeting entries into control at three points:
When a budgeted is being formulated, departments analyze their plans for the future and submit estimates as per their requirements, justifying each of their demands by demon string a need. After budgets of different departments have been reviewed and approved they become targets that set desirable limits on spending. At the end of the budget period, a comparison of actual expenditure with budget expenditure is made as a means of judging performance and fixing responsibility foe deviations.

VTU P.G.CENTER, BELGAUM.

26

ADVANTAGES OF BUDGETING:
Budgeting plays an important role in the effective use of resources and achieving overall organizational goals. Budgeting compels and motivates management to make an early and timely study of its problem. budgeting provides a valuable means of controlling income and expenditure of a business as it is a plan for spreading Budgeting provides a too through which managerial polices and goals are periodically evaluated, tested and established as a guidelines for the entire organization. Budgeting help in directing capital and others resources into the most profitable channels. Budgeting coordinates and correlates all business activates. The use of budgeting in an organization develops an attitude of Cost Consciousness, stimulates the effective use of resources, and creates an environment of profit-mindedness throughout the organization. The uppermost point is that budgets provide a discipline that brings planning to the fore front as a key managerial responsibility. Budgeting encourage productive competition.

VTU P.G.CENTER, BELGAUM.

27

CLASSIFICATION OF BUDGETS:
A. According to time:
Long term budgets: A budget is designed for a period of 5 to 10yrs. Short term budgets: A budget is a generally prepared for a period of Not exceeding 5 years Current Budgets: The budgeted is prepared for a month or a quarter.

B. According to flexibility
Fixed budget: A budget prepared on the basis of fixed or a standard level of activity. It does not change with respect to level of activity. Flexible budget: A budget is prepared depend upon the level of the Activity.

Operating and functional budgets: 1) Sales budget:

The most important budget, which all other budgets are contingent upon, is the sales budget. All budgets, such as production budget, selling & distribution budget & other all affected by the sales budgeted & are depended upon the revenue derived from sales.

Forecasting sales:
The three main factors that should be considered by management in forecasting sales. 1) Information concerning past performance. 2) Information about present condition with in the individual company & in each sales territory. 3) Data concerning the industry & generally business.

VTU P.G.CENTER, BELGAUM.

28

2) Production budget:
A production budget is stated in physical units. essentially the production budget is the sales budget adjusted for inventory changes as follows. Units produced= Budgeted Sales+ (Desired Closing Inventory of Finished GoodsBeginning Inventory of Finished Goods.)

3) Production cost budget:

A production cost budgeted summaries the materials budget, lab our budgeted, the factory budget, and may be expressed and analyzed by departments and or products. It is also known as manufacturing budget.

4) Direct material budget:

This budget specifies the cost if direct materials used and the Cost of the direct materials purchased.

Use of direct material budget

1. It helps the purchasing departments to prepare a schedule to ensure Delivery of material when needed. 2. It helps in fixing minimum and maximum levels of inventories in stores department.

VTU P.G.CENTER, BELGAUM.

29

5. Direct labor budget:

The labour budget estimates the labor, adequate in number and grades, to enable the production budget to be achieved. It is generally preferable to prepare a separate direct labour budget and to include indirect labour in the factory over head budget. 6. Factory overhead budget: This budget is prepared on the basis of chart of accounts which reflects different expenses accounts & which properly classified expenses accounts and details the cost centers or departments factory overhead budgeted where in overhead costs have been classified in to fixed and variable components.

i.

Inventory budget:
An inventory budget can be prepared to find out the values of direct materials &

finished goods inventory.

a. Selling expenses budget:

It is also known as the marketing expenses budget. The selling cost budget is made up of a number of cost items, some of which are fixed and some variable. Fixed expenses are salaries and depreciation; the principal variable expenses are commission, travel advertising and bad debts.

b. Administrative expenses budget

The Administrative expenses budget covers the administrative costs for nonmanufacturing business activates. The administrative expenses budgets contains expenses like directors remunerations, legal charges, audit fees, salaries, rent office expenses, interest, property tax, p&t etc.

BUDGETED INCOME STATEMENT

A budgeted income statement summaries all the individual Budgets i.e. sales budgeted, cost of the goods sold budget, selling budget, and administrative expenses budget. This budget determines income before taxes (If the tax rate is available, net income after taxes can also be computed).A system of budgetary control installation in

VTU P.G.CENTER, BELGAUM.

30

an organization is very much beneficial which may be result in proper planning & control of activates. It ultimately results in minimizing costs and maximizing profits. If the company wants to prepare the budgets for future period of time, it is very much essential that company have to consider the past performance. Thus the past performance is treated as vital basis for the future period. Suppose in case of past performance is not available than the company has to follow the following process.

A. DETERMINATION OF THE OBJECTIVES:

The installation of budgetary control system needs to have proper objective i.e. for what purposes it has been installed. The objective may be Minimizing costs or maximizing profits. Co-ordination of activities of different departments. Controlling the management functions.

B. ORGANIZATION FOR BUDGETING:

Under this process the authorities and responsibilities of each executive are clearly stated. i.e. delegation of work means dividing the work between departmental heads.

C. BUDGET MANUAL:
The budget manual is a written document, which specifies the objective of the budgeting organization & procedures.

SOME IMPORTANT MATTERS COVERED IN A BUDGET MANUAL:

A statement related to objectives of the organization & how they can be achieved through budgetary control. Reports, statements, forms & other records to be maintained. Timetables for all stages of budgeting. A statement related to functions and responsibilities of each executive. There should be proper classification of accounts, which are lost, revenues and other financial amounts are to be classified with their respective nature.

VTU P.G.CENTER, BELGAUM.

31

D. Responsibility for budgeting:

1. Budget controller: The chief executive is ultimately responsible for the budget program and past of work designated as budget controller. The budget controller should have knowledge of technical skill of the business and report to chief executive. 2. Budget committee: Budget committers are framed for true delegation of

authority and responsibilities. The work should be divided under different heads i.e. Sales, production, and finance etc. The duty of budget committee to submit, discuss and finally approve of the budgeted big figures.

E. Fixation of the budgeted period: Budgeted period:

The period for which a budget is prepared & employed. The budget period depend upon: The nature of the business. The control techniques.

F. Budgeted procedure:
The procedure followed while designing and operating a budgetary control system depends upon the nature of the business.

VTU P.G.CENTER, BELGAUM.

32

THE PROCEDURE AS FOLLOWS: 1. Determination of key factor:

Key factor is that factor the extent of whose influence must first be assessed in order to ensure that functioned budgets are reasonably capable of fulfillment. Ex: Sales, production, purchases, cash etc. Key factor must be identified & diagnosed. Budget are meaning & unless key factor identified.

2. Making of forecasts:
Forecast is nothing but estimation of probabilities for a given period. Forecasts are made regarding sales, production cost and financial requirements of the business.

3. Consideration of alternative combinations of forecasts:

Alternative combination of forecasts is considered for efficient of overall plan with the motive to maximum profits.

4. Preparation of budgets:
After finalization of forecasts the budgets will be prepared.

5. Choice between Fixed & Flexible budgets:

A fixed budget is based on a fixed volume of activity. It is ineffective & meaningless because of actual capacity utilization may vary from month to month or quarter to quarter. A flexible budget is prepared for changing levels of activity. The flexible budget considers the fixed and the variable costs separately.

VTU P.G.CENTER, BELGAUM.

33

The Secret to Budgeting Successfully

It's All in the Attitude,
Have you ever attempted to budget and given up in frustration or discouragement? If you can figure out the reason your budgeting attempt failed, you'll be able to institute a rewarding, successful budget and stick to it. Think about it. What really determines whether budgeting works for you? One of the top reasons, if not THE top reason, so many people fail at budgeting is attitude. If you think of it as a penny-pinching sacrifice instead of a means for achieving your financial goals and dreams, how long are you likely to stick with it? Its like the difference between going on a diet and eating healthily. One is negative and restrictive; the other is positive and allows you to indulge now and then and still achieve your goals. To increase your chances of success, work on your attitude first. Why does budgeting matter? Money is a tool that enables you to reach your goals in life, but until you know where your money goes, you cant make conscious decisions about how to use this tool effectively. A budget shows you exactly where your money goes and provides a spending plan that lets you save for the things that are important to you: a new house, a new car, a comfortable retirement, a college education, travel, or whatever your particular goals and dreams happen to be. There are several universal budgeting concepts that every successful budget will include, but one of the most important features of a successful budget is customization to your needs. Dont try to force your lifestyle and personal situation into a generic, one-size-fits-all budget. If a simpler approach makes it easier to stay committed, then go for simplicity. If you stick with a realistic, effective budget long enough, the rewards will keep you motivated; in the meantime, do whatever it takes to keep yourself going.

VTU P.G.CENTER, BELGAUM.

34

One important aspect of a successful, long-term relationship is working towards common goals, and a budget is a means of achieving them. Couples who cant come to an agreement about savings towards common goals should sit down and talk calmly and rationally and come to a compromise to resolve this disconnect in their relationship. Its okay to have individual goals that the other person doesnt share, and to provide for a way for those goals to be met, but its critical to have basic common financial goals that both people in the relationship agree to and are motivated to work towards. If you cant agree about saving towards those goals, youre going to be at cross-purposes that are going to be a cause of ongoing conflict. A budget centered around conflict and resentment is a budget doomed for failure. If you still cant figure out why your budget isnt working, consider the psychological factors at work. What does money mean to you? Do you use it for reasons other than its obvious purpose? Do you use it as a self-esteem booster, to make yourself feel worthwhile? Do you enjoy the heady rush of making a new purchase? Do you use it as a sign of power or control in a relationship? There are a number of good books about the psychological aspects of money that can help you spot these factors and help you work with them. What makes a good budget? In all the budget bloopers and blunders I've seen, the same few problems keep rearing their ugly heads. To avoid them, here are the top ten most important features of a successful budget.

VTU P.G.CENTER, BELGAUM.

35

The three critical elements for successful budgeting: 1. Motivation - the "want to" 2. Education - the "how to" 3. Implementation - the "way to"
You will have limited success -- or fail -- if you lack any one of these critical elements. Many people successfully complete good books or courses on budgeting but they still fail. Why??? They have motivation and education but they are missing the last piece -implementation. They don't have a way to put in practice what they learned (or they have a way but it is so difficult they give up after several months). The BudgetMap system solves this problem. It works with any book or course on budgeting. Simple and effective, it is the "missing link" to implement what you learn. "I have found our special class [actual name not shown] to be the inspiration and motivation and the practical help for our church members to get their financial house in order but there is a missing piece. I believe that BudgetMap has provided that missing piece. It takes the inspiration and motivation and practical worksheets and puts it in women's purses and men's shirt pockets so they can, at a moment's glance, know exactly how much money is left in any of their budgeted accounts

VTU P.G.CENTER, BELGAUM.

36

HOW TO BUDGET
1. Start with a canned budget worksheet. 2. Go through your check book or bills for the last two to three months and add and delete categories from the worksheet to fit your expenditures. 3. Think about your hobbies and your habits and be sure to add categories for these expenses. 4. Go through your pay stubs and calculate your average monthly gross pay. 5. Do the same for any interest income, dividends, bonuses, or other miscellaneous income. 6. For each expense category, try to determine a budget amount that realistically reflects your actual expenses while setting targeted spending levels that will enable you to save money. 7. Once you're comfortable with your expense categories and budgeted amounts, enter expenditures from your checkbook from the last month. 8. Keep track of cash expenditures throughout the month and total and categorize these at the end of each month. 9. Subtotal the income and expense categories. 10. Subtract the total expenses from the total income to arrive at your net income. 11. If the number is negative, your expenses are greater than your income. Your situation can probably be greatly improved by changing your spending habits. 12. If you have a positive net income, transfer most of it to a savings or investment account at the end of each month. Extra cash left in a regular checking account has a way of getting spent. 13. After you've tracked your actual spending for a month or two, analyze your spending to identify where you can comfortably make cuts. 14. Once you've got the budgeting process in place, take an in-depth look at your largest spending categories, brainstorm about ways to reduce spending in specific categories, and set realistic goals 15. Update your budget and expenses monthly

VTU P.G.CENTER, BELGAUM.

37

Tips:
1. Don't try to fit your expenses into somebody else's budget categories. Tailor the categories to fit your own situation. 2. Make your categories detailed enough to provide useful information, but not so detailed that you become bogged down in trivial details. 3. Think of your budget as a tool to help you get out of debt and save money, not as a financial diet.

VTU P.G.CENTER, BELGAUM.

38

1) COMPARISION OF PREVIOUS BUDGETED FIGURES WITH SUBSEQUENT YEAR

s.no 1 2 3 4 5

PARTICULARS Opening stock Opening stock of raw sugar(MT) Opening stock of molases(MT) Estimate of cane to be crushed(mt) Estimated production of sugar(mt) Estimated molases(mt) production of

year 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07

compared to year 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05

Oct to Mar ___________________ Increase Decreases (%) (%) 21.93 51.72 172.39 NA NA NA 35.47 293.38 34.83 127.63 177.01 543.71 NA NA 28.43 125.54 NA NA

April to Sept ___________________ Increase Decrease (%) (%) 78.52 109.34 NA NA NA NA NA NA 290 1188.99 NA NA NA NA NA 385.79 1675.05 NA NA

6 7

Estimated production of ethanol(kl) Molases consumption Estimated sugar releases(mt) Estimated molases sales(mt)

8 9 Ii 1 2 3

Receipts
Sugars sales Sale of buy products Advances/debts recoverable 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 39.48 822.31 40.52 42 97.79 110.96 Nil 331.36 84.192 NA 39.44

Payments
1 2 3 4 5 6 7 Cane consumed Raw sugar Cost of trading sugar Other direct materials Interest on borrowings Labour cost Other administration overheads 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2005-06 2006-07 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 2004-05 114.44 411.21 84.87 447.17 NA 14.42 74.38 565.13 NA 75.79 NA 327.85 NA 490.48 279.32 971.6 NA NA NA 243.25 41.87 121.71 54.4 43.89 18.2 34.47 327.85 NA 490.48 18.2 34.47 88.87

2) BUDGETED STATEMENT ANALYSIS OF RENUKA SUGARS LTD

VTU P.G.CENTER, BELGAUM.

39

S.no

Particulars

2004-05

2005-06

2006-07

VTU P.G.CENTER, BELGAUM.

40

Revenue from sale of sugar A. Own production B. Purchased sugars

Oct To Mar 13302.7 8 4745.22

Apl To Sep 10866.6 4745.22

Oct To Mar 18555 -

Apl To Sep 46875 -

Oct To Mar 22693 6668

Apl To Sep 86340 10002

Sales of byproducts A. Alchol spirit B. Power export revenue Other income A. Bio-fertilizer B. Sale of bagasse

2513.58 1038.54

2513.58 1038.54

1602 410

1368 735

6894 132

6894 132

NA

NA

48

48

NA

NA 444

Total A 4 Expenditures A.canes consumed(purchased) B. Rawsugar cost C. Sugar cost(trading) D.Purchase of molases&bagasse E.directmat.(cons.stores etc.) F.repairs & mait (mfr exp) G.estimated excise duty H. Lease rent I.manufacturing expenses J.intrest on borrowings A. Working capital loan B.on other term loan C.other financial charge

21600.1 2

19163.94

20615

49026

36387

103812

9424 5175 7210 625.98 574.62 402.3 955.75 NA NA 379.08 443.16 193.14

1736 5175 2403.5 625.98 574.62 402.3 845.05 NA NA 379.08 443.16 193.14

20209 9568 NA NA 1002 NA NA 549 990 397 18 48

6585 NA NA NA 334 NA NA NA 402 53 12 48

48177 28316 8250 NA 3822 NA NA 1200 1392 565 1118 102

18603 NA 8250 NA 1274 NA NA NA 590 429 930 102

K.other administration expenses L.raw material to power plant M.sales wages etc N.dividend

585.96 286.08 -

585.96 286.08 -

384 432 234 200

384 288 234 -

3460 1794 1224 476

3460 897 1224 -

Total B Net revenue lakhs (A-B) in

26255.0 7

13649.87

34031

8340

99896

35759

-4654.95

5514.07

-13416

40686

-63509

68053

S R S L Combined Profit & Loss budgeted statement

VTU P.G.CENTER, BELGAUM.
41

Year ending September 30, Sales Sugar Sales -Sugar Refinery Sales Cogen Sales - Distillery Sales-Bio products Sales-Total Gross-profit-Sugar Gross-profit-Sugar Refinery Gross -profit - Cogen Gross -profit -Distillery Gross-profit-Bioproducts Gross-profit Total Gross Profit/Total sales (%) Interest on Term loan Interest on working capital loan Depreciation Operating profit/Loss Operating Profit/Sales (%) Profit before tax Less : tax Net profit after tax Net profit/Sales Equity Dividend amount Dividend (%) Dividend tax Retained profit Net cash accruals

2007 111,409 32,452 13,180 14,519 267 171,827 17,672 2,621 3,375 5,620 65 29,353 17.1% 1,859 1,190 2,757 23,547 13.7% 23,547 2,637 20,910 12.2% 476 20% 95 20,338 23,095

2006 52,671 18,481 2,904 2,700 140 76,896 6,352 3,834 173 1,155 11 11,525 15.0% 190 548 769 10,018 13.0% 10,018 3,376 6,642 8.6% 402 0% 80.00 6,160 6,929

2005 34,190 NA 4,370 4,278 110 42,948 6,534 NA NA NA NA 6,534 15.2% 356 746 637 4,796 11.2% 4,796 537 4,259 9.9% NA 0% NA 4,259 4,895

PEAK LEVEL WORKING CAPITAL REQUIREMENT Rs. Lakhs

59,607

17,585

9,360

ANALYSIS OF BALANCE SHEET Period Ending on 30th September ASSETS III YEAR Projected 2007 (Rs. In Crores) 2008 IV YEAR Projected

VTU P.G.CENTER, BELGAUM.

42

CURRENT ASSETS 26. Cash and Bank balances 27. Investments (other than long term investments) (I) Government & other Trustee securities (ii) Fixed deposits with Banks 28. (i) Receivables other than deferred & exports (incld. Blls purchased and discounted by banks) (ii) Export receivables (including bills purchased and discounted by banks) 29. Instalments of deferred receivables (due within one year) 30. Inventory: (i) Raw Materials (including stores & other items used in the process of mfr.) (a) Imported (b) Indegenous (ii) Stocks in process (iii) Finished goods (iv) Other consumable spares (a) Imported (b) Indegnous 31. Advances to suppliers of raw materials & stores/spaares 32.Advance payment of taxes 33. Other current assets (specify) Deposits with Gov. Depts Advances to staff Advances to Others Balance with Central Excise 34. TOTAL CURRENT ASSETS (Total of 26 to 33)

3 5 5 0 5 5.84

4 6 6 0 6 33.77

101.7 17.53

587.65 101.32

17.53

101.32

81.83

472.82

2.34 4.68

13.51 27.02

4.68 1.17 1.17 1.17 1.17 126.89

27.02 6.75 6.75 6.75 6.75 687.46

FIXED ASSETS 35. Gross Block (land & building machinery, work-in-progress)

901.83

901.83

VTU P.G.CENTER, BELGAUM.

43

36. Depreciation to date 37. NET BLOCK (35-36) OTHER NON-CURRENT ASSETS 38. Investments/book debts/ advances/deposits which are not Current Assets (i) (a) Investment in subsidiary Co.s/affiliates (b) Others (ii) Advances to suppliers of capital goods & contractors (iii) Deferred receivables (maturity exceding 1 yr) (iv) Others 39. Non-consumable stores & spares 40. Other nn-current assets including dues from directors 41. TOTAL OTHER NON-CURR. ASSETS 42. a. Intangible assets (patents. Goodwill prelim. Expenses, bad/doubtful expenses not provided for etc. b. Deferred Tax Assets (DTA) 43. TOTAL ASSETS (34+37+41+42) 44. TANGIBLE NET WORTH (24-21-42) capital+reserve-misc. exps 45. NET WORKING CAPITAL [(17+24)-(37+41+42)] 46. Current Ratio 47. Total Outside Liabilities/TNW 48. Total Term Liabilities/TNW YEAR LIABILITIES ASSETS DIF.

92.72 809.11

143.73 758.1

0.55

0.55

0.55

0.55

951.04 381.15 -1.71

1457.7 598.43 221.98

0.99 1.46 1.12 2007 951.04 951.04 0

1.48 1.42 0.64 2008 1457.7 1457.7 0

Period Ending on 30th September LIABILITIES

(Rs. In Crores) 2007 2008 III YEAR IV YEAR Projected Projected

VTU P.G.CENTER, BELGAUM.

44

CURRENT LIABILITIES 1. Short-term borrowings from banks (incld bills purchased, discounted & excess borrowing placed on repayment basis) (i) From applicant Bank (ii) From other Banks (iii) (of which BP & BD) Sub-Total (A) 2. Short term borrowings from others 3. Sundry Creditors (Trade) (i) Trade (ii) Capital Goods 4. Advance payment from customers/deposits from dealers 5. Provision for taxation 6. Dividend payable 7. Other statutory liabilities ( due within one year) 8. Deposits/Instalments of term loans/DPGs/ Debentures, etc. (payable within one year) 9. Other Current Liabilities & Provisions (due within 1 year)

17.33 69.32

84.94 339.76

86.65

424.7

9.17 9.17

9.17 9.17

27.78

26.6

Sub-Total (B)41.95 10. TOTAL CURRENT LIABILITIES [total of 1 to 9 excld 1 (iii)]

40.77 128.61 465.48

TERM LIABILITIES 11.Debentures (not maturing within one year)

VTU P.G.CENTER, BELGAUM.

45

12. Preference shares (redeemable after one year) 13. Term Loans (excld instalments payable within one year) 14. Deferred Payment Credits (excluding instalments due within one year) 15. Term Deposits (repayable after one year) 16. Other term liabilities (unsecured) 17. TOTAL TERM LIABILITIES 18. TOTAL OUTSIDE LIABILITIES [Item 10 plus item 17] 23.54 426.8 555.41 33.56 382.21 847.68 390.82 12.43 336.37 12.28

NET WORTH 19. Ordinary share capital 20.General Reserve 21. Revaluation Reserve 22.Other reserves [excluding provisions] 23. Surplus(+) or Deficit(-) in Profit & Loss Account 23 a. Deferred Tax Liability [DTL] 23 b. Others 24. NET WORTH 25. TOTAL LIABILITIES 395.63 951.04 610.01 1457.7 1.88 177.1 1.88 214.38 23.81 192.85 23.81 369.95

Period Ending on 30th September

(Rs. In Crores) 2007 2008 III YEAR IV YEAR

VTU P.G.CENTER, BELGAUM.

46

Projected 1. Gross Sales (i) Domestic Sales (ii) Export Sales Add other revenue income Total 2. Less Excise Duty Deduct other items 3.Net Sales[item 1 - item 2] 4. % rise [+] or fall [-] in net sales as compared to last year [annualised] 5. Cost of Sales i] Raw materials [including stores & other items used in the process of manufacture] [a] Imported [b] Indigenous ii] Other spares [a] Imported [b] indigenous iii] Power & fuel iv] Direct labour [Factory wages] v] Other mfg. Expenses vi] Depreciation vii] SUB-TOTAL [I to vi] viii] Add: Op, stocks-in-process Sub-total 1266.28 0.45 24.53 28.75 27.57 1266.28 1280.2 321.92 1602.13 60.14 1541.99 191.32%

Projected

2380.84 2380.84 91.07 2289.78 148.50%

1184.98 310.1 874.88

1795.39 593.27 1202.12

52.79 25.59 33.56 51.01 1958.35

1985.35

ix] Deduct: CI. Stocks-in-process

VTU P.G.CENTER, BELGAUM.

47

x] Cost of Production xi] Add: Op. Stock of F. G. Sub-Total xii] Sub -Total [ Total cost of sales] 6. Selling, Genl. & Admn. Expenses 7. SUB-TOTAL [5+6] 8. Op. profit after Interest [3-7] 9. Interest 10. Op. profit after Interest [8-9] 11. [i] Add other non-op. income [a] Futures Trading [b] Interest recd. & Misc. Income Sub-total [income] [ii] Deduct other non-op. exp. [a] Preliminary Exps [b] Deferred Rev. Exps. Sub-total [expenses] [iii] Net of non-op.income/exp [iii] Expenses Amortised 12. Profit before tax/loss [10+11 (iii)] 13. [a] Provision for taxes [b] Provision for Deferred Tax [b] Prior period Adjustment 14. Profit After Tax 15. [a] Equity dividend paid-amt [Already paid+B.s.Prov) [b] Dividend Rate 16. Retained Profit [14-15] 17.Retained Profit/Net Profit[%]

1266.28 49.18 1315.47 1266.28 39.34 1305.63 236.36 30.49 205.87

1958.35 49.18 2007.53 1958.35 40.19 1998.54 291.24 33.86 257.38

205.87 23.06

257.38 27.76

182.81 4.77 20% 178.04 97.39%

229.62 4.77 20% 224.85 97.92%

SHREE RENUKA SUGARS LIMITED

VTU P.G.CENTER, BELGAUM.

48

PROFIT & LOSS ACCOUNT (All amounts in millions of Indian rupees unless otherwise stated)
Shree Renuka Sugars Limited Regd. Office: BC 105, Havelock Road, Camp, Belgaum - 590 001. Profit & Loss Account for the year ended September 30, 2007 All amounts in millions of indian Rupees, unless otherwise stated

Schedule No. INCOME Revenues (Net) Other income TOTAL EXPENDITURE Raw material consumed Cost of traded goods Increase in inventories Personnel expenses Operating and other expenses Managerial Commission Depreciation/amortization Financial expenses Research & Development Profit before tax Provision for tax Current Tax Fringe benefit tax Deferred Tax Profit after tax and before prior period items Prior Period items Add: Excess provision of Dividend on Equity Shares Less: Prior Period Expenses Net Profit Balance brought forward from previous year Profit available for appropriation Dividend on Preference Shares Dividend on Equity Shares Corporate Dividend Tax General reserve Surplus carried to Balance Sheet Basic and Diluted Earnings Per Share (in rupees) Significant Accounting Policies Notes of Accounts 16 17

30-Sep-07 7323.69 114.92 7438.61 3378.51 1589.18 115.32 237.85 935.67 15.88 249.16 132.89 4.24 779.91 88.4 2.1 145.08 544.33 0 0 544.33 382.15 926.48 35.51 49.62 14.47 500 326.88 21.04

30-Sep-06 8015.85 50.06 8065.91 3964.05 2160.81 -128.28 122.24 899.24 15.45 87.84 187.84 11.19 745.53 164 2.44 16.39 562.7 0.1 7 555.8 180.65 736.45 0 47.62 6.68 300 382.15 23.98

18 19 20 21 22 6 23

24 25 26

SHREE RENUKA SUGARS LIMITED BALANCE SHEET

VTU P.G.CENTER, BELGAUM.

49

(All amounts in millions of Indian rupees unless otherwise stated)

Shree Renuka Sugars Limited Regd. Office: BC 105, Havelock Road, Camp, Belgaum - 590 001. Balance Sheet as at September 30, 2007 All amounts in millions of indian Rupees, unless otherwise stated Schedule No. 30-Sep-07 30-Sep-06 SOURCES OF FUNDS Shareholders' Funds Share Capital 1 310.67 238.1 Reserve and surplus 2 3046.77 1986.33 3357.44 2224.43 Loan funds Secured loans 3 6210.91 3544.39 Unsecured loans 4 259.07 166.92 6469.98 3711.31 Deferred Tax Liabilities 5 201.93 56.85 TOTAL 10029.35 5992.59 APPLICATION OF FUNDS Fixed Assets 6 Gross block 6313.65 1629.56 Less: Depreciation 690.62 436.04 Net block 5623.03 1193.52 Capital work-in-progress including capital advances 2077.26 3312.86 Investments 7 167.61 5.54 Current Assets, Loans and Advances Inventories 8 1001.69 1121.83 Sundry debtors 9 386.85 539.12 Cash and bank balances 10 306.71 171.66 Other current assets 11 323.32 32.88 Loans and advances 12 1333.83 774.66 Less: Current Liabilities and Provisions Current Liabilities 13 822.32 916 Provisions 14 389.77 319.25 Net Current Assets 2140.31 1404.9 Miscellaneous Expenditure 15 21.14 75.77 TOTAL 10029.35 5992.59 Significant Accounting Policies Notes on Accounts 25 26

OBESERVATION IN SHREE RENUKA SUGAR LTD

All departments are fully computerized no manual work is done. Budgetary control system is adopted for checking the industrial performance.

VTU P.G.CENTER, BELGAUM.

50

 In house power is available as the co-generation is mandatory for Sugar Manufacturing companies; also it maybe noted that the surplus power is exported to HESCOM Grid. SAP software is used for accessing the financial, accounting, logistics and material management. In Shree Renuka Sugars Ltd both monthly operation plan and annual operation plan are prepared ascertaining the budgeting performance with actual performance. In Shree Renuka Sugars Ltd monthly operations plan is prepared on the availability of cane and orders / commitments to corporate customers (viz; Pepsi Co, Cadbury India Ltd, Coca Cola and many others. Depreciation is charged on the basis of Straight Line Method. Company is paying on an average 9% interest rate for borrowing money from financial institution like UTI, SBI etc. for their working capital arrangements. Shree Renuka Sugars Ltd is Exporting 40% out of its total sales to mark its presence in International market and has been awarded a Two Star Rating from DGFT (Directorate General of Foreign Trade). Shree Renuka Sugars Ltd is importing raw sugar from countries like Brazil where sugar is by product, the same is adopted to keep the plant running for almost whole of the year.

FINDINGS:

VTU P.G.CENTER, BELGAUM.

51

As annual Budging is commonly prepared by all Industrial concerns, it normally assesses the performance of concern at the end of the financial year. The following are some things are finding out in Annual Budgeting, which is Accurate position of the business cannot be estimated: It arises due to inflationary pressure and change in Government policies all these affect the budgeting performance. Time factor is not taken into consideration: As the budgeting is prepared for whole year, so it doesnt consider time value of money. Performance cannot be ascertained in between the budgeted period; It is very difficult to estimate the budget performance during the course of business. Budgeting performance can be ascertained only when books of accounts are closing. Marketing condition may not be stable throughout the year Marketing condition may not react properly towards estimated sales, sales price etc.

VTU P.G.CENTER, BELGAUM.

52

RECOMMENDATION:
Quarter budget helps Industrial concerns to realize its actual performance Quarter by Quarter. Its serve as a safety signal to industrial for following reasons. Use of quarter Budget leads to chances of improvement or modification. Quarter Budget helps industrial concerns to checks its actual performance. After ascertaining the actual performance if any modification requires that can be adjusted in next quarter. Business risk can be ascertained. It helps to ascertain industrial performance in terms of profit or loss during particular quarter. If industry is incurring loss that can be minimized or adjusted in next quarter. Optimum utilization of available resource. It helps industrial concern to utilize available resource at maximum extent. The resource may be raw material, human resource, machinery or equipments etc. Co ordination can be achieved It helps to maintain favorable relationship among all departments in the organization Cost of working capital can be minimized. As a sugarcane is the seasonal product

VTU P.G.CENTER, BELGAUM.

53

CONCLUSION
From the above analyses of the study it is clear that budgetary control is treated as a sophisticated techniques for minimizing cost and maximizing profit in Shree Renuka Sugar Ltd. It helps industry to check its performance by way of comparing with budgeted performance. Budgetary control is not mainly used for minimizing cost also used for controlling the inventory It creates better relationship among all departments in the organization, departments like Finance, Marketing, Production etc. it makes the decentralization of authority in the organization which helps organization goal with in stipulated period of time. Budgetary control acts as safety for an organization because it helps to identify business risk and necessary steps can be taken to avoid the risk. It helps the management to identify the reason of variation in the actual performance necessary steps can be taken. A budgetary control technique helps management for proper planning, organizing, directing, and controlling the activities of organization. Finally I can say that budgetary control techniques helps organization for optimum utilization of available resource, it leads to achieve organization goal within stipulated period of time it checks industrial performance by way of compare with budgeted performance.

VTU P.G.CENTER, BELGAUM.

54

BIBILOGRAPHY
Principle of MANAGEMENT ACCOUNTING Dr.S.N.Maheshwari

MANAGEMENT ACCOUNTING Principles and Practice M.A.Sahaf COST ACCOUNTING Jawahar Lal FINANCIAL MANAGEMENT Khan & Jain

WEB SITE OF SRSL w.w.w.shreerenukasugars.com

VTU P.G.CENTER, BELGAUM.

55

ANNEXURES
SHREE RENUKA SUGARS LIMITED PROFIT & LOSS ACCOUNT (All amounts in millions of Indian rupees unless otherwise stated)
Shree Renuka Sugars Limited Regd. Office: BC 105, Havelock Road, Camp, Belgaum - 590 001. Profit & Loss Account for the year ended September 30, 2007 All amounts in millions of indian Rupees, unless otherwise stated

Schedule No. INCOME Revenues (Net) Other income TOTAL EXPENDITURE Raw material consumed Cost of traded goods Increase in inventories Personnel expenses Operating and other expenses Managerial Commission Depreciation/amortization Financial expenses Research & Development Profit before tax Provision for tax Current Tax Fringe benefit tax Deferred Tax Profit after tax and before prior period items Prior Period items Add: Excess provision of Dividend on Equity Shares Less: Prior Period Expenses Net Profit Balance brought forward from previous year Profit available for appropriation Dividend on Preference Shares Dividend on Equity Shares Corporate Dividend Tax General reserve Surplus carried to Balance Sheet Basic and Diluted Earnings Per Share (in rupees) Significant Accounting Policies Notes of Accounts 16 17

30-Sep-07 7323.69 114.92 7438.61 3378.51 1589.18 115.32 237.85 935.67 15.88 249.16 132.89 4.24 779.91 88.4 2.1 145.08 544.33 0 0 544.33 382.15 926.48 35.51 49.62 14.47 500 326.88 21.04

30-Sep-06 8015.85 50.06 8065.91 3964.05 2160.81 -128.28 122.24 899.24 15.45 87.84 187.84 11.19 745.53 164 2.44 16.39 562.7 0.1 7 555.8 180.65 736.45 0 47.62 6.68 300 382.15 23.98

18 19 20 21 22 6 23

24 25 26

VTU P.G.CENTER, BELGAUM.

56

SHREE RENUKA SUGARS LIMITED BALANCE SHEET (All amounts in millions of Indian rupees unless otherwise stated)
Shree Renuka Sugars Limited Regd. Office: BC 105, Havelock Road, Camp, Belgaum - 590 001. Balance Sheet as at September 30, 2007 All amounts in millions of indian Rupees, unless otherwise stated Schedule No. 30-Sep-07 30-Sep-06 SOURCES OF FUNDS Shareholders' Funds Share Capital 1 310.67 238.1 Reserve and surplus 2 3046.77 1986.33 3357.44 2224.43 Loan funds Secured loans 3 6210.91 3544.39 Unsecured loans 4 259.07 166.92 6469.98 3711.31 Deferred Tax Liabilities 5 201.93 56.85 TOTAL 10029.35 5992.59 APPLICATION OF FUNDS Fixed Assets 6 Gross block 6313.65 1629.56 Less: Depreciation 690.62 436.04 Net block 5623.03 1193.52 Capital work-in-progress including capital advances 2077.26 3312.86 Investments 7 167.61 5.54 Current Assets, Loans and Advances Inventories 8 1001.69 1121.83 Sundry debtors 9 386.85 539.12 Cash and bank balances 10 306.71 171.66 Other current assets 11 323.32 32.88 Loans and advances 12 1333.83 774.66 Less: Current Liabilities and Provisions Current Liabilities 13 822.32 916 Provisions 14 389.77 319.25 Net Current Assets 2140.31 1404.9 Miscellaneous Expenditure 15 21.14 75.77 TOTAL 10029.35 5992.59 Significant Accounting Policies Notes on Accounts 25 26

VTU P.G.CENTER, BELGAUM.

57