Roll No. 91 (BUDGETING AND BUDGETORY CONTROL AS A TOOL FOR EFFECTIVE DECISION AND PLANING)

BUDGETING AND BUDGETORY CONTROL AS A TOOL
FOR EFFECTIVE DECISION AND PLANING
A PROJECT SUBMITTED TO
UNIVERSITY OF MUMBAI FOR PARTIAL

COMPLETION OF DEGREE OF B.COM
(ACCOUNTING & FINANCE)
OF FACULTY OF COMMERCE OF:
J.B.S.P. SANSTHA’S
CHANGU KANA THAKUR ARTS,

COMMERCE AND SCIENCE COLLEGE, NEW
PANVEL (W) - 410 206.
REACCREDITED WITH ‘A+’ GRADE BY NAAC (3RD

CYCLE- CGPA 3.61)
March 2020
CERTIFICATE
To whomsoever it may concern
This is to certify that Ms. Apeksha Sanjay Potbhare has worked and duly
completed his project work for the degree of B.Com. (Accounting and
Finance) under the faculty of Commerce in Changu Kana Thakur Arts,
Commerce and Science college, New Panvel in the subject of project work
and his project is entitled “The Study on contribution of venture capitalists
in growth of Indian economy.” under my supervision. I further certify that
the entire work has been done by the learner under my guidance and no part
of it has been submitted previously for any degree or diploma of any
university. It is his own work and facts reported by his personal findings and
investigations.
Seal of the
College
Dr.Nilesh Koli.
Name and Signature of

guiding teacher
Date of submission:
DECLARATION BY LEARNER.
I the undersigned Ms. Apeksha Sanjay Potbhare hereby, declare that the
work embodied in this project world titled “The Study on contribution of
venture capitalists in growth of Indian economy” forms my own
contribution to research work carried out under guidance of Dr. Nilesh Koli
is a result of my own research work and has not been previously submitted
to any other university for any other degree/diploma to this or any other
university.
Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the bibliography.
I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.
Apeksha Sanjay Potbhare

Name and signature of the learner
ACKNOWLEDGEMENT
To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.
I would like to acknowledge the following as being idealistic channels and

fresh dimension in completion of this project.
I take this opportunity to thank University of Mumbai for giving me chance to this
project.
I would like to thank my Principal, for providing the necessary facilities

required for completion of this project.
I take this opportunity to thank our coordinator and project guide Dr. Nilesh
Koli, for his moral support and guidance that made this project successful.
I would like to thank my college library, for having provided various

reference books and magazines related to project.
Lastly I would like to thank each and every person who directly or indirectly
helped me in the completion of project especially my parents and peers who
supported me throughout the project
INDEX
Sr. No. Title of Chapter Page No.
1. Introduction
1.1 what is budget
1.2 Definition
1.3 Characteristics of budget
1.4 Meaning of budgetary control
1.5 Objectives of budgetary control system
1.6 Advantages of budgetary control system
1.7 Disadvantages budgetary control system
1.8 Types of budget
1.9 profile of the company
2. Research and methodology

2.1hypothesis
2.2 scope of the study
2.3 limitations
2.4 role and significance
2.5 data collection
2.6 budgeting and budgetary control in kesoram ltd
2.7 objectives of the current budgetary control system in kesoram
cement industries limited
2.8 Stages in the formulation of performance budget
3 Review of literature
3.1 Review of literature:
4 Data analysis, Interpretation and Presentation

4.1 Tabulation
4.2 Testing Of Hypothesis
5 Conclusions and suggestions

5.1 Conclusions
5.2 Suggestions
CHAPTER ONE
1.Introduction
1.1 what is budget
A budget is a financial plan for a business, prepared in advance. A budget may be

set in money terms, it can be expressed in terms of units. budget is a financial and
or quantitative statement .it is prepared and approved prior to a defined period of
time. There is a target fix in terms of rupees or quantities or both. This target
must be fixed in advance. The budget must clearly state policies to be pursued for
achieving the targets. Most budgets are prepared for the next financial year
Budgets can be income budgets for money received, e.g. a sales budget, or
expenditure budgets for money spent, e.g. a purchases budget.
Every organization achieves itspurposes by coordinating different

activities. For the execution of goals efficient planning of these activities
is very importantandthat is why the management has a crucial role to
play in drawing out the plans for its business. Various activities within a
company should be synchronized by the preparation of plans of actions
for future periods. These comprehensive plans are usually referred to as budgets.
Budgeting is a management device used for short‐term
planning and control.It is not just accounting exercise.

A budget is an itemized summary of likely income and expenses for a given
period. It’s an invaluable tool to help you prioritize your spending and manage
your money—no matter how much or how little you have.
1.2 Definition
CIMA has defined 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 the employment of capital.”
An analysis of the above definition reveals the following features of a budget.:

1.It is mainly a forecasting and controlling device.
2.It is prepared in advance before the actual operation of the
company or project.
3.It is in connection with a definite future period.
4.Before implementation, it is to be approved by the management.
5.It also shows capital to be employed during the period.
1.3 Characteristics of budget
 it is expressed in quantitative or monetary terms.

 It is prepared for a fixed period of time It is prepared before the period in
which it commences.
 Practical to implement.
 It spells out the objects and the policies to be pursued in order to achieve the
objective of the organization.
 Many people are involved in drawing up a budget.
 Flexible enough to allow changes in the changing environment.
 Prepared on the basis of established standards of performance.
 Analysis of cost and revenues.
 Analysis of cost and revenues.
1.4 Meaning of budgetary control system
Budgetary Control is a method of managing costs through preparation of
budgets. Budgeting is thus only a part of the budgetary control.
According to CIMA, “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.”
The main features of budgetary control are:
•Establishment of budgets for each purpose of the business.
•Revision of budget in view of changes in conditions.
• Comparison of actual performances with the budget on a continuous basis.
• Taking suitable remedial action, wherever necessary.
•Analysis of variations of actual performance from that of the
budgeted performance to know the reasons thereof.
1.5 Objectives of budgetary control system
Budgeting is a forward planning. It serves basically as a tool for
management control; it is rather a pivot of any effective scheme of control.
The objectives of budgeting may be summarized as follows:
1. Planning-
Planning has been defined as the design of a desired
future position for an entity and it rests on the belief that the
future position can be attained by uninterrupted management action. Detailed
plans relating to production, sales, raw‐material
requirements, labour needs, capital additions, etc. are drawn
out. By planning many problems estimated long before they
arise and solution can be thought of through careful study. In short,
budgeting forces the management to think ahead, to
foresee and prepare for the anticipated conditions. Planning is a constant
process since it requires constant revision with changing conditions.
2. Co‐ordination-
Budgeting plays a significant role in establishing and maintaining
coordination. Efficient
planning and business contribute a lot in achieving the targets. Lack
of coordination in an organization is observed when a department head
is permitted to enlarge the department on the specific needs of that
department only, although such
development may negatively affect other departments and alter
their performances. Thus, coordination is required at all vertical
as well as horizontal levels.
3. Measurement of Success:
Budgets present a useful means of
informing managers how well they are performing in meeting
targets they have previously helped to set. In many companies,
there is a practice of rewarding employees on the basis of their
accomplished low budget targets or promotion of a manager is
linked to his budget success record. Success is determined by comparing the
past performance with a previous period's performance.
4. Motivation-
Budget is always considered useful tool for encouraging managers to
complete things in line with the
business objectives. If individuals have intensely participated in the preparatio
n of budgets, it acts as a strong motivating force to achieve the goals.
5. Communication:
A budget serves as a means of communicating information within a firm.
The standard budget copies are distributed to all management peoplethat
provides not only
sufficient understanding and knowledge of the programmers and
guidelines to be followed but also gives knowledge about the restrictions to be
adhered to.
6.control
Control is essential to make sure that plans and
objectives laid down in the budget are being achieved. Control, when applied t
o budgeting, a systematized effort is to keep
the management informed of whether planned performance is
being achieved or not.
1.6 Advantages of budgetary control system
In the light of above discussion one can see that, coordination and control help
the planning. These are the advantages of budgetary control. But this tool offer
many other advantages as follows:
1. This system provides basic policies for initiatives.
2.It enables the management to perform business in the most
professional manner because budgets are prepared to get the
optimum use of resources and the objectives framed.
3.It ensures team work and thus encourages the spirit of support
and mutual understanding among the staff.
4. It increases production efficiency, eliminates waste and controls the costs.
5. It shows to the management where action is needed to remedy a position.
6. Budgeting also aids in obtaining bank credit.
7. It reviews the presentsituation and pinpoints the changes which are necessary.
8.With its help, tasks such as like planning, coordination and control
happen effectively and efficiently.
9.It involves an advance planning which is looked upon with support
by many credit agencies as a marker of sound management.
1.7 Disadvantages of budgetary control system
1.Unpredictability.-
The significance of budgetary control can be undermined by the fact that

there really is no way to anticipate certain outcomes, such as shifts in
customer demand that affect sales numbers and shortages that affect the cost
of critical materials. Inflation can also influence both revenue and
expenditure levels. Budgetary control may create a false sense of certainty
and control in situations where it may be more advantageous to accept the
difficulty of predicting outcomes and instead maintain maximum flexibility.
2.Accounting costs.-
To practice budget control conscientiously, your company will need to

allocate resources and personnel. If you have a dedicated accounting
department, this may not be an issue, but if you have a small staff that shares
responsibilities, you may have to divert employees and payroll hours from
activities such as production that are more likely to directly produce income.
3.False sense of security.-
The budgetary control process may create the illusion that you know what
you can expect from future business activities. For example, you may
forecast that a new product you introduce will increase revenue by 20
percent and then purchase inventory and equipment based on this projection.
If these anticipated sales fail to materialize, you may find yourself in the
position of spending funds you cannot recoup.
1.7TYPES OF THE BUDGET
1.8.1Functional Classification:
1. sales budget:
The sales budget is an estimate of total sales which may be articulated in
financial or quantitative terms. It is normally forms the fundamental basis on which
all other budgets are constructed. In practice,
quantitative budget is prepared first then it is translated into economic
terms. While preparing the Sales Budget, the Quantitative Budget is generally the
starting point in the operation of budgetary control
because sales become, more often than not, the principal budget factor.
The factor to be consider in forecasting sales are as follows:
 Study of past sales to determine trends in the market.
 Estimates made by salesman various markets of company products.
 Changes of business policy and method.
 Government policy, controls, rules and Guidelines etc.
 Potential market and availability of material and supply.
2. production budget:
The production budget is prepared on the basis of estimated production for
budget period. Usually, the production
budget is based on the sales budget. At the time of preparing the
budget, the production manager will consider the physical facilities
like plant, power, factory space, materials and labour, available for the period.
Production budget envisages the production program for
achieving the sales target. The budget may be expressed in terms of
quantities or money or both. Production may be computed as follows:
Units to be produced = Desired closing stock of finished goods +
Budgeted sales – Beginning stock of finished goods.
3.production cost budget:
This budget shows the estimated cost of production. The production
budget demonstrates thecapacity of production. These capacities of
production are expressed in terms of cost in production cost budget.
The cost of production is shown in detail in respect of material cost,
labour cost and factory overhead. Thus production cost budget is
based upon Production Budget, Material Cost Budget, Labour Cost
Budget and Factory overhead.

4. raw‐material budget:
Direct Materials budget is prepared with an intention to determine
standard material cost per unit and consequently it involves quantities
to be used and the rate per unit. This budget shows the estimated quantity of all the
raw materials and components needed for
production demanded by the production budget. Raw material serves
the following purposes:
 It supports the purchasing department in scheduling the purchases.
 Requirement of raw‐materials is decided on the basis of
production budget.
 It provides data for raw material control.
 Helps in deciding terms and conditions of purchase like credit
purchase, cash purchase, payment period etc.
It should be noted that raw material budget generally deals with only the direct
materials whereas indirect materials and supplies are
included in the overhead cost budget.
5.purchase budget:
Strategic planning of purchases offers one of the most importantareas
of reduction cost in many concerns. This will consist of direct and indirect material
and services. The purchasing budget may be
expressed in terms of quantity or money.
The main purposes of this budget are:
 It designates cash requirement in respect of purchase to be made during
budget period; and
 It is facilitates the purchasing department to plan its operations in time in
respect of purchases so that long term forward contract
may be organized.
6. labour budget:
Human resourcesare highly expensive item in the operation of an
enterprise. Hence, likeother factors of production, the management
should find out in advance personnel requirements for various jobs in
the enterprise. This budget may be classified into labour requirement
budget and labour recruitment budget. The labour necessities in the various job cat
egories such as unskilled, semiskilled and supervisory
are determined with the help of all the head of the departments. The
labour employment is made keeping in view the requirement of the
job and its qualifications, the degree of skill and experience required
and the rate of pay.
7. production overhead budget:
The manufacturing overhead budget includes direct material, direct labour
and indirect expenses. The production overhead budget represents the
estimate of all
the production overhead i.e. fixed, variable, semivariable to be incurred during the
budget period. The reality that overheads include many different types of
expenses creates considerable problems in:
 Fixed overheads i.e., that which is to remain stable irrespective of
vary in the volume of output,
 Apportion of manufacturing overheads to products manufactured,
semi variable cost i.e., thosewhich are partly variable and partly fixed.
 Control of production overheads.
 Variable overheads i.e., that which is likely to vary with the output.
The production overhead budget engages the preparation of
overheads budget for each division of the factory as it is desirableto have estimates
of manufacturing overheads prepared by those overheads to have the
responsibility for incurring them. Service departments cost are projected and
allocated to the production departments in the proportion of the services
received by each department.
8. selling and distribution cost budget:
The Selling and Distribution Cost budget is estimating of the cost of
selling, advertising, delivery of goods to customers etc. throughout
the budget period. This budget is closely associated to sales budget in
the logic that sales forecasts significantly influence the forecasts of
these expenses. Nevertheless, all other linked information should also be taken into
consideration in the preparation of selling and
distribution budget. The sales manager is responsible for selling and
distribution cost budget. Naturally, he prepares this budget with the help of managers
of subdivisions of the sales department. The
preparation of this budget would be based on the analysis of the
market condition by the management, advertising policies, research programs and
many other factors. Some companies prepare aseparate advertising budget,
particularly when spending on advertisements are quite high.
9. administration cost budget:
This budget includes the administrative costs for nonmanufacturing business
activities like directors fees, managing directors’ salaries,
office lightings, heating and air condition etc. Most of these expenses
are fixed so they should not be too difficult to forecast. There are semivariable expens
es which get affected by the expected rise or fall
in cost which should be taken into account. Generally, this budget is
prepared in the form of fixed budget.
10. capital‐ expenditure budget:
This budget stands for the expenditure on all fixed assets for the
duration of the budget period. This budget is normally prepared for a
longer period than the other functional budgets. It includes such items
as new buildings, land, machinery and intangible items like patents,
etc. This budget is designed under the observation of the accountant which is
supported by the plant engineer and other functional managers.
At the time of preparation of the budget some important
information should be observed:
 Overfilling on the production facilities of certain departments as
revealed by the plant utilization budget.
 Long‐term business policy with regard to technical developments.
 Potential demand for certain products.
11. cash budget:
The cash budget is a sketch of the business estimated cash inflows and
outflows over a specific period of time. Cash budget is one of the most important
and one of the last to be prepared. It is a detailed
projection of cash receipts from all sources and cash payments for all
purposes and the resultants cash balance during the budget. It is a
mechanism for controlling and coordinating the fiscal side of business to ensure
solvency and provides the basis for forecasting and
financing required to cover up any deficiency in cash. Cash budget thus plays avital
role in the financing management of a business undertaken.
Cash budget assists the management in determining the future
liquidity requirements of the firm, forecasting for business of those
needs, exercising control over cash. So, cash budget thus plays a vital
role in the financial management of a business enterprise.
Function of Cash Budget:
 It designates cash excesses and shortages so that steps may be
taken in time to invest any excess cash or to borrow funds to meet
any shortages.
 It shows whether capital expenditure could be financed internally.
 It provides funds for standard growth.
 It provides a sound basis to manage cash position.
Advantages of Cash Budget:
1. Usage of Cash:
Management can plan out the use of cash inaccord with the changes of receipt
and payment. Payments can be
planned when sufficient cash is available and continue the business
activity with the minimum amount of working capital.
2. Allocation for Capital Investment: It is dual benefits such as capital
expenditure projects can be financed internally and can get an idea
for cash availability of capital investment.
3. Provision of Excess Funds: It reveals the availability of excess cash.
In this regard management candecide to invest excess funds for short
term or long term according to the requirements in the business.
4. Payout Policy: This budgetary system may help the management
for future payout policy in the form of dividend. In case the cash
budget liquid position is not favourable, the management may reduce
the rate of dividend or maintain dividend amount or skip dividend for
the year.
5. Provision for acquiring Funds: It gives the top level management
ideas for acquiring funds for a particular time duration andsources to
be explored.
6. Profitable Use of Cash:Business person can take decision for the
best use of liquidity to make more profitable transaction. It can be
used at the time of bulk purchase payments and one get the benefit of
discount.
Limitation of Cash Budget:
1. Complex Assumption: Business is full of uncertainties, so it is very
difficult to have near perfect estimates of cash receipts and payments,
especially for a longer duration. It can be predicted for short duration
such as of three to four months.
2. Inflexibility: If the finance manager fails to show flexibility in
implementing the cash budget, it will incur adverse effects. If the
manager follows strictly adheres to the estimates of cash inflow it may
negatively result in losing customers. Likewise, loyalty in payments
may lead to deterioration of liquid position.
3.Costly: Application of this technique necessitates collecting of

statistical information from various sources and expert personnel in
operation research would be the costliest deal. It becomes expensive
which may not be affordable to small business houses. In addition,
finding out experts is not always possible. In this situation the long
term predictions do not prove correct.
1.8.2 fixed and flexible budget
1. fixed budget:
A fixed budget is prepared for one level of output and
one set of condition. This is a budget in which targets are tightly
fixed. It is known as a static budget.According to CIMA, “A budget
which is designed to remain unchanged irrespective of the level of
the activity attained.”It is firm and prepared with the assumption
that there will be no change in the budgeted level of motion. Thus,
it does not provide room for any modification in expenditure due to the change in
the projected conditions and activity. Fixed
budgets are prepared well in advance.
2. flexible budget
This is a dynamic budget. In comparison with a fixed budget, a
flexible budget is one “which is designed to change in relation to
the level of activity attained.” The underlying principle of flexibility
is that a budget is of little use unless cost and revenue are related
to the actual volume of production. The statistics range from the
lowest to the highest probable percentages of operating activity in
relation to the standard operating performance. Flexible budgets
are a part of the feed advance process and as such are a useful
part of planning. An equally accurate use of the flexible budgets is
for the purposes of control.
Flexible budgeting has been developed with the objective of
changing the budget figures so that they may correspond with the
actual output achieved. It is more sensible and practical, because changes expected
at different levels of activity are given due
consideration. Thus a budget might be prepared for various levels
of activity in accord with capacity utilization.
Flexible budget may prove more useful in the following conditions:
 Where the level of activity varies from period to period.
 Where the business is new and as such it is difficult to forecast the demand.
 Where the organization is suffering from the shortage of any
factor of production. For example, material, labour, etc. as the
level of activity depends upon the availability of such a factor.
 Where the nature of business is such that sales go on changing.
 Where the changes in fashion or trend affects the production and sales.
1.8.3. Time budget:
1. Long‐term Budget:
These budgets are prepared on the basis of longterm projection and portray a longrang
e planning. These budgets generally cover plans for three to ten years. In this regard
it is mostly prepared in terms of physical quantities rather than in monetary values.
2.Shortterm Budget:
In this budget forecasts and plans are given in
respect of its operations for a period of about one to five years. They are generally
prepared in monetary units and are more specific than long‐term budgets.
3.Current Budgets:
These budgets cover a very short period, may be
a month or a quarter or maximum one year. The preparation of these budgets
requires adjustments in short‐term budgets to current conditions.
4.Rolling Budgets:
A few companies follow the practice of preparing
a rolling or progressive budget. In this case companies prepare the
budget for a year in advance. A new budget is prepared after the
end of each month or quarter for a full year in advance. The figures for the month
or quarter which has rolled down are dropped and the statistics for the next
month or quarter are added.
1.8.4. master budget:
The master budget is a review budget which combines all functional
budgets and it may take the form of Financial Statements at the end
of budget period. It is also called the operating budget. It embraces
the impact of both operating decisions and financing decisions. It
provides the necessary plan for operations during the period when all
detailed budgets have been completed. A master budget becomes a principal
document for the operations of the industry during the
period it covers. Actually, budgets have to be amended several times
before the position disclosed by the summary budget is accepted. A master budget is a
n annual profit plan, which may be broken into months or quarters.
As a result a master budget is:
 A statement of a company’s operating policy for the budget period, and
 A budgeted profit and loss account for the budget period and a
balance sheet as at the end the period.
Merits of the Master Budget:
 A review of all the functional budgets in specific form is
available in one report.
 It presents an overall profit position of the organization for the budget.
 It also contains the information regarding the forecast balance sheet.
 It examines the fitness of all the functional budgets.
PROFILE OF THE COMPANY
The 85-year –old Indian cement industry is one of the cardinal and basic
infrastructure industries which enjoys core sector status and played crucial role in the
economic development and growth of a country. Being a core sector this industry
was subject to price and distribution controls almost uninterruptedly from world
war-II. When government of India announced the partial decontrol manufacturing
cement became increasingly attractive and the industry experienced substantial
expansion. As the supply in response to the 1982 partial decontrol was significant in
March 1989, price and distribution control were finally dispensed with .It was one of
the first Major industries in the country to be so deregulated.
Definition of cement:
Cement may is defined as a mixture of calcium sulfate and aluminates which have the
property of setting and hardening under water .The amount of silica which is present
on each crust are sufficient to combine with calcium oxide to form the corresponding
calcium silicate and aluminates.
History of the kesoram
The first unit at Basantnagar with a capacity or 2.1 lakh tons per annum in
corresponding suspension-preheated system was commissioned during the year of
1969 the second unit Was setup in year 1971 with a capacity of 2.1 tones per
annum and the third unit with a capacity of 2.5lakh tons per annum went on
stream in the year 1978 the coal for this company is being supplied iron
singareni collories and the power is obtained from
APSEB the power demand for the factory is about 21MW kesoram has got 2DG
sets of 4MW each installed in the year 1987.
Kesoram cement industry has set up a 15kw capacity power plant to facilitate
for uninterrupted power supply for manufacturing of cement starts at 24 august 2008
per hour 12 mw, actual power is 15mw.
Birla supreme in popular brand of kesoram cement from its prestigious

plant of Basantnagar in A.P which has outstanding track record in
performance and productivity serving the nation for the last two and had
decades It distinction by Bagging several national awards .It also has the
distinction optimum capacity utilization.
Kesoram offers a choice of top quality portioned cement for light heavy
constructions and allied applications quality is built every fact of the
operations.
The plant layout is rational to begin with the limestone is rich in calcium
carbonate a key factor that influence the quality of final product the day
process technology used in the latest computerized monitoring overseas the
manufacturing process samples are sent regularly to the bureau of Indian
standards national council of constructions and Building material for
certification of derived quality norms
The company has vigorously undertaking different promotional
measures their product through different media which includes the use of
newspapers ,magazines ,hoardings etc
Kesoram cement industry distinguished itself among all the cement factories in
India by bagging the national productivity award consecutively for two years
and the year 1985 -1987.the federation of Andhra Pradesh chamber of commerce
and industries also conferred kesoram cement an award for the best Industrial
promotion expansion efforts in the year 1981.kesoram also bagged FAPCCI
Awarded for “best family planning effort in the state “ for the year 1987-1988.
One among the industrial giants in the country today serving the nation
on the industrial front kesoram industrials Ltd has a cheque red and eventful
history dating Back to the twenties when only a textile mill under its banner
1924 it grew from Strength to spread and activities 10 newer fields like
Rayan pulp Transport paper spun pipes refractivites types and other products
Looking to the wide gap between the demand and supply of a vital commonly cement
Which plays UI important role in national building activity the government of
India had de-licensed the cement industry in the year 1966 with a view to attract
private entrepreneurs to augment the cement industry production kesoram rose to
the occasion And divided to setup a few cement plants in the country
Kesoram cement undertaking marketing activities extensively in the states of Andhra

Pradesh, Karnataka, Tamilnadu, kerala, Maharastraha, and Gujarat. In AP sales
depots are located in different areas like karimnagar Warangal Nizambad
Vijayawada and Nellore In other states it has opened around 10 depots.
Awards won by kesoram
Kesoram cement bagged prestigious awards like national awards for productivity
and technology and conservation and several state awards for year 1984 kesoram
cement is best family planning effort in the federation of Andhra Pradesh
chamber of commerce And industry and also national award for two successive
years 1985-86&1986-87.It has also bagged the national award for energy efficiency
for the year 1989-90 for the performance among all cement plants in India .thus
award stall-by national council
For cement and building material in association with the government of India.
Kesoram bagged the prestigious Andhra Pradesh state productivity award in 1987-
1989 also Annexed state award for industrial management in 1988-1989.and also
“Best Industrial promotion expansion efforts “ in the state and yajamanya ratna
and best efforts an industrial unit in the state to develop rural economy was
bagged for its contribution towards the year 1991.
it also bagged the “may day award” of the government of India For the best
management and the Pandit Jawaharlal Nehru silver rolling trophy for the
industrial productivity effort in the state of Andhra Pradesh by FAPCCI and
also the Indira Gandhi memorial national award of the government of Andhra
Pradesh for the year 1993.
During the last 3 years the government of Andhra Pradesh has given the
following awards Best awards for the year 1994.
Best industrial relation award for 1994.
To keep the ecological balance they have also undertaken massive tree plantation in
the economy and government of India has nominated township areas and them for
vrikshmithra award Best effort of an industrial unit in March 1996.
In the year March 2008 “Best management award 2008” for the best management
practices in kesoram cement industry presented by chief minister.
CHAPTER TWO
2. Research and methodology

2.1Object of the study
 To provide a theoretical framework of budget, and budgetary control.
 To describe the profile of the organization as a material for undertaking a

study of budgetary control system.
 To analyze the budgetary system in Kesoram cement Industries Limited

(hereafter Kesoram) with particular reference to their objectives and phases of
organizational .
 To develop standards/norms of performance in the various areas of operation

and maintenance based on the experience.
2.2 Hypothesis for selecting research topic:

2.1.1 Null hypothesis :
budgeting and budgetary control is not a tool for effective decision and
planning.
2.1.2 Alternatives hypothesis:
Budgeting and budgetary control is a tool for effective decisions and
planning.
2.2Scope of the study
Budgetary control is not limited to commercial and industrial firms attempting to

produce a profit. The procedures involved are equally applicable to not-for-
profit organisations such as government departments, universities and charities.
All aspects of the business or organisation can be budgeted. There might be income
and expenditure budgets, cash budgets, capital budgets, research and
development budgets to mention only a few examples. Budgets can be classified
as master budgets, departmental budgets or functional budgets. Whatever level or
degree of detail, a budget is useless if it does not focus on a point of responsibility.
Budgeting is a management function that incorporates the following:
 Setting objectives
 Establishing detailed financial estimates
 Delegating specific responsibility
 Monitoring performance
 Reacting to expectations.
2.3Limitations
1. Danger of inaccurate estimates:

Budgets are based on estimates and they involve forecasting of future events. The
effectiveness of budgetary programme depends to a great extent on the accuracy with
which estimates are made.
2. Danger of rigidity:
In practice, budgets often tend to become rigid. It becomes difficult to make changes
in budgets to suit the changing circumstances.
Budgetary limits are regarded as final and little scope is left for initiative and
judgment on the part of the subordinate staff. Inflexibility makes budgets unrealistic
and invalid under the changed conditions.
3. Human factor:
Budgets need the willing co-operation and active participation of people working in
the enterprise. It is not always possible to get the voluntary cooperation and support
from all in the construction and implementation of budgets.
4. Expensive:
It requires a lot of expenditure in terms of money, time and effort. A considerable
time is needed in learning effective budgeting. Budgets cannot give results overnight
and great patience is required on the part of the management. Management may lose
interest and confidence in budgeting, where quick results are expected.

5. Hide Inefficiencies:
Budgets are sometimes used to hide inefficiencies. Budgets tend to grow from the
precedent. Many items which cease to be relevant are continued because of their use
in previous budgets.
6. Departmental Outlook:
Budgeting fails when departmental goals are allowed to supersede enterprise
objectives. Functional budgets may not reflect the overall goals of the organisation in
their proper perspective.
Similarly, situation may demand that the departmental manager should not cross
budget limit in the interest of overall business objectives. However, in this enthusiasm
and zeal to keep within budget limits, a departmental manager may overlook the
enterprise goals.
7. Danger of over budgeting:

Budgets are often so detailed that they become cumbersome, meaningless and unduly
expensive. Over budgeting usually reflects the superior manager’s desire to maintain
control. However, to derive full benefits of budgetary control, over budgeting should
be avoided and subordinates should be adequately trained to read and administer
budgets in the proper manner.
8. No substitute for efficient management:

No doubt, budgeting is of a great help in arriving at right decisions. But budget does
not replace management and administration. It is a servant and not a master. It opens
up vistas but someone has to read it, interpret it and implement it.
9. Lack of cost-benefit analysis:
Budget making is a tempting exercise. It can be effective only when there is a
correlation between the cost of the system and the benefits to be derived from it.
Inspite of these limitations, budgets provide guidelines to managerial action in more
concrete terms. However, budgets should be used only as a tool of planning and
control. The various limitations should be taken into consideration while using
budgetary control system.

2.4Role and Significance
Budgetary control mainly refers to the budget during the execution of the budget
implementation of the routine supervision and control; it is the budget target to
achieve the necessary guarantees. Control functions are the basic functions of
management of the budget in the analysis of the implementation of enterprise
budget management; Control effect of budget management throughout the
management process.
Budgeting is a pre-budget control, budget execution is a matter of control, budget

evaluation is a kind of ex post control. As the enterprise’s own internal and
external conditions change, sometimes business strategy need to make
corresponding adjustments, though corporate budget management must change in
accordance with the strategic objectives of changes in the future management of
operational activities to achieve feed forward control. In the budget execution
process, from budget management, budgetary control organizations in the field
and promptly discovered that the actual deviations from the budget differences,
and took the necessary measures to eliminate weaknesses and achieve process
control.
Budget management functions In the budget- feedback control, budget

management, budget management and the implementation of the main functions
keep the actual results to compare with budget targets in time, and deviations
occur message to budget management and the main body so that adjust it timely to
ensure the budget goals.
In short, the advance control focuses on the corporate budget management and
budgeting. Things in the process control focuses on each link to control the
implementation of a business, and afterwards, feedback control focuses on the
feedback according to deviate from the budget target follow-up control of
information. Because of the combination, only the budget to strengthen all-round
management and control capabilities, it enables Enterprise’s strategic objectives to
be refined to implement.
Budgetary control is not only a wide range of control, but also a full range of
control; budget control must penetrate to the enterprise in all business processes
and the business links, which is covering all business sectors and positions. On the
one hand, the application of accounting measurement accounting methods reflect
implementation of the budget process and oversight for accounting control and
budget management for the basic values to provide the required information. On
the other hand, in-depth into the origin of the value of management activities, the
daily operations of specific business areas, such as procurement, production, sales
and so on, to carry out management control. Enterprise Budget Management of
the main needs of the accounting department and co-ordination between business
units and communication account control and management control together.
Budget management involves many factors, the breadth of the decision of the
board of directors and the boards of supervisors only grasp what is important in
order to take into account the overall situation, but also decided to encourage the
implementation of the budget, the main body of self-control is particularly
necessary.
2.5 Data collection
2.5.1 Planning of budget

The process of planning all flows of financial resources into within from an entity
during some specified future period it includes providing detailed allocation of
available future resources to projects ,responsibilities and time periods From
above definition I it clear that budgeting Is the actual act of caring the budget it
is the process of evolving the final statement yet is the end product of budgeting.
2.5.2 Essential of budgetary control
1. Organization for budgetary control:
The proper organization is essential for the successful preparation

maintenance and administration of budgets A budgetary committee is formed
which comprises the departmental heads of various departments All the
functional heads are entrusted with the responsibility if ensuring proper
implementation of their respective departmental budgets
The chief executive is the overall in the charge of budgetary system
he constitutes a budget committee for preparing realistic budgets A budget
officer is the convener of the budget committee who co-ordinates the budgets
of different departments responsible fro their departmental budgets
2. Budget officer:
The chief executives appoints the budget officer such budget officer also called as
Budget controller or budget Director “ thus rank should be equal to other functional
managers” The Budget officer does not have the direct responsibility of
preparing the budgets the various functional managers prepare the budgets his role
is that of a supervisor the budget officer has the specific duty of the budgeting
activity by various departments and for co-ordination between them so that there
is a proper link between them He is empowered to scrutinize the budgets
prepared by different functional heads and to make changes in them if the
situation so demands. The budget officer works as a coordinator among different
departments he continuously monitors the actual performance different departments
steps to rectify the defiance if any he also informs the top management about the
performance of different departments
The budget officer will be able to carry out his work only if he is versant with the
working of all the departments he must have technical knowledge of the business
and should also process accounting knowledge.
2.5.3. Budget committee:
A budget committee is formed to assist the budget officer. The heads all the
important departments are made members of this committee. The committee is
responsible for preparation and execution of budgets. The chambers of this committee
put up the case of their respective departments to help the committee to take collective
decisions if necessary. The budget committees responsible for reviewing the budgets
prepared by various functional heads coordinate all the budgets and approve the final
budgets. The budget officer acts as a coordinate of this committee all the functional
heads are entrusted with the responsibility of ensuring proper implementation of their
respective final departmental budgets.
2.5.4 Budget centers:
A budget center is the part of the organization for which the budget is
prepared. A budget creator may be a department section of department or any other
part of department ideally, the head of every center should be a member of the budget
committee. However it must be ensured that each budget center at least has an indirect
representation in the budget committee.
The establishment of budget centers is essential for covering all parts of the
organization becomes easy when different centers are established the budget
centers are also necessary for cost control purpose.
2.5.3. Budget manual:
A budget manual is a document that spells out duties and responsible the
various executives conquered with it specifies among various functional areas
A budget manual covers the following matters.
A budget manual clarity defines the objectivities of budgetary control systems
it also gives the benefits and principles of this system.
the duties and responsibilities of various persons dealing with preparation and
execution of budgets are also given in the budget manual it enables the
management to know the persons dealing with various aspects to budgets
and provides clarity on their duties and responsibilities it gives the
information about the sanctioning authorities of various budgets the
financial powers of sanctioning authorities of various budgets the financial
powers of different manages are given in the manual for enabling the
spending amount on various expenses
a dropper table for budgets including the sending of performance reports is
drawn so that every work starts in the and a systematic control is exercised
the specimen forms and number of copies to be lased fro ore oaring budget
reports is also stated budget centers involved should be clearly stated.
the length of various budget periods and control points is clearly given
The problem follow all in the centre system clearly stated.
A method of accounting to be used for various expenditures is also stated in
the manual... A budget manual helps the documentation the role of every
employee his duties responsibilities the ways of undertaking various tasks etc
thus it also helps n reducing ambiguity at any point of time
2.5.6. Budget period:
A budget period is the length of time for which a budget is prepared upon a number of
factors the choice of a budget period depends upon the following considerations the
type of budget (long\short).
 The nature of demand for the products

 The timing for the availability of the finance
 The construction situation of the cycles
All the above mentioned factors are taken into account while fixing the period of
budgets
The financial manager usually responsible for organizing this budget he

must perform the following functions.
 To decide the general polices and guidelines

 To offer technical advice.
 To suggest changes.
 To receive and review individual budget estimates.
 To reconcile divergent with or without revisions.
 To coordinate budgeting activities.
 To approve budgets with or without revisions.
 To scrutinize control reports later on
 To scrutinize to budget reports later on.
 To disseminate these guidelines.
After finalizing the budget proposal the budget committee subjects the final budget to
the Board of Directories or Budget Director for approval.
2.5.7.Requisites for a successful budgetary control system.
Making budgetary control system successful requisites are required.
1. Clarifying objectives.
The budgets are used to realize objectives of the business. The objectives must be
clearly spelt out so that budgets are properly prepared. In the sense of clear goals, the
budgets will also be unrealistic.
2. Proper delegation of authority and responsibilities.
Budget preparation and control is done at every level of management. Even though
budgets are finalized at top level but involvement of persons. In lower levels of
management is essential for their success. This Hesitates proper delegation and
responsibility.
3. Proper communications system.
An effective system of communication is required for a successful budgetary control.

The flow of information regarding budgets should be quick so that these are
implemented. The upward communication will help in knowing the difficulties in
implementation of budgets. The performance reports of various levels will help top
management in budgetary control.
4. Budget education.
The employees should be educated about the benefits of budgeting system

they should be educated about their roles in the success of this system. Budgetary
control may not be taken only as a control device by the employees but it should be
used as a tool to improve their efficiency.
5. Flexibility.
Flexibility in budgets is required to make them suitable under changed

circumstances. Budgets are prepared for the future, which is always uncertain, even
though budgets are prepared by considering the future possibilities but still some
adjustments. Flexible makes the budgets more appropriate and realistic.
6. Motivation
Budgets are too implemented by human beings. Their successful

implementation will depend upon the interest shown by the employees. All persons
should be motivated to improve their working so that budgeting is successful. A
proper system of motivation is introduced for making is system a success.
2.6 Budgeting and budgetary control in kesoram ltd
2.6.1 Zero based budgeting:
Zero budgeting is the latest technique of budgeting and it has increased

use as a material tool. This technique was first used in America in 1962, by the
former president America, Jimmy Carter.
As the name suggests, it is starting from a "scratch”, the normal technique

of
Budgeting is to use previous levels as a base for preparing this year's budget.
This method carries previous years inefficiencies to the present year because we
taken last year as a guide, and decide "what is to be done this year when this
much was the performance of the last year.
In the zero based budgeting every year is taken as new year and previous
year is not as a base, the budget for this year will have to be justified according
to present situation, zero is taken as base and likely future activities are decided
according to present situations. In zero based budgeting a manager is to justify
why he wants to spend. The performance of spending on various activities will
depend upon their justification and priority for spending will have to be that an
activity is essential and the amounts asked for are really reasonable taking into
account the volume of activity.
2.6.2. Objectives of the budgetary system:
To prepare annual budgets in such a manner those managers at various levels in

organization carry out periodical exercise in respect of each contact or responsible
centre for physical planning and matching resources broke up into monthly targets or
cash flows.
To introduce and operate responsible for achievement of specified targets with
the recourses allocated for the purpose.
To bring about effective co-ordinate of all activities of the organization and
To gear up service divisions to meet effectively the requirements of project.
2.6.3 Budget period and phasing:
The budget period or annual begets should with the financial year. In October every
year the budget should drawn up for the ensuring the financial year in the form of
Budget estimates financial year in the form of Revised Estimates [R.E]...In addition
the budgets are to be reviewed on monthly basis by project review teams, in the light
of actual expenditure and projections in the budget period. Budget should indicate
monthly phasing of expenditure and targets for the first and quarterly phasing for the
second half of the year. At the time of review of the budget estimates to frame revised
estimates the quarterly phasing should be broken up into monthly phasing.
While drawing up the actual budget in October every year, the long term capital
budget for ongoing and new schemes should be formulated as apart of exercise as
preparation of annual plan. The long term capital budget should indicate for a period
of six years following the budget period of six years following the budget period of
six years following the budget period wise annual phasing of the capital expenditure
and physical schedules recourse based network.
2.6.4. Types of budgets in kesoram cement industries limited:
According to the nature expenditure budget are classified under:
 Direct capital outlay on works

 Technical consultancy
 incidental construction during construction
 Employee cost
Other establishment expenses:
 Training and recruitment

 Preliminary expenses
 misc.brought-out assets
 cash budget
 Township budget
2.6.5. Brief explanation to the nature of expenditure included in each

budget is indicated below:
Incidental expenditure during construction personal payment:
These comprises of salary, wages, allowance, contribution of PF and other

funds and other expenses such as LIC, medical reimbursement, canteen subsidy etc.
any provision of areas of salary D.A.
Office and other expenses:
Expenses incidental to construction and capital works not traceable directly to

incidental expenditure, during contribution equipments, vehicle running expense,
office rent.LC and cost of drawings, travelling expenses, printing and stationary,
communication expenses, advertisement for tenders etc. are major items in the
category.
Training recruitment & other deferred revenue expenditure:
The first part of the budget consists of expenses for training executives, and non
executive trainees, rent for training halls and expenses for management development
courses. The second part consists of expenses for recruitment such as advertisement
for recruitment, interview expenses, T.A. candidate etc. the third part combines
preliminary expenses including registration fees and research ad development
expenses.
Miscellaneous bought out passes:
Vehicles, furniture and fixtures equipments, hospital and medical equipment.

Miscellaneous assesses township figure in the budget.
2.6.6 Budget of service division corporate budgets:
A review of budgets of service and corporate divisions should be conducted at

quarterly intervals by corporate budget committee[CS'C].For this purpose corporate
accounts should report actual expenditure up to the need of the quarter by the 10th of
the month following quarter to corporate budget and budget-coordination of the
remaining period of the year should be sent to the corporate budget should put up a
consolidated report division wise and project wise to corporate budget
committee[CBC] by the 15th of the may, August, November and February every year.
2.7 Objectives of the current budgetary control system in kesoram
cement industries limited
 The current budgetary control system-operating phase has been compiled to

achieve the following objectives.
 To control actual performance with reference to standards/norms adapted in

the budget ascertain the deviations analyze and establish the reasons.
 To identify constraints in generation and timely action for estimation

constraints.
 To monitor the generation of internal recourses so as to ensure the availability

of adequate funds.
 To prepare the revenue budget so as to forecasting the periodical profitability

of the organization.
 To develop standards/norms of performance in the various areas of operation

and maintenance based on the experience.
 To ensure effective coordinate planning of all activities so that all the inputs
and services necessary for achieving the physical targets are available at
appropriate time.
 To create cost consciousness among the managers responsible for decision

making
 To provide data regarding operational norms and cost for the purpose of
formulating tariff.
 To provide data basis for assessment of working capital requirements
 To control the working capital particularly book debts spares and other items
inventory.
 To improve profitability and internal resources generation.
2.8. Stages in the formulation of performance budget:
2.8.1 Initial proposal:
In the initial proposal the project is required to indicate yearly targets. In the
addition to furnishing basic information like synchronization and commercial
generation dates.
Constraints and coal operation at less than the designed specification calorific
value of raw material and limestone, material consumptions. In physical terms for
items whose consumption value in Rs.5 lakhs or more planned shutdown for a
maintenance and overhauling and norms for serious operating parameters provided for
designs specifications and in the tariff agreements to the corporate budget committee.
In the initial proposals is planned to be submitted after considering else factors and
keeping in view the perspective plan of the organization, as well as norms for various
operating parameters. These targets and terms are then communicated to all stations
and transmissions line offices of the last week of July to be used for formulating
detailed budget in the final proposal.
2.8.2.Final proposal:
Budgeted balance sheet. Budgeted profit and loss account and budgets in the
form of cash budget along with the final proposal will consist of detailed supporting
schedules for each of the investment centre/cost centre. This final proposal needs to
be submitted to corporate centre with in three weeks of receiving approval for initial
proposal.
The final proposal, after approval by board, will become the basis of
monitoring performance for cost centers and investment centers.
The frequency and extent review and monitoring will be done is under:
1. The monitoring of actual performance against budgeted target for

investment center/profit center on monthly basis and for cost centers on quarterly for
remedial/corrective action.
2. The review of performance budget on quarterly basis to assess the

anticipated profitability.
The first step in the preparation of performance budget, O&M is formulation

of maintenance and overhauling schedules for boiler and TO with generation, then
considering the grid demand, the availability or inputs and factory problems, if any
the utilization of capacity will be worked out on month-month basis for the budget
period the gross generation targets can be worked and accordingly.
 Employee cost:
The basis of employee cost will be the approved manpower budget effective of
respective years of budget period. The estimation of employee cost is to be done for
each grade considering mid-point as the scale as basis pay and after reading various
allowances like "D.A., H.R.A., C.C.A" project allowance etc. admissible in respective
grades. This is to be worked 49 out or each of the budget periods based on existing
strength (at the time of estimation) in each grade and additions during each quarter
(taking 70% satisfaction for additions).
The provisions of LTC medical reimbursement, PF and other welfare

expenses in previous years are taken into account policies changes, if any the details
of welfare expenses like liveries and uniforms, safety expenses, accident
compensation, games & sports, canteen subsidy etc. are to list out as per chart of
account the provisions for incentive, bonus and payments of one time nature are to be
shown separately based on total employee cost for executives, supervisors and non-
supervisors and total man power in these categories ,separates of cost per employee
will be worked out for each of theses categories as under.
1. Salaries and allowance
2. Contribution of PF and other funds
3. Welfare expenses
The cost centre of employee cost will be worked out based on these rates
separately for theses executives, supervisors and non-supervisors. This will again be
consolidated separately for operations, maintenance and common [service] function.
The employee cost of common functions will be appropriated between construction
and O&M budgets in ratio of capital expenditure and sales during respective years.
 Repairs & maintainence:
In line, with costing system following three activities can represent major
classification of repairs and maintenance.
1. Major overhaul
2. Preventive maintenance
3. Breakdown maintenance
Normally, budgeting will be done for the former two; under each activity
separate estimates will be prepared for consumption of materials and maintenance
jobs. This estimation will be done at ach of sub cost centre wise details are required to
be mentioned.
The consumption material for repairs and maintenance will be classified into
spares, lubricant loose tools and plants, consumables and others. The cost centre totals
separately for three activities will be added to arrive at summary of material
consumption and maintenance jobs, which will be reflected in the profile & loss
account.
The material consumption, especially of spares, can be estimated based on the

expected life of various components/spares in the installed equipment the frequency
of breakdowns in the past and the requirement for preventive maintenance and major
overhauls. The actual life of components may be different from that indicated in the
manufacturer's specification. Therefore, it is very difficult to estimate requirements of
spares. But this estimation will become gradually accurate as more experience is
gained. For new stations it will be advisable to collect such information from old
stations that have gained experience in this field.
Normally, maintenance of equipment through contractors should be avoided.

But in certain areas, if the expertise and in house capability or sufficient man power is
not available, maintenance jobs can be got done through contractors. Such contracts
will need to be listed out separately .If owner supply items are covered in such
contracts the cost of theses items will be included in the material cost.
 Factory & general overheads
All the items of an expenditures under this head will be estimated based on
past trend with due adjustment for policy changes. The estimates will be given by cost
centre needs for items identified with respective cost centers. The total administrative
cost of service cost centers will be allocated between construction and O&M in the
ratio of capital expenditure and sales during respective years.
Depreciation:s
This is to be charged as per ES act from the year following the year in which
assets have been capitalized value and, rates of depreciation furnished by the site
finance and account for different categories of assets. Cost centre-wise depreciation
will be added to arrive at total deprecation for the investment centre.
Interest on fixed capital:
As per existing accounting policy, the interest is to be charged to profit &

loss account based on the loan content in the capitalized assets restricted to total
accrued interests on actual loans.
For budgeting purposes, interest will be worked on equated loan content or

equated loan which ever is less.
CHAPTER THREE
3.1 Review of literature:
Several authors have made various propositions and have defined the term budget;
from various perspectives, mostly on individual perspectives and experiences.
Aseshemic (1997) defined a budget as a financial or quantitative statement of plan to
be pursued for achieving given objective.
According to Brown and Howard (2002), a budget is a predetermined statement of

management policy during a given period which provides a standard for comparison
with result actually achieved.
Buyers and Holmes (2003) on their part define a budget as a financial and/or
quantitative statement prepared and approved prior to be pursued during that period
for the purpose of attaining a given objective. They opined that a complete budget of
the future operation of a business involves the matching of sales with production. This
is to set an attainable objectives and the planning of the work to be carried out and
costs to be incurred by the canters into which the business is divided for budgeting
purposes.
In the views of Charles (2003) a budget is a quantitative expression of plan of action

and an aid to coordination and implementation. This suggest that budgets are designed
to carry out a variety of functions; planning, evaluating performance, coordinating
activities, implementing plans, communicating, motivating and authorization, thus
punctuating the basic element of a result oriented budgetary system.
Pandey (2004) posits that a budget is a comprehensive and co-ordinated plan

expressed in financial terms for the operations and resources of an enterprise and for
some specific period in the future. According to him, the basic elements of a budget
are would include the following: • It is a comprehensive and co-ordinated plan. • It is
expressed in financial terms. • It is a plan for the firms operation. • It is a future plan
for a specified period.
Olafusi (2007) sums up budgeting in a write-up for the “Nigerian Accountant”, when
he defined budgeting as an indispensable tool for effective performance, by which
costs are assigned to specific tasks that are planned within a definite time period. To
Parker (2007), budgeting is a faith accompli in economic discourse, because resources

are scarce relative to need for them. Thus an overall perspective of budgeting is such
that, it can be viewed as an instrument that provides a benchmark for the
measurement and control of performance, while it equally provides feedback
information, which facilitates ability to take corrective measures, based on its
relativity to the nature and types of planning.
Cope (2008) views the term budget as a comprehensive plan expressed in financial
terms by which an operating programme is effective for a given period of time
(usually one year) including estimates of the services, activities and projects
comprising the programme, resultant expenditure requirement and the resources
usable for their support.
Onuorah (2011) however holds the view that budgeting spells out management plan in
quantitative terms. According to him, it also helps to evaluate organizational plans,
while at the same time performing two vital management functions namely: • The
formulation of a comprehensive future plan of action; • It compares actual result with
predetermined plan, thus, planning and control (which are two primary functions of
management) are also essential features of the budgeting process.
In the views of Lucey (2013) as it relates to the discourse, a budget is the annual
process of funds allocation, which should be seen as stages in the progressive
fulfillment of the long term objectives of the organizations. Accordingly, the
budgeting process steers the organization towards the long term objectives defined in
the corporate plan. An analysis of the above propositions on the concept of budget
reveals that although they have different interpretations they all have a common
element. In essence, a budget is a predetermined statement of management policy
during a given period, which provides a standard for comparison with the results
actually achieved. It involves an estimation of income and expenditure over a period
of time, thus the act of preparing a plan and quantifying it financially is known as
budgeting. A budget is generally the organization’s expectation in the future and it
basically involves planning (which involves the control and manipulation of relevant
variables - controllable and non-controllable) and reduces the impact of uncertainty. It
makes management active to influence the environment in the interest of the
enterprise. A budget expresses the plan in formal terms and helps to realize the firm’s
expectation. It is a comprehensive plan in the sense that all activities and operations
are considered when it is being prepared.
Mcalpine (2013) opines that it is important to ensure that the budgeting scheme is
comprehensive and effective and that the members of the organization know their
responsibilities under the scheme; what is needed to be done, how it should be done
and how performance will be measured. He further stated that these requirements are
fulfilled through comprehensive matter procedures. According to him, some of the
questions that have to be considered in drafting a procedure (among several others)
include:
• What budgets are in the scheme?
• Who is responsible for preparing and coordinating them?
• What decision has to be made in the preparation of each budget?
• What information will be required to guide these decisions?
• What are the sources of this information? How will it be collected, analyses an
interpreted to establish the facts? These procedures will be based on a factual
approach to decision making and in this connection, it has to be appreciated that
decisions based on incomplete information can be misleading as those based on
wrong information.
Owler and Brown (2015), puts the concept of budget within the theoretical
perspective when they opined that budgets are expected to be viewed from a
humanistic approach. This is because human aspect of budgeting is much more
important than the accounting techniques. The success of any budgetary system
depends on its acceptance by those saddled with the responsibilities of managing the
budget and the company members who are affected by the budgets. It is not enough to
prepare budgets and assign responsibility for them; the behavioral aspect must be
appraised. This fact was rightly and succinctly pointed out by Owler and Brown
(2015) when they stated that: “It is nevertheless necessary to consider also the
behavioral aspects of a system. The system will be ineffective if the people who are
operating the system have not been considered and are not asked to participate in it”.
To fully appreciate the theoretical framework of budgeting and budgetary control,
closely examined.
CHAPTER FOUR
4.1 Tabulation
Kesoram Industries Limited Revenue Budget (2008-09)
S.no Particulars Budget Actual Variance

Amount(Rs.
Estimated
Crores)
Amount(Rs.
Crores)
Sales
1 Fixed and recovery 689 599 90
2 Variable cost recovery 745 652 93
3 Fuel price adjustment recovery 784 823 -39
4 Own consumption 116 128 -12
5 Total of (1…4) 2334 2202 132
6 Average intensives 98 91 7
7 Other income 51 43 8
Grand total(5+6+7) 2483 2336 147
Table-I
Interpretation:
The data pertaining to the generation and consumption of cement at kesoram

Industries Limited have been obtained from the year 2008-09 and presented in Table-
1.The aspect included are total generation of cement in (cores Rs) and utilization for
auxiliary consumption, raw material consumption and line store respectively.During
the year 2008-09 the sales, fixed cost, variable cost, fuel price, consumption was
decreased. Sales decreased by 132 crores to the estimated budget. During the year
2008-09 the average intensives are decreased by 7 crores., there income also
decreased by 8 crores respectively. Finally, with regard to the result in revenue
budget of kesoram cement industries limited, totally decreased by 147 crores in the
year 2008-09 respectively.
Kesoram Industries Limited Operational expenditure budget for

the year 2008-09

Amount(Rs.
Estimated
Crores)
Amount(Rs.
Crores)
Variable cost
1 Raw material 400 423 23
2 Lime stone 430 450 20
3 Total of (1,2) 830 873 43
Operative
maintained cost
4 Chemicals and 120 140 20

water
5 Repairs & 240 275 35

maintenance
6 Employee cost 290 335 45
7 Stationary & 55 70 15
general
expenses
8 Rebate 10 12 2
9 Share of 8 10 2
operating
expenses
10 Total of(4..9) 723 842 119
Finance charges
11 Deprecation 38 11 -27
12 Interest on 18 20 2
fixed capital
13 Totalof-3 56 31 -25
Gland total 1609 1746 137

(3+10+13)
Interpretation:
Observed from the above table that the "Operational Expenditure Budget" of
kesoram cement industries Limited in the year 2008-09.
In the year 2008-09 variable cost components, Raw material consumption

23 crores increased and the lime stone consumption 20 crores also increased.
In operating & maintain aces cost components, chemicals & water, repair &
maintenance, employee cost, stationary & general expenses rebate and share of other
expenses in all are fluctuating expenses of the year 2008-09.how ever the total
operating maintenance costs are 119 crores increasing respectively.
In finance charges depreciation and interest on fixed capital, has been

included, the total finance
Charges recording decreasing 25 crores in the year 2008-09 respectively.

Table-I
S.no Particulars Budget Actual Amount(Rs. variance
Crores)
Estimated
Amount(Rs.
Crores)
Sales
1 Fixed and 689 617 72

recovery
2 Variable cost 829 735 94

recovery
3 Fuel price 815 856 -41

adjustment
recovery
4 Own 110 132 -22

consumption
5 Total of 2443 2340 103
(1…4)
6 Average 93 86 7
intensives
8 Grand 2585 2464 121

total(5+6+7)
Interpretation:

Industries Limited have been obtained from the year 2009-10 and presented in
Table-1.The aspect included are total generation of cement in (cores Rs) and
utilization for auxiliary consumption, raw material consumption and line store
respectively.
During the year 2009-10 the sales, fixed cost, variable cost, fuel price,
consumption was decreased. Sales consumption is deceased by 103 crores
respectively.
During the year 2009-10 the average intensives are decreased by 7 crores and
there income also decreased 11 crores respectively.
Finally, with regard to the result in revenue budget of kesoram cement

industries limited, totally decreased by 121 crores in the year 2009-10 respectively.
Kesoram Industries Limited Operational expenditure budget for
the year 2009-10
S.no Particulars Budget Actual variance

Amount(Rs.
Estimated
Crores)
Amount(Rs.
Crores)
Variable cost
2 Lime stone 420 465 45
3 Total of(1,2) 839 914 75
Operative maintained
cost
4 Chemicals and water 121 148 27
5 Repairs & maintenance 232 289 57
7 Stationary & general 59 77 18

expenses
8 Rebate 11 13 2
9 Share of operating 8 10 2
expenses
10 Total of(4..9) 745 885 140
Finance charges
12 Interest on fixed capital 18 20 2

13 Total of(11,12) 56 34 -22
Grand total (3+10+13) 1640 1833 193
Table-II
Interpretation:
Observed from the above table that the "Operational Expenditure

Budget" of kesoram cement industries Limited in the year 2009-10.

In operating & maintain aces cost components, chemicals & water, repair
& maintainance,employee cost, stationary & general expenses rebate and share of
other expenses in all are fluctuating expenses of the year 2009-10.how ever the
total operating maintenance costs are 140crores increasing respectively.

included, the total finance charges decreasing by 22 crores in the year 2009-10
respectively.
s.no Particulars Budget Actual Variance

Amount(Rs.
Estimated
Crores)
Amount(Rs.
Crores)
Sales
1 Fixed and 721 611 110

recovery

recovery
3 Fuel price 810 823 -13

adjustment
recovery
4 Own 121 131 -10

consumption
5 Total of (1…4) 2467 2294 173
6 Average 97 92 5
intensive
8 Grand 2617 2434 183

total(5+6+7)
Table-I
Interpretation:

Industries Limited have been obtained from the year 2010-11 and presented in Table-
1.The aspect included are total generation of cement in (cores Rs) and utilization for
auxiliary consumption, raw material consumption and line store respectively.
consumption was decreased. Sales consumption is decreased by 173 crores
respectively.
During the year 2010-11 the average intensives are decreased by 5 crores and
there income also decreased 5 crores respectively.

Kesoram cement industry Revenue Budget (2011-12)
Table-I

Amount(Rs.
Estimated
Crores)
Amount(Rs.
Crores)
Sales
1 Fixed and 724 618 106

recovery

recovery
3 Fuel price 820 863 -43

adjustment
recovery
4 Own consumption 132 148 -16
5 Total of (1…4) 2516 2369 147
6 Average 102 98 4
intensives
8 Grand 2674 2516 158

total(5+6+7)
Interpretation:

Industries Limited have been obtained from the year 2011-12 and presented in
Table-1.The aspect included are total generation of cement in (cores Rs) and
utilization for auxiliary consumption, raw material consumption and line store
respectively.
consumption was decreased. Sales consumption is decreased by 147 crores
respectively.
During the year 2011-12 the average intensives are decreased by 4 crores and,
their income also decreased 7 crores respectively.

Table showing operating expenditure of for the year 2011-2012
Table-II
Particulars Budget Actual Variance

Sr.n amount
Estimated
o
amount (RS. Crores)
(Rs. Crores)
Variable cost
2 Lime stone 450 470 20
3 Total of (1,2) 870 920 50
Operative maintained cost
4 Chemicals and water 130 150 20
5 Repairs & maintenance 280 300 20
7 Stationary & general expenses 65 80 15
8 Rebate 11 13 2
9 Share of operating expenses 8 10 2
10 Total of(4...9) 814 903 89
Finance charges
12 Interest on fixed capital 18 20 2
13 Total of(11,12) 60 35 -25

Grand total (3+10+13) 1744 1858 114
Interpretation:
Observed from the above table that the "Operational Expenditure Budget"
of kesoram cement industries Limited in the year 2011-12.

In operating & maintainaces cost components, chemicals & water, repair &
maintainance,employee cost, stationary & general expenses rebate and share of
other expenses in all are fluctuating expenses of the year 2011-12.how ever the
total operating maintenance costs are 89 crores increasing respectively.

included, the total finance charges recording decreasing by 25 crores in the year
2011-12 respectively finally with regard to the operational expenditure budget of
kesoram cement industries limited the total profit has increased by 114 crores
during the year 2011-12.
The overall budget results of kesoram cement industry is industries

limited is earning more profits.
Cash Flow
Mar Mar Mar

Mar 19 Mar 17
19 18 16
12 12 12
12 mths 12 mths
mths mths mths
Net Profit/Loss Before

-
Extraordinary Items And -266.20 0.00 -154.11 137.12
465.51
Tax
Net CashFlow From
755.90 0.00 214.66 118.67 209.53
Operating Activities
Net Cash Used In Investing -

136.47 0.00 1,804.13 545.01
Activities 453.38
Net Cash Used From - - -

0.00 59.51
Financing Activities 1,322.92 2,125.70 425.51
Adjustments on
Amalgamation / Merger / 0.00 0.00 0.04 0.00 -25.80
Demerger / Others
Net Inc/Dec In Cash And -
-430.55 0.00 -202.90 303.23
Cash Equivalents 179.17
Cash And Cash Equivalents

-153.71 0.00 25.46 228.36 140.27
Begin of Year
Cash And Cash Equivalents -

-584.26 0.00 25.46 443.50
End Of Year 153.71
Profit And Loss
Mar '19 Mar '18 Mar '17 Mar '16
12 mths 12 mths 12 mths 12 mths
Income
Sales Turnover 4,202.02 3,995.81 4,325.81 4,292.07
Excise Duty 0.00 0.00 0.00 414.35
Net Sales 4,202.02 3,995.81 4,325.81 3,877.72
Other Income 87.86 77.02 172.42 58.54
Stock Adjustments -75.17 -26.20 -125.85 87.96
Total Income 4,214.71 4,046.63 4,372.38 4,024.22
Expenditure
Raw Materials 1,333.70 1,361.58 1,343.00 2,241.11
Power & Fuel Cost 813.83 727.98 642.71 555.91
Employee Cost 355.56 411.27 377.22 180.41
Other Manufacturing
0.00 0.00 0.00 36.18
Expenses
Selling and Admin
39.28 55.12 55.28 195.09
Expenses
Miscellaneous Expenses 1,382.64 1,362.09 1,298.69 145.34
Preoperative Exp
0.00 0.00 0.00 0.00
Capitalised
Total Expenses 3,925.01 3,918.04 3,716.90 3,354.04
Mar '19 Mar '18 Mar '17 Mar '09
Operating Profit 201.84 51.57 483.06 611.64

PBDIT 289.70 128.59 655.48 670.18
Interest 512.36 443.02 283.47 153.86
PBDT -222.66 -314.43 372.01 516.32
Depreciation 153.15 146.10 136.22 111.86
Other Written Off 0.00 0.00 0.00 0.00
Profit Before Tax -375.81 -460.53 235.79 404.46
Extra-ordinary items 0.00 0.00 0.00 4.65
PBT (Post Extra-ord
-375.81 -460.53 235.79 409.11
Items)
Tax -11.95 -2.00 -7.87 30.37
Reported Net Profit -363.32 -577.56 -242.09 378.73
Minority Interest 0.00 0.00 0.00 0.00
Share Of P/L Of
0.00 0.00 0.00 0.00
Associates
Net P/L After Minority
Interest & Share Of -363.32 -376.06 133.90 374.09
Associates
Total Value Addition 2,591.31 2,556.46 2,373.90 1,112.93
Preference Dividend 0.00 0.00 0.00 0.00
Equity Dividend 0.00 0.00 0.00 25.16
Corporate Dividend Tax 0.00 0.00 0.00 4.28
Per share data (annualised)
Shares in issue (lakhs) 1,425.90 1,373.40 1,172.69 457.43
Earning Per Share (Rs) -25.48 -42.05 -20.64 82.80
Equity Dividend (%) 0.00 0.00 0.00 0.00
Book Value (Rs) 7.87 38.40 68.02 294.16
Balance sheet
Mar '19 Mar '18 Mar '17 Mar '09
Sources Of Funds
Total Share Capital 142.59 137.34 117.27 45.74
Equity Share Capital 142.59 137.34 117.27 45.74
Share Application Money 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00
Init. Contribution Settler 0.00 0.00 0.00 0.00
Preference Share
0.00 0.00 0.00 0.00
Application Money
Employee Stock Option 0.00 0.00 0.00 0.00
Reserves -30.33 390.10 680.39 1,299.83
Net worth 112.26 527.44 797.66 1,345.57
Secured Loans 2,990.13 3,732.03 2,912.98 1,536.27
Unsecured Loans 0.00 247.93 295.97 605.65
Total Debt 2,990.13 3,979.96 3,208.95 2,141.92
Policy Holders Funds 0.00 0.00 0.00 0.00
Group Share in Joint
0.00 0.00 0.00 0.00
Venture
Total Liabilities 3,102.39 4,507.40 4,006.61 3,487.49
Mar '19 Mar '18 Mar '17 Mar '09
Application Of Funds
Gross Block 3,194.60 3,169.74 2,678.93 2,787.13
Less: Revaluation
0.00 0.00 0.00 0.00
Reserves
Less: Accum.
422.58 279.67 135.38 913.22
Depreciation
Net Block 2,772.02 2,890.07 2,543.55 1,873.91
Capital Work in Progress 799.94 789.85 729.96 864.85
Investments 81.60 720.02 71.22 49.18
Inventories 361.19 458.01 466.56 589.06
Sundry Debtors 586.78 572.92 526.68 380.17
Cash and Bank Balance 46.51 107.64 177.76 56.86
Total Current Assets 994.48 1,138.57 1,171.00 1,026.09
Loans and Advances 346.62 629.77 817.35 513.12
Fixed Deposits 0.00 0.00 0.00 0.00
Total CA, Loans &
1,341.10 1,768.34 1,988.35 1,539.21
Advances
Deferred Credit 0.00 0.00 0.00 0.00
Current Liabilities 1,723.20 1,469.64 1,221.97 494.38
Provisions 169.07 191.24 104.50 345.29
Total CL & Provisions 1,892.27 1,660.88 1,326.47 839.67
Net Current Assets -551.17 107.46 661.88 699.54
Group Share in Joint
0.00 0.00 0.00 0.00
Venture
Miscellaneous Expenses 0.00 0.00 0.00 0.00
Total Assets 3,102.39 4,507.40 4,006.61 3,487.48
Contingent Liabilities 498.89 564.37 743.94 364.91

Book Value (Rs) 7.87 38.40 68.02 294.16
4.2 Testing Of Hypothesis:
From above analysis of collected data, hypothesis are interpreted as follows:

(H0): Budgeting and budgetary control is not a tool for effective decision
and planning, is rejected.
The study shows that budgeting and budgetary control has no negative
impact as a tool for effective decision and planning.
(H1): Budgeting and budgetary control is a tool for effective decisions

and planning, is accepted.
The study shows that budgeting and budgetary control has made a positive
impact as a tool for effective decision and planning.
CHAPTER FIVE
5.1 CONCLUSIONS
a. Every organization has predetermined set of objectives and goals, but reaching
their objectives and goals by proper planning and executing of these plans
economically.
b. The kesoram cement industries Limited objectives of planning and organizing

promoting an integrated development of Cement Company.
c. The corporation machine of kesoram cement industries is to make available

and quickly cement in increasingly small quantities, the company will spear
head the process of accelerated development of cement sector by
expeditiously.
d. The organization needs the capable personalities as management makes the

plans and implement of these plans are expressed in terms of budget and
budgetary control.
e. The kesoram cement Industries Limited has budget process in two stages. one
is the capital expenditure budget and another is operating maintenance budget,
the capital expenditure budget shows the list of capital projects selected for
investment along with their estimated costs, operating maintenance budgets,
the medical budgets are rarely used in the organization like long term budgets,
search & development budget for consultancy.
f. The Kesoram cement industries is to make efficient utilization of its resources

and implementation of sophisticated technology to produce available and
quality cement and also creating ambience of collective working of its
employees.
5.2 SUGGESTIONS:
Planning has become the primary function of management most of the

planning relates to individual situations and individual proposals. Budgets are
nothing but expressions largely in financial terms, budgetary control has, therefore
become and essential tool of management for controlling and maximizing profits.
a. Continuous comparison of actual performance with budgeted performance.
b. The company has to maintain super quick assets in order to maintain sound
liquidity.
c. A company has to recollect their own standing amount from the debtors
regularly.
d. The company has to maintain funds for long-term investment.
e. The company has to monitory from liability position in regular intervals.
f. The company must be conscious about their working capital position.
g. There is lot of pretension consistence demand the cement industry as a

cement producer the company can able to source, their funds throw more
share holders funds.
h. Company is maintaining the inventories a part from current assets for the
entire study period. To show that excessive inventory level are not good
for any organization and any company. Since the company has it
concentrate much more on inventory maintain.
5.3 References:
5.3.1 websites:
Web site of a company www.kesoram.com
Web site for cement industry www.kesoram
Websiteforcementindustry www.kesoramcement.com
Websiteofacompany www.kesocorp.com

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BUDGETING AND BUDGETORY CONTROL AS A TOOL

FOR EFFECTIVE DECISION AND PLANING

UNIVERSITY OF MUMBAI FOR PARTIAL

CHANGU KANA THAKUR ARTS,

REACCREDITED WITH ‘A+’ GRADE BY NAAC (3RD

To whomsoever it may concern

Name and Signature of

Apeksha Sanjay Potbhare

I would like to acknowledge the following as being idealistic channels and

I would like to thank my Principal, for providing the necessary facilities

I would like to thank my college library, for having provided various

2. Research and methodology

4 Data analysis, Interpretation and Presentation

5 Conclusions and suggestions

1.1 what is budget

A budget is a financial plan for a business, prepared in advance. A budget may be

Every organization achieves itspurposes by coordinating different

CIMA has defined as – “A financial and / or quantitative statement, prepared and

An analysis of the above definition reveals the following features of a budget.:

1.3 Characteristics of budget

 it is expressed in quantitative or monetary terms.

1.5 Objectives of budgetary control system

1.6 Advantages of budgetary control system

The significance of budgetary control can be undermined by the fact that

To practice budget control conscientiously, your company will need to

3.False sense of security.-

3.Costly: Application of this technique necessitates collecting of

History of the kesoram

Birla supreme in popular brand of kesoram cement from its prestigious

Kesoram cement undertaking marketing activities extensively in the states of Andhra

Best industrial relation award for 1994.

2. Research and methodology

 To provide a theoretical framework of budget, and budgetary control.

 To describe the profile of the organization as a material for undertaking a

 To analyze the budgetary system in Kesoram cement Industries Limited

 To develop standards/norms of performance in the various areas of operation

2.2 Hypothesis for selecting research topic:

Budgetary control is not limited to commercial and industrial firms attempting to

Budgeting is a management function that incorporates the following:

 Establishing detailed financial estimates

 Delegating specific responsibility

1. Danger of inaccurate estimates:

effectiveness of budgetary programme depends to a great extent on the accuracy with

which estimates are made.

in budgets to suit the changing circumstances.

and invalid under the changed conditions.

from all in the construction and implementation of budgets.

interest and confidence in budgeting, where quick results are expected.

their proper perspective.

7. Danger of over budgeting:

be avoided and subordinates should be adequately trained to read and administer

budgets in the proper manner.

8. No substitute for efficient management:

Inspite of these limitations, budgets provide guidelines to managerial action in more

budgetary control system.

Budgeting is a pre-budget control, budget execution is a matter of control, budget

Budget management functions In the budget- feedback control, budget

2.5 Data collection

2.5.1 Planning of budget

2.5.2 Essential of budgetary control

1. Organization for budgetary control:

The proper organization is essential for the successful preparation