A SYNOPSIS ON

SAVITRIBAI PHULE PUNE UNIVERSITY

MVP’S

KRT Art’s, BH Commerce and AM Science (KTHM) college,

Nashik

Department of Commerce

A STUDY OF BUDGET AND BUDGETORY CONTROL SYSTEM

(With reference to “Kamdhenu Engineering Company”)

Research Student

Nandini Rajendra Nerkar

(M.Com.II, Sem.IV)

Research Guide

Prof. S. S. Deshmukh Sir

Year 2021-22

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 Table Of Contents
PARTICULARS Page No.
1. Introduction…………………………………………………………………………………………………..4
1.1 Profile of Kamdhenu Engineering Company………. ……….…………………………………...….…4
2. Statement of Research Problem………………………………………..…….………………….……….…...4
3. Significance of Research Study……………………………………...…………………………….……....…5
4. Objective of Study…………………………………………………..……………………………………..…5
5. Hypothesis…………………………………………………………………………………………………....5
5.1 Meaning of Hypothesis…………………………………………..………………………………….…....5
5.2 Hypothesis of Research Study…………………………………..………………………………………..5
6. Review of Literature……………………………………………..………………………………….....……..6
7. Scope and Period of Research…………………………………..…………...…………………………….…7
7.1 Scope of Research…………………………………………..……………………..………………….….7
8. Limitation of Research Study…………………………………..…………………………………..…….…..7
9. Research Methodology………………………………………..………………………………………...……7
9.1 Data And Data Analysis……………………………………..………………………………...……..….8
9.2 Data Collection…………………………………………….……………………………………….…....8
9.2.1 Primary Data…………………………………………..………………………………………….….…8
9.2.2 Secondary Data……………………………………..………………………………...…………….…..8
9.3 Data Interpretation……………………………………..……………………………….....…………..…8
9.4 Analysis from Survey…………………………….….………………………………………………..…8
10. Working Definitions…………………………….….…………………………………………………….....8
10.1 Types of Budgets……………………………….………………………………………………….........8
1) Long Term Budgets…………………………….………………………………………………………....8
2) Short Term Budgets…………………………….…………………………………………………...…....8
3) Current Budgets…………………………………………………………………………………………..9
4) Interim Budgets……………………………………………………………………………………...........9
11. Classification Of Budget According To Content…………………….…………………………..…….…..9
1) Budgets In Physical Terms……………………………………….…………………………….….……..9
2) Budgets In Monetary Terms……………………………………………………………………................9
12. Classification Of Budgets According To Function……………………………………………………..….9
1) Operating Budgets………………………………………………….……………………………………...9
A) Programmed Budgets…………………….…………………………………………………………..10
B) Responsibility Budgets………………….………………………………………………………..…..10
2) Financial Budgets…………………………….……………………………………………………….…...10
3) Master Budget………………………………………………………………………………………..……10
13. Classification On The Basis Of Flexibility………………………………………………………………..10
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 A)Fixed Budget………………………………………………………………………………………….11
B) Flexible Variable Sliding Scale Or Control Type Budget……………………...……………….……11
14. Conclusion and Suggestion…………………………………………………………………………...…...12
15. References…………………………………………………………………………..……………….…….12
16. Website….....................................................................................................................................................12

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1. INTRODUCTION:
Budget is essential in every walk of our life national, domestic and business. A budget is prepared to
have effective utilization of funds and for the realization of objectives as effectively, as possible. Budget is a
widely practiced technique and most of us use budgets in some way or the other. Budget is one of the
emphasized terms used in efficient methods of planning and control. It is employed, no doubt, in large business,
houses, but even his small businesses are using it, in some informal manner. Budget in common parlance is
understood as planning for expenditure.
In the view of E.H.Grahem of the chrysler corporation, “of the management tools used by chrystler
corp., including computers, pert, operations research (or) and system analysis and so on, budgets are
undoubtedly the most important tools”.
Budget is always expressed in terms of money and quantity. The techniques of budgeting are important
applications of management accounting. Budgets are set in large business, houses as well as in families. It is
basically a statement of expected income and expense under certain anticipated operating conditions.
It is well recognized that budget are among the essential tools of management of any organization unlike
other management aids, budgets are made use of practically by all functionaries in the organization. Budget not
only reflect the plan of action for different levels of management but are also useful to monitor various activates
and initiates mid course corrective actions. Budgets just do not reduce the managerial functions to a mere
formula but aids as managerial tool.
Hence “effective use” of this art as well science. Thus it needs continuous budget education and creation
of evaluation and performance through budgets. Budgets provide management summaries picture of the result
to be expected, also forms the proposed plans of operations. They enable the management to determine whether
the plan is satisfactory. Budgets serve as a guide to executives and departmental heads. They measure or
performance since “budget derivations” reflects either the organization failure to achieve the plan standards of
performance or its ability to better them.
The budgeting is a means of obtaining the most productive and profitable use of the companies
resources through planning and control. Budgets are helpful in coordination the various activities (such as
production, sales, purchase etc.) of the organization with the result that the activities precede according to the
objective.
Budgets are means of communication. Ideas of the top management are given the shape of the budget and
are passed on the subordinates who are to give them the practical shape. As the activities of various departmental
heads are coordinated at the preparation of budget, it is helpful in developing a team work which is very much
needed for the very success of an organization. Thus, a budget is necessary to plan for the future, to motivate the
staff associated, to coordi9nate the activities of different levels. A budget is an overall blue print of a
comprehensive plan of action expressed in physical and financial terms; it includes plan for each of the activity
responsibility centers of the business and provides a link between the physical and financial plans of various
departments of a company. It is also a document to serve as control for monitoring and review. The budget
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system should be such that it makes it imperative for management to establish goals and objectives, define
policies, develop programmers’ both long term and short term, measure performance against the targets and in
the process, revises the part of management. In a way of budgetary control system has been increasing an
enterprise’s profits, and a goals-achieving machine for facilitating organizational coordination and planning while
achieving the budgeted targets.

1.1 Profile of Kamdhenu Industries Company:

"Incepted in 1991, we Kamdhenu Engineering Company are leading organization instrumental in
manufacturing and supplying an optimum quality range of Tractor Mounted Loader, Fixed Type Loader,
Hydraulic Cylinder, Post Hole Digger & many more. Situated at Nashik (Maharashtra, India), we are backed by
an advanced infrastructural base that helps us to manufacture qualitative products. Spreads over a wide area, we
have divided this infrastructural base into different departments such as manufacturing, quality control, research
& development, sales & marketing and warehousing & packaging. Our manufacturing department is well
armed with all the requisite machines and tools. Under the direction our mentor, Mr. Manohar Bhat, we have
achieved a distinct position in the industry. His efficient and crystal clear business methodologies help us
building fruitful relation with our clients.

Details of Kamdhenu Engineering Company

Address H-40, Industrial Area MIDC, Ambad Nashik 422010
Maharashtra, India
Nature of Business Manufacturer Additional Business Service Provider,
Supplier
Company CEO Mr. Manohar Bhat
Total Number of Employees 26 to 50 People
Year of Establishment 1991
Legal Status of Firm Partnership Firm
Annual Turnover Rs. 2-5 Crore
Gmail response@kamdhenuengineering.com

2. STATEMENT OF THE RESEARCH PROBLEM:

The main focus of the problem is based on problem of poor performance in an organization to lack of
effective and efficient budgets and budgetary control system. Also problem of inadequate allocation of
resources to meet organizational goals and maximize performance. Further more studies on problem of
reflecting data of the past and present and how to unable predictions and forecast to be made out in future.

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 The decision as to how to distribute limited financial and non-financial resources, in an effective and
efficient manner, is an important challenge in all organizations. In most large and complex organizations, this
task would be nearly impossible without budgeting. Without effective budget analysis and feedback about
budgetary problems, many organizations would become bankrupt. Some of the problems arise from inadequate
data to formulate and implement a proper budget; and non existence of well defined structure, which leads to
overlapping of duties. These deficiencies can therefore be addressed through the use of budgeting technique.
Therefore, this study traces the extent by which budgeting can used as a good planning and controlling tool.

3. SIGNIFICANCE OF RESEARCH STUDY:

The addition of knowledge is basically the aim of every research and this research work seeks to
achieve more importantly, this research is necessary in understanding how the budgetary control affect
organizational performance. Also it is a tool which measures managerial performance of an organization in
brings solution in allocation of resources and promotes good morale and harmony in the organization.
The research apart from explaining the concept of budget and budgetary control looks into in the
comparison between the past and present budget in future prediction. It will contribute immensely to the
existing knowledge on the concept on how Kamdhenu Engineering Company can take part in budget
preparation in order to achieve an organizational goal. In conclusion, numerous pressure that are mounted in job
constrain to manager are reduced and more measures are taken in dressing the issues.

4. OBJECTIVES OF THE STUDY:

1) To study the various aspects of budget and budgetary control
2) To study the performance of the organization in terms of profitability.
3) To study revenue receipt and revenue expenditure of the organization
4) To study the actual performance with budget performance.
5) To facilitate centralized control with delegated authority and responsibility.
6) To describe the profile of the organization as a backdrop for undertaking a study of budgetary control system.
7) To analyze the budgetary system in practice with particular reference to their objectives and phases of
organizational and re-appropriation.

5. HYPOTHESIS:
5.1 Meaning of Hypothesis:
A research hypothesis is a scientific, clear, and testable preposition or predictive statement about the possible
outcome of scientific research of study based on a particular property of a population, such as presumed
differences between groups on a particular variable or relationships between variables. A research hypothesis is
a statement that will be tested by research.

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 5.2 Hypothesis of Research Study:
1) There is no significant relationship between budgetary planning and control on organization performance
2) Effective budgetary control does not influence the result achieved
3) Budgeting technique is of no importance in a manufacturing firm
4) Budgetary control does not affect the working performance of an employee in a manufacturing concern.

6. REVIEW OF LITERATURE:
Historically, the scripture made us to believe that budget originates as far back as the stone age period, when
the early man failed to get all his needs he was forced to plan and manage the little he had in terms of foods and
other essential things. He rationed his food over a period of time so as to prevent himself from being starved,
though his wants as compared to what the modern man will require are very small, he still could not get all he
needed to the level of his utmost satisfaction. He pre-served the fruits he plucked during their seasons for the
period of glut, when they are not in plenty, so as to avoid starvation during that period. He also preserved the
excess bush meats, as he was not sure he would be able to get animal killed on daily basis. As far as the early
man plans for the future because of uncertainty that pervades the future, he is said to be involved, directly or
indirectly, in primitive budgeting.
Modern day budgeting started during the Egyptian and Roman civilization periods around 2500BC and
500BC respectively. Then the merchant’s belief in drafting all expected expenditure against expected income in
respect of their businesses so as to be able to know the kind of venture that would be profitable. Formal
presentation and preparation of budget started during the middle age.
In England when the Chancellor of the Exchequer, British equivalent of our Minister of Finance, used to pre-
pare his annual account to be read to the parliament in a scroll, usually put in a bag. During the time for discussion
on the finances of the state he used to open his bag containing the statement of accounts to be read to the
parliament. The name of this bag is called the budget, which has its original word in French (baguette). With
time, the financial statement took over the name of the bag; hence today’s statement of finance for governments
on yearly basis is referred to as the budget. It is the same Great Britain that firstly adopted the practice of an
annual national budget in 1787, the parliament adopted the Consolidated fund Act which provided for a single
general fund for receiving and recording all revenue and expenditure. This laid the basis for a modern budget
system, by 1822 the chancellor of Exchequer had adopted the practice of presenting an annual budget statement
to account committee for respective review of chequer and Audit Act provided an independent post audit. The
United State adopted the system by 1912, as the federal budget system was set up by the budget and accounting
Act of 1912 and by 1831, the French parliament controlled the details of appropriation. Currently, much attention
has been given to the strengthening of budget and planning and their interrelationship in developing countries
including Nigeria. The advocacy for this has come from prominent international agencies as United Nation,
International Monetary Fund, World Bank and United State Agency for International Development. All these
agencies are all interested in encouraging developing and underdeveloped nations to improve their budget
practice. All these show the importance attached to budget as a management process.
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 7. SCOPE AND PERIOD OF RESEARCH:
7.1 Scope of Research:
The scope of the study is very wide as it ranges from the various specific budget of each department to the
master budget and performance budget of the organization.Master budget is a “summery of the budget scheduled
in capsule form made for the purpose of presenting in one report the highlights of the budget for cast”.
Performance budget involves evaluation of the performance of the organization in the contexts of both specific
as well as overall objectives of the organization according to the national institute of bank management
performance budgeting technique is, “the process of analyzing identifying simplifying and crystallizing specific
performance objective of a job to be achieve over a period in the framework of the organization objectives, the
purpose and objectives of the job. The technique is characteristic by its specific directions towards the business
objectives of the organization”.

7.2 Period of Research:

The researcher will study the last 1 years study of budget and budgetary control system in Bhargavi Sales.
Budgeting and budgeting control are tasks that every organization has to undertake to successfully manage the
operations of the entity. These tasks are very important organizational activities which need time to prepare,
operationalize and implement successfully.

8. Limitation of Research Study:

1) Estimates are used as basis for budget plan and estimates are based on available facts and best managerial
judgment
2) Budgetary control cannot reduce the managerial function to a formula. It is only a managerial
3) Tool which increase effectiveness of managerial control
4) The use of budget may lead to restricted use of resources.
5) Efforts may therefore not be made to exceed the performance beyond the budgeted targets.
6) Frequent changes may be called for in budgets due to fast changing industrial climate.
7) In order that a system may be successful, adequate budget education should be imparted at least through the
formative period. Sufficient training programs should be arranged to make employees gibe positive response to
budgetary activities.

9. RESEARCH METHODOLOGY:
The proposed study is carried with the help of both primary and secondary sources of data.

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 9.1 Data and Data Analysis:
The study focuses on budgeting and budgetary control of manufacturing Kamdhenu Engineering Company, with
special reference. In order to carry out an in-depth and comprehensive study, some respondents were randomly
selected. These respondents cut across all the groups of the Kamdhenu Engineering Company.

9.2 Data collection:

There are two sources of data collection i.e. primary data and secondary data. The data collected is checked,
analyzed and study properly to conclude ethic research in a systematic way.

9.2.1 Primary Data:

The primary data is a source of data where the information is collected by using some techniques like surveys,
questionnaire, interview, personal interview etc.

9.2.2 Secondary Data:

All the secondary data used for the study has been extracted from the annual reports, manuals and other
published material of the Kamdhenu Engineering Company.

9.3 Data Interpretation:

Data analysis and interpretation is the process of assigning meaning to the collected information and
determining the conclusions, significance, and implications of the findings. The interpretation of data helps
researcher to categorize, manipulate, and summarize the information in order to answer the questions.

9.4 Analysis from survey:

Data collection surveys collect information from the targeted Kamdhenu Engineering Company and people about
their opinions, behavior, and knowledge. Written questionnaires, face to face or telephonic interviews etc.

10. WORKING DEFINITIONS:

10.1 TYPES OF BUDGETS:

1) Long Term Budgets:

The long-term budgets are the budgets prepared for a long period of five to years. They are concerned with
planning the operations of a firm over a considerably long period of time. The financial “Controller” exclusively
for top management usually prepares long-term budgets. These budgets are useful in terms of physical units
(i.e.….. quantities) or percentages, the accurate values may be difficult to forecast over such long period. Initial
expenditure, research and development budgets, etc, are examples long-term budgets.

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2) Short Term Budgets:
Short –term budgets are budgets prepared for a short period of one to two is. They are prepared for those activities
the trend in which cannot be seen easily over long periods. These budgets are very useful are very useful in case
of consumer goods industries such as sugar, cotton, textiles, etc. they are generally, prepared in terms of physical
units (i.e., Quantities) as well as monetary units (i.e., values...) Materials budget, cash budget. Etc are examples
of short-term budgets. They are useful to lower level of management for control purpose.

3) Current Budgets:
Current budgets are a budget, which is established for use over a short period of time and is related to
current conditions. Thus current budgets are essentially short term budgets adjusted to current (i.e., present or
prevailing) conditions or circumstances. They are prepared, for a very short period. Say, a quarter or a month.
They relate to current activities of the budgets.

4) Interim Budgets:
Interim budgets are budgets, which are prepared in between two budgets periods. These budgets may get
integrated with the budgets of the following period.

11. CLASSIFICATION OF BUDGETS ACCORDING TO CONTENT:

Budget may be classified into budgets in physical terms and into budgets in monetary terms.

1) Budgets In Physical Terms:

Budgets in physical terms are budgeted that budget in terms of quantities only. They do not include
corresponding rupee value. Long –term budgets are usually in prepared in physical terms. Examples of such
budgets are production budget, materials budget, etc.

2) Budgets in monetary terms:

Budgets in monetary terms are budgets that budget in terms of quantities as well as their corresponding rupee
value. Sales budget, purchase budget, etc are examples of such budgets. Budgets such as cash budget capital
expenditure budget, etc that may not have physical quantities also from part of budgets in monetary terms.

12. CLASSIFCATION OF BUDGETS ACCORDING TO FUNCTION:

Budgets can be classified into
1. Operating Budgets
2. Financial Budget
3. Master Budget
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 1). Operating Budgets:
These budgets relate to different activities or operations of a firm. The number of such budgets depends
upon the size and nature of the business, the commonly used operation budgets are:
1) Sales Budgets
2) Purchase Budget
3) Raw Materials Budget
4) Lab our Budget
5) Factory Utilization Budget
6) Manufacturing Expenses or Works overhead budget
7) Administrative and Selling Expenses Budget etc.

The operating budget for a film may be constructed in terms of programmers or responsibility areas, and hence
may consist of:
A) Programmed Budget
B) Responsibility Budget

A) Programmed Budget:
It Consists of expected revenues and costs of various products or projects that are termed as the major
programmers of the firm, Such a budget can be prepared for each product line or project showing revenues, Cost
and the relative profitability of the various in locating areas where efforts may be required to reduce COST5 ad
increase revenues. They are so useful in determining imbalances and inadequacies in programmers so at
corrective action may be taken in future.

B) Responsibility Budget:
Here the operating of a firm is constructed in terms of responsibility areas. Such a budget shows the plan in terms
of person’s for achieving them. It is used by the management as a control thus used by the management as a
control device to evaluate the performance of executives who are in charge of various cost centers. Their
performance is compared to the targets (Budgets), set for them and proper taken for adverse results.
Responsibility areas may be classified under three brand categories:
Cost / expense center
I. Profit center
II. Investment center

2) Financial budgets:

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Financial budgets are concerned with cash receipts and payments, working capital, financial position and results
of business. The commonly used financial budgets include Cash budget, Capital budget, and Income statement
budget, Statement of earnings budget, Budgeted balance sheet or position statement.

3) Master Budget:
The Master budget is the summary budget incorporating its functional budgets. All the operational and
financial budgets are integrated into the Master budget. The budget officer for the benefits of the top-level
management prepares this budget. This budget is used to coordinate the activities of various functional
departments. It is also used an effective control devices.

13. CLASSIFICATION ON THE BASIS OF FLEXIBILITY:

A) Fixed Budget:
According to ICMA London “a fixed budget is a budget which is designed to remain unchanged
irrespective of the level of activity actually attained”. It is based on a fixed volume of activity and shows one
volume of output and related cost. It is not adjusted according to the actual level of activity attained.
A fixed budget is useful only when the actual level of activity corresponds with the budgeted level of
activity. But this, generally, does not happen; as such a fixed budget is not useful for managerial purposes.

B) Flexible Variable Sliding Scale or Control Type Budget:

According to ICMA, London “a flexible budget is a budget which is designed to change in accordance
with the level of activity) actually attained”. Thus, a flexible budget changes according to the change in the level
of activity. In other words it provides the budgeted costs at any level of activity.
Business activity cannot be accurately predicted on account of uncertainties of business environment. A
flexible budget contains several estimates for different assume circumstances instead of just one estimate, it
provides for automatic adjustments with changes in the volume of activity. Hence a situations operating in an
unpredictable environment.

14. CONCLUSION AND SUGGESTION:

The relevant research questions raised above has been examined in the light of mode of operation of
Kamdhenu Engineering Company. In the operation of Kamdhenu Engineering Company, it has been discovered
that quite a number of the employees know the budgetary system of the Kamdhenu Engineering Company and
there exist considerable participation of lower level employees in planning and budgeting. It was also discovered
that the work force is well motivated and competent enough to propel the Kamdhenu engineering company to a
greater height. Finally, it can be said that dedicated work force, improved technology and effective policies
(budgeting inclusive) has helped the Kamdhenu Engineering Company to remain effective and efficient.

15. REFERENCES:
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1) Chartered Institute of Management Accountants (2000), “Management Accounting Official Terminologies”,
CIMA
2) Prasanna Chandra, Financial Management: Theory and Practice, 7/e, 2008, Tata McGraw-Hill Education.
3) I.M.Pandey, financial management: Principles and Practice 9/e, 2005, Vikas publishing.
4) R.K Sharma Shashi K Gupta, financial management: Principal and Management, 7/e, 2002, Kalyani Publishers.
5) Dr. S N Maheshwari: management Accounting and financial control, 6/e, 1996, sultan chand and sons.
6) M. Y. Khan, and P.K Jain: Basic financial management, 3/e, 1982, Tata McGraw-Hill.
7) A. W. Willsmore: business budget and budgetary control, 2/e1949, pitman&sons.

16. WEBSITE:
www.kamdhenuengineering.com
www.businessmanagementideas.com
http://www.dynamictutorialsandservices.org.

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