CHAPTER I

INTRODUCTION

1
 INTRODUCTION
A budget is a quantitative expression of a plan of action relating to the forthcoming
budget period. It represents a written operational plan of management for the budget
period.” A plan expressed in money. It is prepared and approved prior to the budget
period and may show income, expenditure, and the capital to be employed, may be
drawn up showing incremental effects on former budgeted or actual figures, or be
compiled by zero based budgeting”. Budget and Budgetary control. The terms budget
and budgetary control are often used interchangeable to refer to a system of
managerial control. Budgetary control implies the use of a comprehensive system of
budgeting to aid management in carrying out its functions like planning, co-ordination
and control.

BUDGET:

According to Institute of Chartered Management Accountants (ICMA) England “A

plan qualified in monetary term prepared and approved prior to a defined period of
time usually showing planned income to be generated and or to be incurred during
that period and the capital to be employed to attain a given objective”.

BUDGETORY CONTROL:

The Chartered Institute of Management Accountants (CIMA) London defines

budgetary control as establishment budget relating to the responsibility of executives
to the requirement policy and the continuous comparison of actuals with budgeted
results either to secure individuals action the objective of policy or to provide a basic
for its revision.

A budget is the monetary and quantitative expressions of business plans and policies
to be pursued in the future period of time the term budgeting is used for preparing
budgets and other procedures for planning co-ordination and control of business
enterprise. Budgetary control is the process of determining various budgeted figures
for the enterprises for the future period and then comparing the budgeted figures with
the actual performance for calculating variations, if any first of all budgets are
prepared and then actual results are recorded.

2
 NEED FOR THE STUDY

The day-to–day’s cut throat competition in the world of business, trade and commerce
is leading to many complexities which when is not predicted properly according to the
fast growing changes that are taking place in the market situations may result in
adverse progress and sometimes may leads to exit from the industry or domestic
markets.

To avoid these kinds of threats endangering the survival prospects, there is a

compulsion today to have a proper plan of action in predicting the prices, costs,
funding the proposals, controlling the same and implementing the framed budgets and
utilize the scarce resources avoiding maximum extent of wastages.

Budget shows the real need to know the SWOT-analysis which in turn is simply
known as Strengths, Weaknesses, Opportunities, and Threats. Following these
guidelines it is very simple to make proper budget allocations according to
requirement and make timely decisions. Budgeting and Budgetary control helps in
this context of dynamism.

Preparation of Budgets in various fields like purchases, production, salaries and

wages, and sales process of the company on a monthly basis, quarterly and half-yearly
basis gives effective control system in financial management and thus makes the
management aware of the regular price changes.

3
 OBJECTIVES OF THE STUDY

 To present the conceptual frame work of budget and budgetary control

 To analyze the budgetary system in practice in ICICI with particular reference to
their objectives and phases of organizational and re-appropriation.
 To analyse the budgeted estimates and accruals of the revenue expenditure and
revenue receipts.
 To study the variations in the actuals from the budgeted estimates.
 In addition to the analysis of the conventional budgetary system in practice in
ICICI. The study aims at evaluation and modification to the budgetary system
with reference to the various types of budgets.

4
 SCOPE OF THE STUDY

The scope of the study limited to collecting the data published in the reports of the
company and opinions of the employees of the organization with reference to the
objective stated above and theoretical framework of the data. With a view to suggest
solutions to various problems relating to budget and budgetary control.

5
 METHODOLOGY

Research is the systematic investigation of fact that seeks to establish relationship

between two types. The source which is not readily available & which is collected by
questionnaires, personal interview

Primary data: The source which is not readily available & which is collected by
questionnaires, personal interview.

 Officers of accounts sections.

 Executives and staff of financial and accounts department.
 Meeting with concerned people.
 Personal observation.
Secondary data: Secondary data which is readily available and collected from
reports, journals, books and periodicals
The main source for the project is purely secondary which is collected from
 Annual reports of ICICI. Financial management text books.
 Printed Materials.
 Journals and magazines
 News papers.

6
 LIMITATIONS OF THE STUDY

 The study is purely based on the information provided by the company

 Estimates are used as basis for budget plan and estimates are based mostly on
available facts
 Frequent changes may be called for in budgets due to first changing industrial
climate.
 To study is restricted to ICICI. Co.
 To study is restricted to limited period of 30 days.

7
 CHAPTER II
INDUSTRY PROFILE
&
COMPANY PROFILE

8
 INDUSTRY PROFILE

A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while
enriching investors. Government restrictions on financial activities by banks vary over
time and location. Banks are important players in financial markets and offer services
such as investment funds and loans. In some countries such as Germany, banks have
historically owned major stakes in industrial corporations while in other countries
such as the United States banks are prohibited from owning non-financial companies.
In Japan, banks are usually the nexus of a cross-share holding entity known as the
keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services
(and now real estate services) to their clients.

The level of government regulation of the banking industry varies widely, with
countries such as Iceland, having relatively light regulation of the banking sector, and
countries such as China having a wide variety of regulations but no systematic
process that can be followed typical of a communist system.The oldest bank still in
existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been
operating continuously since 1472.

History:
Origin of the word:

The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above
a desk covered by a green tablecloth. However, there are traces of banking activity
even in ancient times, which indicates that the word 'bank' might not necessarily come
from the word 'banco'.

9
In fact, the word traces its origins back to the Ancient Roman Empire, where
moneylenders would set up their stalls in the middle of enclosed courtyards called
macella on a long bench called a bancu, from which the words banco and bank are
derived. As a moneychanger, the merchant at the bancu did not so much invest money
as merely convert the foreign currency into the only legal tender in Rome—that of the
Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin

from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–
325 BC, presented in the British Museum in London. The coin shows a banker's table
(trapeza) laden with coins, a pun on the name of the city.In fact, even today in
Modern Greek the word Trapeza (Τράπεζα) means both a table and a bank.

Traditional banking activities:

Banks act as payment agents by conducting checking or current accounts for

customers, paying cheques drawn by customers on the bank, and collecting cheques
deposited to customers' current accounts. Banks also enable customer payments via
other payment methods such as telegraphic transfer, EFTPOS, and ATM.Banks
borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend
money by making advances to customers on current accounts, by making installment
loans, and by investing in marketable debt securities and other forms of money
lending.

Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks that
provide payment services such as remittance companies are not normally considered
an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and lend
most funds to households and non-financial businesses, but non-bank lenders provide
a significant and in many cases adequate substitute for bank loans, and money market
funds, cash management trusts and other non-bank financial institutions in many cases
provide an adequate substitute to banks for lending savings to.

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Entry regulation:

Currently in most jurisdictions commercial banks are regulated by government

entities and require a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is
extended to include acceptance of deposits, even if they are not repayable to the
customer's order—although money lending, by itself, is generally not included in the
definition.

Unlike most other regulated industries, the regulator is typically also a participant in
the market, i.e. a government-owned (central) bank. Central banks also typically have
a monopoly on the business of issuing banknotes. However, in some countries this is
not the case. In the UK, for example, the Financial Services Authority licences banks,
and some commercial banks (such as the Bank of Scotland) issue their own banknotes
in addition to those issued by the Bank of England, the UK government's central
bank.

Definition:

The definition of a bank varies from country to country.

Under English common law, a banker is defined as a person who carries on the
business of banking, which is specified as:

 conducting current accounts for his customers

 paying cheques drawn on him, and
 collecting cheques for his customers.

In most English common law jurisdictions there is a Bills of Exchange Act that
codifies the law in relation to negotiable instruments, including cheques, and this Act
contains a statutory definition of the term banker: banker includes a body of persons,

11
whether incorporated or not, who carry on the business of banking' (Section 2,
Interpretation). Although this definition seems circular, it is actually functional,
because it ensures that the legal basis for bank transactions such as cheques do not
depend on how the bank is organised or regulated.

The business of banking is in many English common law countries not defined by
statute but by common law, the definition above. In other English common law
jurisdictions there are statutory definitions of the business of banking or banking
business. When looking at these definitions it is important to keep in mind that they
are defining the business of banking for the purposes of the legislation, and not
necessarily in general. In particular, most of the definitions are from legislation that
has the purposes of entry regulating and supervising banks rather than regulating the
actual business of banking. However, in many cases the statutory definition closely
mirrors the common law one. Examples of statutory definitions:

 "banking business" means the business of receiving money on current or

deposit account, paying and collecting cheques drawn by or paid in by
customers, the making of advances to customers, and includes such other
business as the Authority may prescribe for the purposes of this Act; (Banking
Act (Singapore), Section 2, Interpretation).

 "banking business" means the business of either or both of the following:

1. receiving from the general public money on current, deposit, savings or other
similar account repayable on demand or within less than [3 months] ... or with
a period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers[6]

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct
credit, direct debit and internet banking, the cheque has lost its primacy in most
banking systems as a payment instrument. This has led legal theorists to suggest that
the cheque based definition should be broadened to include financial institutions that
conduct current accounts for customers and enable customers to pay and be paid by
third parties, even if they do not pay and collect cheques.

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Accounting for bank accounts;

Bank statements are accounting records produced by banks under the various
accounting standards of the world. Under GAAP and IFRS there are two kinds of
accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities. Debit
Accounts are Assets and Expenses. This means you credit a credit account to increase
its balance, and you debit a debit account to decrease its balance.

This also means you debit your savings account every time you deposit money into it
(and the account is normally in deficit), while you credit your credit card account
every time you spend money from it (and the account is normally in credit).

However, if you read your bank statement, it will say the opposite—that you credit
your account when you deposit money, and you debit it when you withdraw funds. If
you have cash in your account, you have a positive (or credit) balance; if you are
overdrawn, you have a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank statement.
Your savings might be your assets, but the bank's liability, so they are credit accounts
(which should have a positive balance). Conversely, your loans are your liabilities but
the bank's assets, so they are debit accounts (which should also have a positive
balance).

Where bank transactions, balances, credits and debits are discussed below, they are
done so from the viewpoint of the account holder—which is traditionally what most
people are used to seeing.

Economic functions:

1. Issue of money, in the form of banknotes and current accounts subject to cheque
or payment at the customer's order. These claims on banks can act as money
because they are negotiable and/or repayable on demand, and hence valued at par.
They are effectively transferable by mere delivery, in the case of banknotes, or by
drawing a cheque that the payee may bank or cash.

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2. Netting and settlement of payments – banks act as both collection and paying
agents for customers, participating in interbank clearing and settlement systems to
collect, present, be presented with, and pay payment instruments. This enables
banks to economise on reserves held for settlement of payments, since inward and
outward payments offset each other. It also enables the offsetting of payment
flows between geographical areas, reducing the cost of settlement between them.
3. Credit intermediation – banks borrow and lend back-to-back on their own account
as middle men.
4. Credit quality improvement – banks lend money to ordinary commercial and
personal borrowers (ordinary credit quality), but are high quality borrowers. The
improvement comes from diversification of the bank's assets and capital which
provides a buffer to absorb losses without defaulting on its obligations. However,
banknotes and deposits are generally unsecured; if the bank gets into difficulty
and pledges assets as security, to raise the funding it needs to continue to operate,
this puts the note holders and depositors in an economically subordinated position.
5. Maturity transformation – banks borrow more on demand debt and short term
debt, but provide more long term loans. In other words, they borrow short and
lend long. With a stronger credit quality than most other borrowers, banks can do
this by aggregating issues (e.g. accepting deposits and issuing banknotes) and
redemptions (e.g. withdrawals and redemptions of banknotes), maintaining
reserves of cash, investing in marketable securities that can be readily converted
to cash if needed, and raising replacement funding as needed from various sources
(e.g. wholesale cash markets and securities markets).

Law of banking:

Banking law is based on a contractual analysis of the relationship between the bank
(defined above) and the customer—defined as any entity for which the bank agrees to
conduct an account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the

14
 customer; when the account is overdrawn, the customer owes the balance to the
bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to
the credit of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from
the customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's
account as the customer's agent, and to credit the proceeds to the customer's
account.
5. The bank has a right to combine the customer's accounts, since each account is
just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the
extent that the customer is indebted to the bank.
7. The bank must not disclose details of transactions through the customer's
account—unless the customer consents, there is a public duty to disclose, the
bank's interests require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular
jurisdiction may also modify the above terms and/or create new rights, obligations or
limitations relevant to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may
be partly or wholly exempt from bank licence requirements, and therefore regulated
under separate rules.

The requirements for the issue of a bank licence vary between jurisdictions but
typically include:

1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors,
and/or senior officers

15
 4. Approval of the bank's business plan as being sufficiently prudent and
plausible.

Types of banks:

Banks' activities can be divided into retail banking, dealing directly with individuals
and small businesses; business banking, providing services to mid-market business;
corporate banking, directed at large business entities; private banking, providing
wealth management services to high net worth individuals and families; and
investment banking, relating to activities on the financial markets. Most banks are
profit-making, private enterprises. However, some are owned by government, or are
non-profit organizations.

Central banks are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash interest
rate. They generally provide liquidity to the banking system and act as the lender of
last resort in event of a crisis.

Types of retail banks:

 Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that
banks only engage in banking activities, whereas investment banks were limited to
capital market activities. Since the two no longer have to be under separate
ownership, some use the term "commercial bank" to refer to a bank or a division
of a bank that mostly deals with deposits and loans from corporations or large
businesses.
 Community Banks: locally operated financial institutions that empower
employees to make local decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services
and credit to under-served markets or populations.

16
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals.
 Offshore banks: banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks take their roots in the 19th or sometimes
even 18th century. Their original objective was to provide easily accessible
savings products to all strata of the population. In some countries, savings banks
were created on public initiative; in others, socially committed individuals created
foundations to put in place the necessary infrastructure. Nowadays, European
savings banks have kept their focus on retail banking: payments, savings products,
credits and insurances for individuals or small and medium-sized enterprises.
Apart from this retail focus, they also differ from commercial banks by their
broadly decentralised distribution network, providing local and regional outreach
—and by their socially responsible approach to business and society.
 Building societies and Landesbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.
 Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks:

 Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade
for their own accounts, make markets, and advise corporations on capital market
activities such as mergers and acquisitions.
 Merchant banks were traditionally banks which engaged in trade finance. The
modern definition, however, refers to banks which provide capital to firms in the
form of shares rather than loans. Unlike venture capital firms, they tend not to
invest in new companies.

Both combined:

 Universal banks, more commonly known as financial services companies, engage

in several of these activities. These big banks are very diversified groups that,
among other services, also distribute insurance— hence the term bancassurance, a

17
 portmanteau word combining "banque or bank" and "assurance", signifying that
both banking and insurance are provided by the same corporate entity.

Other types of banks:

 Islamic banks adhere to the concepts of Islamic law. This form of banking
revolves around several well-established principles based on Islamic canons. All
banking activities must avoid interest, a concept that is forbidden in Islam.

COMPANY PROFILE
ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion
(US$ 91 billion) at March 31, 2020 and profit after tax Rs. 51.51 billion (US$ 1,155
million) for the year ended March 31, 2020. The Bank has a network of 2,556
branches and 7,440 ATMs in India, and has a presence in 19 countries, including
India.
ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its
specialised subsidiaries in the areas of investment banking, life and non-life
insurance, venture capital and asset management.
The Bank currently has subsidiaries in the United Kingdom, Russia and Canada,
branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and
Dubai International Finance Centre and representative offices in United Arab
Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our
UK subsidiary has established branches in Belgium and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts
(ADRs) are listed on the New York Stock Exchange (NYSE).
Corporate Profile
ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion
(US$ 77 billion) as on December 31, 2017.
Board Members
Mr. K. V. Kamath, Chairman
Mr. Sridar Iyengar
Mr. Homi R. Khusrokhan

18
Mr. Lakshmi N. Mittal
Mr. Narendra Murkumbi
Dr. Anup K. Pujari
Mr. Anupam Puri
Mr. M.S. Ramachandran
Mr. M.K. Sharma
Mr. V. Sridar
Prof. Marti G. Subrahmanyam
Mr. V. Prem Watsa
Ms. Chanda D. Kochhar,
Managing Director & CEO
Mr. Sandeep Bakhshi,
Deputy Managing Director
Mr. N. S. Kannan,
Executive Director & CFO
Mr. K. Ramkumar,
Executive Director
Mr. Sonjoy Chatterjee,
Executive Director

Mr. K. V. Kamath is a mechanical engineer and did his management studies from the
Indian Institute of Management, Ahmedabad. He joined ICICI in 1971 and worked in
the areas of project finance, leasing, resources and corporate planning. In 1988, he
joined the Asian Development Bank and spent several years in south-east Asia before
returning to ICICI as its Managing Director & CEO in 1996. He became Managing
Director & CEO of ICICI Bank in 2002 following the merger of ICICI with ICICI
Bank. Under his leadership, the ICICI Group transformed itself into a diversified,
technology-driven financial services group, that has leadership positions across
banking, insurance and asset management in India, and an international presence. He
retired as Managing Director & CEO in April 2017, and took up the position of non-
executive Chairman of ICICI Bank effective May 1, 2017. He was the President of the
Confederation of Indian Industry (CII) for 2016-09. He was awarded the Padma
Bhushan by the President of India in May 2016. He was conferred the Lifetime
Achievement Awards at the Financial Express Best Bank Awards 2016 and the

19
NDTV Profit Business Leadership Awards 2016; was named 'Businessman of the
Year' by Forbes Asia and The Economic Times' 'Business Leader of the Year' in
2015; Business Standard's "Banker of the Year" and CNBC-TV18's "Outstanding
Business Leader of the Year" in 2006; Business India's "Businessman of the Year" in
2005; and CNBC's "Asian Business Leader of the Year" in 2001. He has been
conferred with an honorary PhD by the Banaras Hindu University.

Awards:

 Ms. Chanda Kochhar, Managing Director & CEO was awarded the "CNBC Asia
India Business Leader Of The Year Award". She also received the "CNBC Asia's
CSR Award 2019"
 For the third year in a row ICICI Bank has won The Asset Triple A Country
Awards for Best Domestic Bank in India
 ICICI Bank won the Most Admired Knowledge Enterprises (MAKE) India 2017
Award. ICICI Bank won the first place in "Maximizing Enterprise Intellectual
Capital" category, October 28, 2017
 Ms Chanda Kochhar, MD and CEO was awarded with the Indian Business
Women Leadership Award at NDTV Profit Business Leadership Awards ,
October 26, 2020.
 ICICI Bank received two awards in CNBC Awaaz Consumer Awards; one for
the most preferred auto loan and the other for most preferred credit Card, on
September 30, 2017
 Ms. Chanda Kochhar, Managing Director & CEO ranked in the top 20 of the
World's 100 Most Powerful Women list compiled by Forbes, August 2017
 Financial Express at its FE India's Best Banks Awards, honoured Mr. K.V.
Kamath, Chairman with the Lifetime Achievement Award , July 25, 2020
 ICICI Bank won Asset Triple A Investment Awards for the Best Derivative
House, India. In addition ICICI Bank were Highly commended , Local Currency
Structured product, India for 1.5 year ADR GDR linked Range Accrual Note.,
July 2019
 ICICI bank won in three categories at World finance Banking awards on June 16,
2017

20
o Best NRI Services bank
o Excellence in Private Banking, APAC Region
o Excellence in Remittance Business, APAC Region
 ICICI Bank Mobile Banking was adjudged "Best Bank Award for Initiatives in
Mobile Payments and Banking" by IDRBT, on May 18, 2017 in Hyderabad.
 ICICI Bank's b2 branchfree banking was adjudged "Best E-Banking Project
Implementation Award 2016" by The Asian Banker, on May 11, 2017 at the
China World Hotel in Beijing.
 ICICI Bank bags the "Best bank in SME financing (Private Sector)" at the Dun &
Bradstreet Banking awards 2017.
 ICICI Bank NRI services wins the "Excellence in Business Model Innovation
Award" in the eighth Asian Banker Excellence in Retail Financial Services
Awards Programme.
 ICICI Bank's Rural Micro Banking and Agri-Business Group wins WOW Event
& Experiential Marketing Award in two categories - "Rural Marketing
programme of the year" and "Small Budget On Ground Promotion of the Year".
These awards were given for Cattle Loan 'Kamdhenu Campaign' and "Talkies on
the move campaign' respectively.
 ICICI Bank's Germany Branch has been certified by "Stiftung Warrentest". ICICI
Bank is ranked 2nd amongst 57 savings products across 19 banks
 ICICI Bank Germany won the yearly banking test of the investor magazine
€uro in the "call money"category.
 The ICICI Bank was awarded the runner's up position in Gartner Business
Intelligence and Excellence Award for Asia Pacific for its Business Intelligence
functions.
 ICICI Bank's Organisational Excellence Group was recently awarded ISO
9001:2016 certification by TUV Nord. The scope of certification comprised
processes around consulting and capability building on methods of quality &
improvements.
 ICICI Bank has been awarded the following titles under The Asset Triple A
Country Awards for 2017:
o Best Transaction Bank in India
o Best Trade Finance Bank in India

21
o Best Cash Management Bank in India
o Best Domestic Custodian in India

ICICI Bank has bagged the Best Cash Management Bank in India award for the
second year in a row. The other awards have been bagged for the third year

Vision:
Our vision is a world free of poverty in which every individual has the freedom and
power to create and sustain a just society in which to live.

Mission:
Our mission is to create and support strong independent organisations which work
towards empowering the poor to participate in and benefit from the Indian growth
process.
As a key partner in India's economic growth for more than five decades, the ICICI
Group endeavours to promote growth in all sectors of the nation ’s economy. To give
focus to its efforts to promote inclusive growth amongst low-income Indian
households, the ICICI Group founded ICICI Foundation for Inclusive Growth in
January 2018.
The foundations of ICICI Group’s approach towards human and social development
were established with the Social Initiatives Group (SIG), a non-profit resource group
within ICICI Bank, in 2000.
ICICI Foundation for Inclusive Growth (ICICI Foundation) has been set up as a
public charitable trust registered at Chennai vide registration of the Trust Deed with
the Sub-Registrar’s Office at Chennai on January 04, 2018.
The application for registration of the Foundation under section 12AA of the Income
tax Act, 1961 (“the Act”) was filed on February 7, 2017 and the application under
section 80G of the Act was filed on February 14, 2016. Subsequently, ICICI
Foundation was registered as a “PUBLIC CHARITABLE TRUST” under Section
12AA of the Act with effect from February 7, 2016. Further, ICICI Foundation
received approval under Section 80G(5)(vi) of the Act on March 19, 2016. This
approval is valid in respect of donation received by ICICI Foundation from February

22
14, 2016 to March 31, 2017. Accordingly, ICICI Bank and Group Companies will be
eligible to get a deduction under section 80G on donations made during this period.
ICICI Foundation has also obtained its Permanent Account Number (PAN) and Tax
deduction Account Number (TAN).

ICICI Centre for Child Health and Nutrition (ICCHN):

The grant of Rs.150.00 million was provided to ICCHN by way of corpus support
and for pursuing various projects consistent with its mission.
IFMR Finance Foundation (IFF):
The grant of Rs.200.00 million was provided to IFMR Finance Foundation by way of
corpus support and for pursuing various projects consistent with its mission.
Environmentally Sustainable Finance (ESF):
The grant of Rs.20.00 million was provided to ESF for their collaboration work with
Rural Energy Network Enterprise (RENE) on sustainable energy and environment
projects benefiting remote rural end users. The proposed projects will promote
developing tools and driving innovation to scale rural energy access for remote rural
users.
CSO Partners:
The grant of Rs.50.00 million was provided to CSO Partners by way of corpus
support and for pursuing various projects consistent with its mission.
CARE (Policy Unit):
A grant of Rs.5.00 million was provided to CARE, an Indian NGO that is closely
affiliated with CARE (USA), to create a policy unit in Delhi. Learning from CARE’s
work in India and world-wide as well as from the work of ICICI Foundation and its
partners, the unit will serve as a platform to engage the government and policymakers
in an effort to bring about required policy changes in areas such as maternal and child
health.

23
 CHAPTER III

THEORETICAL FRAME WORK

24
 THEORETICAL FRAME WORK

INTRODUCTION TO BUDGET AND BUDGETARY CONTROL

BUDGET:

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
objective as efficiently as possible. Budgeting is a powerful tool to the management
for performing its functions i.e., formulation plans, coordination activities and
controlling operations etc., efficiently. For efficient and effective management
planning and control are tow highly essential functions. Budget and budgetary control
provide a set of basic techniques for planning and control.

A budget fixes a target in terms of rupees or quantities against which the actual
performance is measured. A budget is closely related to both the management
function as well as the accounting function of an organization.

As the size of the organization increases, the need for budgeting is correspondingly
more because a budget is an effective tool of planning and control. Budget is helpful
in coordinating the various activities (such as production, sales, purchase etc) of the
organization with result that all the activities precede according to the objective.
Budgets are means of communication. Ideas of the top management are given the
practical shape. As the activities of various department heads are coordinated at the
much needed for the very success of an organization. Budget is necessary to future to
Motivate the staff associated, to coordinate the activities of different departments and
to control the performance of various persons operating at different levels.

25
 Budgets may be divided into two basic classes. Capital and operating budgets.
Capital budget are directed towards proposed expenditure for new projects and often
require special financing.
The operating budgets are directed towards achieving short-term operational goals of
the organization for instance, production or profit goals in a business firm. Operating
budgets may be sub-divided into various departmental of functional budgets.

Definitions of Budget:
According to Institute of Charted Management Accountants, England “ A plan
quantified in monetary term prepared and approved prior to a defined period of time
usually showing planned income to be generated and / or to be incurred during that
period and the capital to be employed to attain a given objective.”

According to ICMA, England, a budget is, “a financial and/or quantitative statement,

prepared and approved prior to a defined period of time, of the policy to be pursed
during the period for the purpose of attaining a given objective.”
It is also defined as, “a blue print of projected plan of a action of a business for a
definite period of time.”

BUDGETARY CONTROL:
No system of planning can be successful without having an effective and efficient
system of control. Budgeting is closely connected with control. The exercise of
control in the organization with the help of budgets is known as budgetary control.
The process of budgetary control includes.
1. Establishment of budget for each function and section of the organization.
2. Executive responsibility in order to perform the specific tasks so that objectives of
the enterprise may be attained.
3. Continues comparison of the actual performance with that of the budget and
placing the responsibility of executives for failure to achieve the desired result a
given in the budget
4. Taking suitable remedial action to achieve the desired objective if there is a
variation of the actual performance from the budgeted performance.

26
5. Revision of budgets in the light of changed circumstances.

Definitions of Budgetary Control:

According to the Brown and Howard “Budgetary control is the system of controlling
costs which includes the preparation of Budgets, co-coordinating the department and
establishing the responsibilities, comparing the actual performance with the budgeted
and acing upon the results to achieve the maximum profitability”

According to the J.Betty:“A system which uses budgets as a means of planning and
controlling all aspects of producing and / or selling commodities and services”
.According to the CIMA, London, “Budgetary control is the establishment of budgets
relating to responsibilities of executives to the requirement of a policy, and the
continuous comparison of actual with budged results, either to secure by individual
action the objective of that policy or to provide a basis for revision.

BUDGET, BUDGETING AND BUDGETING CONTROL

Row land and William in their book entitled Budgeting for management control has
given the difference between budge, budgeting and budgetary control as follows:
“Budgets are the individual objectives of a department etc where as budgeting may be
said to be the act of building budgets. Budgetary control embraces all this and in
addition includes the science of planning the budgets themselves and the utilization of
such budgets to effect on overall management tool for the business planning and
control”. Thus, a budget is a financial plan and budgetary control results from the
administration of the financial plan.

Essential Features of a Budgetary:

 Budgetary control defines the objectives and policies of the undertaking as a
whole.
 It is an effective method of controlling the activities of various departments of
a business unit. It fixed targets and the various departments have to efficiently
to reach the targets.
 It secures proper co-ordination among the activities of various departments.
 It helps the management to fix up responsibility in case the performance is
below expectations.

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  It helps the management to reduce wasteful expenditure. This leads to
reduction in the cost of production.
 It brings in efficiency and economy by promoting cost consciousness among
the employees.
 It facilitates centralized control with decentralized activity.
It acts as internal audit by a continuous evaluation of departmental results.

Limitations of Budgetary Control:

 The preparation of a budget under inflationary conditions and changing
Government policies is really difficult. Thus, the accurate position of the
business can not be estimated.
 Accuracy in budgeting comes through expenditure. Hence it should not be
relied on too much in the initial stages.
 Budget is only a management tool. It is not a substitute for management. It
can not replace management in decision making.
 Budgeting involves a heavy expenditure, which small concerns cannot afford.

 There will be active and passive resistance to budgetary control as it points out
the efficiency or inefficiency of individuals.
 The success of budgetary control depends upon wiling co-operation and team
work. This is often lacking.
 Frequent changes maybe called for in budgets due to fast changing industrial
climate. It may be difficult for a company to keep pace with these fast
changes, because revision of budgets is expensive exercise.
OBJECTIVES OF BUDGETARY CONTROL:
Planning:
A budget is a plan of the policy to be pursued during the defined period of time to
attain a given objective. The budgetary control will force management at all the
activities to be done during the future periods. A budget as a plan of action achieves
the following purposes:

28
  Action is guided by well thought out plan because a budget is prepared after a
careful sturdy and research.
 The budget serves as a mechanism through which.
 Management’s objectives and policies are affected.
 It is a bridge through which communication is establishment between the top
management and the operatives who are to implement the policies of the top
management.
 The most profitable course of action is selected from the various available
alternatives.

Co-ordination:
The budgetary control co-ordinates the various activities of the firm and secures co-
operation of all concerned so that the common objective of the firm may be
successfully achieved. It forces executives to think and think as a group. It co-
coordinating the policies, plans and actions. An organization without a budgetary
control is like a ship sailing in a chartered sea.
Motivation:
It employees have actively participated in budget preparation and if they are
convinced that their personal interests are closely associated with the success of
organizational plan, budgets provide motivation in the form of goals to be achieved.
The budgets will motivate the workers, depends purely on how the workers have been
mentally and physically involved with the process of budgeting.

Control:
Control consists of the action necessary to ensure the performance of the organization
conforms to the plans and objectives. Control of performance is possible with
predetermined standards which are laid down in a budget. Thus, budgetary control
makes control possible by continuous comparison of actual performance with that of
the budget so as to report the variations from the budget to the management of
corrective action.
Thus, budgeting system integrates key managerial functions as it links top
management’s planning function with the control function performed at all levels in
the managerial hierarchy. But the efficiency of the budget as a planning and control
device depends upon the activity in which it is being used.

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Approved Plan:
A mater budget provides an approved summary of results to be expected from
proposed plan of operations. It concerns all functions of organization and serves as a
guide to executives and departmental heads responsible for various departmental
objectives.
Budget procedures:
Having the budget organization and fixed the period, the actual work or budgetary
control can be taken upon the following pattern.

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STEPS IN BUDGETING CONROL:
Organization for budgeting:
The setting up of a definite plan of organization is the first step towards installing
budgetary controlling system in an organization a budget manual should be prepared
giving details of the powers, duties, responsibilities and areas of operation of each
executive in the organization.

Budget Manual:
A Budget manual lays down the details of the organizational set up, the routine
procedures and programmers to be followed for developing budgets for various items
and the duties and responsibilities of the executives regarding the operation of the
budgetary control system. CIMA England defines a budget manual as “a document
schedule or Booklet which sets out, inter alia, the routine of and the forms and records
required for budgetary control”. Thus, it is a written document which guides the
executives in preparing various budgets. Budgets are to be drawn keeping in view the
objectives of the organization given in the budget manual. Responsibility and
functions of each executive in regard to budgeting are written down in the budget
manual to avoid any duplication or overlapping of responsibilities. Steps and the
methods for developing various budgets and the methods of reporting performance
against the budget are written down in the budget manual. In short it is a written
document which gives everything relating to the preparation and execution of various
budgets. It should be clear and there should be no ambiguity in it.

The following are some of the most important matters covered in a Budget
manual:

a) Introducing and brief explanation of the objects, benefits and principles of

budgetary control.
b) Organization chart giving the titles to different personnel’s with full explanation
of the duties of each to operating system and preparation of departmental and
functional budgets.
c) Length of budget periods and control periods should be clearly stated.
d) A method of accounting and control of expenditure.

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e) A statement showing the responsibility and of authority given to each manger for
approval of budgets, vouchers and all other forms and documents which authorize
them to spend the money. The authority for granting approval must be clearly
stated.
f) The entire process of budgeting programme including the time table for periodical
reporting. A schedule should be drawn for this.
g) Purpose, specimen form and number of copies to be used for each report and
statement. Budget centers involved should also be stated clearly.
h) Outline of main budgets and their accounting relationships.
i) Explanation of key budgets.
FIXATION OF BUDGET PERIOD:
The budget period mean the period for which a budget is prepared and employed. The
budget period will depend upon the type of business and the control aspect.

Budget period mean the period for which a budge is prepared and employed. The
budget period depends upon the nature of the business and the control techniques. For
example, in case of seasonal industries (i.e., food or clothing) the budget period
should be a short one and should cover one season. But in case of industries with
heavy capital expenditure such as heavy engineering works, the budget period should
be long enough to meet the requirements of the business. From control point of view,
the budget period should be a short one so that the actual results may be compared
with the budget each week end or month end and discussed with and discussed with
the Budget committee. Long term budgets should be supplemented by short term
budgets to make the budgetary control successful, as short-terms budgets will helping
exercising control over day-today operations. In short, the budget period should not be
too long so that there may be sufficient time before budget implementation. For most
business, annual budget is quite common because it compares with the financial
accounting year.

There should be a regular time plan for budget preparation. It may be on the following
lines.
 Long-term budgets for three to five years should be prepared for expansion and
modernization of the undertaking, introduction of new products or new projects
and undertaking heavy advertisement.

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 Annual budgets coinciding with financial accounting year should be prepared for
the operations activities (i.e., sales, purchases, and production etc, of the business)
 For control purposes, short-term budgets-monthly or even weekly budget-should
be prepared for watching progress of actual performance against targets. Short-
term budgets are prepared to see that actual performance is proceeding according
to the budgets and early corrective action may be taken if there is any pitfall.

The responsibility for preparation and implementation of the budgets may be fixed as
under.
Budgetary controller:
Although the chief executive l finally responsible for the budgetary programme. It is
better if a large part of the supervisory responsibility is deluged to an official
designated as Budget Controller or Budget Director. Such a person should have
knowledge of the technical details of the business and report directly to the president
or the chief executive.
Rolling (Continues) Budget:
This is a budget which is updated continuously by adding a further period (a month\
quarter) and deducting a corresponding earlier period. Budgeting is a continuous
process under these methods of preparation of budget. Once the first period elapses,
the forecast for that period is dropped and the forecast for the future period beyond
the existing could not be predicted and forecast reliably, this method is useful.
However, it is a costly exercise but matched by considerable reduction in operational
variances.
Annual Vs Continues budgeting system:
In some organizations budgets are prepared on annual basis. But annual budgets may
not help the management to have control because variances due to rapidly changing
conditions affect the sales in quantity and prices, severe rapidly changing conditions
affect the sales in quantity and prices, severe inflationary conditions exist resulting
fast increase in the prices of inputs without reflecting in sales prices immediately and
wide range of products being produced making it not feasible to have precise estimate
of levels of activity for a year.

The procedure in continuous budgeting will be that a year will be divided into four
quarters. Monthly budgets for the first quarter and three quarterly budgets for the next

33
year can be prepared. For the first quarter precise estimates can be drawn up monthly.
The budget estimates for the second quarter may be revised working out separately
monthly estimates on more precise basis for control purposes before the starting of the
second quarter.
Similarly procedure may be followed for third and fourth quarters. This method a time
which need not be in respect of or coincide with the financial year. It will enable to
evolve a precise plan of action and control of variance functions at least for the
immediate quarter and a broad tentative one the subsequent three quarters on a
continues basis.

Principal Budget (limiting) factor:

Principal budget factor is such an important factor that it would affect all the
functional budgets to a large extent. The extent of its influence must be assessed first
in order to ensure that functional budgets are reasonably capable of fulfillment. This is
the factor in the activities of an undertaking which at a particular point in time or over
a period will limit the volume of output. It is the governing factor which is a major
constraint on all the operational activities of the organization, so this factor is taken
into consideration to determine whether the budgets are capable of attainment. It is
essential to locate the limiting factor may be any one of the following:
Is there sufficient demand for the product? (Customer demand)
Will a required quality and quantity of materials be available? (Availability of raw
material)
Is the plant capacity sufficient to cope up with the expected sales? (Plant capacity)
Is the required type of labor available? (Available of labor)
Is cash position sufficient to finance the expected volume of sales? (Cash position)
Are there any Government restrictions? (Government restrictions)
For example, a concern has the capacity to produce 50,000 units of particular item per
year. But only 30, 000 units can be sold in the market. In this case, low demand for
the product is the limiting factor. Therefore, sales budget should be prepared first and
other functional budgets such as production budget, labor budget, plant utilization
budget, cash budget etc. should be prepared in accordance with this case plant
capacity is limited. Therefore, production budget should be prepared first and other
budgets should follow the production budget.

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Thus, the budget relating to limiting factor should be prepared first and the other
budgets should be prepared in the light of that factor. All budgets should be co-
coordinated keeping in view the principal budget factor if the budgetary control is to
achieve the desired results.
Principal budget factor is not static. It may vary rapidly from time to time due to
internal and external factors. It is of temporary nature and in the long run can be
overcome by suitable management taking sales promotion steps as increasing sales
staff and advertising. Plant capacity can be improved by better planning,
simplification of product or extension of plant.

DIFFERENT TYPES OF BUDGET:

Different types of budgets have been developed keeping in view the different
purposes they serve. Budgets can be classified according to:
 The coverage they encompass;
 The capacity to which they are related;
 The conditions on which they are based; and
 The periods which they cover.

Functional Budget:
A functional budget is a budget which relates to any of the functions of an
undertaking e.g., sales, production, research and development, cash etc, the following
budgets are generally prepared.
Budget Prepared By
1. Sales Budget including selling and Sales Manager
Distribution Cost Budget
2. Production Budget Production Manager
3. Material Budget Purchase Manager
4. Labor and Personnel Budget Personnel Manager

5. Manufacturing Overheads Production Manager

6. Administration Cost Budget Finance Manager

7. Plant Utilization Budget Production Manager

8. Capital Expenditure Budget Chief Executive

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 9. Research and Development Cost Budget

R&D Manager

10. Cash Budget Finance Manager

Sales Budget:
Sales budget is the most important budget and of primary importance. It forms the
basis on which all the budgets are built up. This budget is a forecast of quantities and
values of sales to be achieved in a budget in a budget period. Every effort should be
made to ensure that its figures are as accurate as possible because this is usually the
starting budget (sales being limiting factor on which all the other budgets are built
up). The sales Manger should be made directly responsible for the preparation and
execution of the budget. The sales budget may be prepared according to products,
sales territories, types of customers; salesmen etc., in the preparation of the sales
budget, the sales manager should take into consideration the following factors:

1. Past Sales Figures and Trends.

2. Salesmen’s Estimation.
3. Plant Capacity.
4. Availability of Raw Material and other Supplies.
5. General Trade Prospects.
6. Orders in Hand.
7. Seasonal Fluctuations.
8. Financial Aspect.
9. Adequate Return on Capital Employed.
10. Competition.
11. Miscellaneous Considerations.

Production Budget:
Production budget is a forecast of the total output of the whole organization broken
down into estimates of output of each type of product with a scheduling of operations
(by weeks and months) to be performed and a forecast of the closing finished stock.
This budget may be expressed in quantitative (weight, units etc) r financial (rupees)
units or both. This budget is prepared after taking into consideration the estimated
opening stock, the estimated sales and the desired closing finished stock of each

36
product. The works manger is responsible for the total production budget and the
departmental managers are responsible for the departmental production budget. In
preparing the production budget, the following factors are considered.

The time lag between the production in the factor and sales to the customer should be
considered so as to allow fro the time required or the dispatch of goods from the
factory to the place of the customers.

The stock of goods to be maintained both at the factory’s go gown and at he sales
centers.
The level of production needed to meet the sales programme. Monthly production
targets should be fixed and it should be seen that production is kept more or less at
Uniform level throughout the year. The material labor and plant requirements should
be ascertained to have the desired production to meet the sales programme.

The sales and the production are inter-dependant because production budget is
governed by the sales budget and the sales budget is largely determined by the
production capacity and by production costs.
Cost of production Budget:

After determining the volume of output the cost of procuring the output must be
obtained by preparing a cost of production budget. This budget is an estimate of cost
of output planned for a budget period and may be classified into material cost budget,
labor cost budget and overhead budget because cost of production includes material,
labor and overheads.
Materials Budget:
In drawing up the production budget, one of the first requirements to be considered is
material. As we know, materials may be direct or indirect. The materials budget deals
with the requirements and procurement of direct materials. Indirect materials are dealt
with under the works overhead budget. The budget should be related to the production
budget and the period of the budget should be of short duration because this budget
has an important bearing on the cash budget

Purchase Budget:
Purchase Budget is mainly dependent on production budget and material requirement
budget. This budget provides information about the materials to be acquired from the
market during the budget period.

37
Purchase budget should be prepared by the purchase manger by getting relevant
information about capital items, tools, general supplies and direct materials required
during the budget period from other related departments. Like other budgets, the
purchase
Budget has to be approved by the budget committee. After approval it becomes the
responsibility of the purchase officer to see that purchases are made as per the
purchase budget. Sometimes additional purchases which are not covered by the
purchase budget are made under the following circumstances.
If there is increase in production not anticipated while preparing the purchase budget
and purchase of larger quantities of materials becomes necessary.

If accumulation of stock becomes necessary to avoid shortage of materials.

If overstocking is desired to take advantage of lower prices and there is fear that price
will increase in near future.
The purchase manger should get additional sanctions from the higher authorities for
making the additional purchases not covered by the purchase budget.

Direct Labor Budget:

This budget gives as estimate of the requirements of direct labor essential to meet the
production target. This budget may be classified into labor Requirements budget and
recruitment budget. The labor recruitment budget is developed on the basis of
requirement of the production budget given and detailed information regarding he
different classes of labor e.g., fitters, welders, turner, millers, and grinders and drillers
etc., required for each department, their scales of pay and hours to be spent. This
budget is prepared with a view too enable the personnel department to carry out
programmers of training and transfer and to find out sources of labour needed so that
every effort may be made to remove difficulties arising in production the available
workers in each department, the expected changes in the labour force during the
budget period due to the labour turnover. This budget gives information about the
personnel specification for the jobs for which workers are to be recruited, the degree
for skill and experience required and the rates of pay. Where standard costing system
is applied, the labor cost budget is dev eloped on the basis of standard labor cost per

38
unit multiplied by the quantity of anticipated production determined in the production
budget. If standard costing system is not being followed in the organization, the
information of labour cost may be obtained from past records or estimated cost.

Sometimes another budget known as Manpower budget is prepared. This budget gives
the requirements of direct and indirect labour necessary to meet the programme set
out in the sales, manufacturing, maintenance, research and development and capital
expenditure budgets. The labor terms are expressed of rupee value, number of labour
hours, number and grade of workers etc. this budget makes provision for shift and
overtime work and for the effective training for new workers on labour cost.

Manufacturing Overheads Budget:

This budget gives an estimate of the works overhead expenses to be incurred in a
budget period to achieve the production target. The budget includes the cost of
indirect material, indirect labour and indirect works expenses. The budget may be
classified into fixed cost, variable cost and semi-variable cost. It can be broken into
departmental overhead budget to facilitate control. In preparing the budget, fixed
works overhead can be estimated on the basis of past information after taking into
consideration the expected changes which may occur during the budget period.
Variable expenses are estimated on the basis of the budgeted output because these
expenses are bound to change with the change in output.
The Cost Accountant prepares this budget on the basis of figures available in the
manufacturing overhead ledger or the head of the workshop may be asked to give
estimates for the manufacturing expenses. A good method is to combine the estimates
of the Cost Accountant and the shop executive.

Administrative Expenses Budget:

This budget covers the expenses incurred in framing policies, directing the
organization and controlling the business operations. In other words, the budget
provides as estimate of the expenses of the central office and of management salaries.
The budget can be prepared with the help of past experience and anticipated changes.
Budget may be

39
prepared be prepared for each administration department so that responsibility for
increasing such expenses. This budget covers the expenses incurred in framing
policies, directing the organization and controlling the business operations. In other
words, the budget provides an executive. Much difficulty is not experiences in
developing such budget as most of the administration expenses are of a fixed nature.
Although fixed expenses remain constant and are not related to sale volume in the sort
run, they are dependent upon sales in the long run. With a small change in output,
they do not change. However, if there is persistent fall in output, administration
expenses will have to be reduced by discharging the services of some members of the
staff and taking other economy measures. On the other hand, with persistent increase
in output or business activity, administration expenses will increase but they may lag
behind business activity.

Budgeted Income Statement:

A budgeted income statement summarizes all the individual budges i.e., sales budget,
cost of goods sold budget, selling budget, and administrative sales budget. This
budget determines income before taxes. If the tax rate is available net income after
taxes can also be computed.

Selling and Distribution Costs Budget:

This budget is the forecast of the cost selling and distribution for budget period and is
clearly related to the sale budget. All expenses related to selling and distribution of
the various products as indicated in the sales budget are included in it. These expenses
are based on the volume of sales set in the sales budget and budget and budgets are
prepared for each item of selling and distribution overhead. Long term expenses.

As advertisement are spread over more than one period. Selling and distribution
overheads are divided into fixed and variable category with reference to volume of
sales. Separate budgets are prepared for variable and fixed items of selling and
distribution overheads. Certain items of selling and distribution costs as cost of
transport department
are included in the departmental production cost budget from control point of view
rather that including in selling and distribution costs budget.

40
Plant Utilization Budget:
This budget lays down the requirements of plant capacity to carry out the production
as per the production programme. This budget is terms of convenient physical units as
weight or number of products or working hours. The main functions of this budget
are:
 It will show the machine load in each department during the
 Budget period.
 It will indicate the overloading on some departments, machine or group of
machine and alternative courses of actions as working overtime, off loading,
procurement or expansion of plants, sub-contracting etc., can be taken.
 Idle capacity in some departments may be utilized by making efforts to
increase the demand for the products by providing after sale service,
conducting advertisement campaign, reducing prices, introducing lucky prize
coupons, recruiting efficient sales staff etc.

Capital Expenditure Budget:

The capital expenditure budget gives an estimate of the amount of capital that may be
needed for acquiring the assets required for fulfilling production requirements a
specified in the production budget. The budget is prepared after taking into
consideration in the available productive capacities, probable reallocation of the
existing assets such as plant and equipment budget, building budget etc. The capital
expenditure budget is an important budget proving for acquisition of assets,
necessitated by the following factors:

RESEARCH AND DEVELOPMENT COST BUDGET:

While developing research and development cost budget, it should be clear in mind
that work relating to research and development is different from that relating to the
manufacturing function. Manufacturing function gives quicker results than research
and development which may go on for several years. Therefore, these budgets are
established on a long term basis; say for 5 to 10 years which can be further subdivided
into short-term budgets on annual basis. As a rule research workers are less cost
conscious; so they are not susceptible to strict control. A research and development
budget is prepared taking into consideration the research projects in hand and the new

41
research projects in hand and the new search and development projects to be taken up.
Thus this budget provides an estimate of the expenditure to be incurred on research
and development during the budget period.
After fixation of the research and development cost budget, the research executive
fixes priorities for the various research and development projects and submits
research and development project authorization forms to the budget committee. The
projects are finally approved by the senior executive. Before giving the approval, the
expenditure on research and development is matched against the benefits likely to be
availed of from the new project; after the approval of the budget, a close watch is kept
on the expenditure so that it may not exceed budget provisions. It is also seen that
extent of progress made is commensurate with the expenditure incurred.

CASH (FINANCIAL) BUDGET:

The cash budget can be prepared by any of the following method:
1. Receipts and payments method
2. The adjusted profit and loss method
3. The balance sheet method
1. Receipts and payments method: In case of this method the cash receipts from
various sources and the cash payments to various agencies are estimated. In
the opening balance of cash, estimated cash receipts are added and from the
total of estimated cash payments are deducted to find out of the closing
balance.
2. The adjusted profit and loss method: In case of this method the cash budget is
prepared n the basis of opening cash and bank balance of the various assets an
liabilities.
3. The balance sheet method: With the help of budget balances at end except cash
and bank balances, a budgeted balance sheet can be prepared and the balancing
figure would be the estimated closing cash\bank balance.

Thus under this method, closing balances, other than cash\bank will have to be found
out first to be put in the budget balance sheet. This can be done by adjusting the
anticipated.

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Master Budget (Finalized Profit Plan):
The Master Budget is consolidated summary of the various functional budgets. It has
been defined as “a summary of the budget schedules in capsule form made for the
purpose of presenting, in one report, the highlights of the budget forecast”. The
definition of this budget given by the Chartered Institute of Management Accountant,
England, is as follows:
“Thus summary budget incorporating its components functional budgets and which
are finally approved and employed”.
The master budget is prepared by the budget committee on the basis of co-coordinated
functional budgets and becomes the target for the company during the budget period
when it is finally approved by the committee. This budget summaries functional
budget to produce a budgeted Profit and Loss Account and a Budget Balance Sheet as
at the end of the budget period.

Fixed Budget:

This budget is drawn for one level of activity and one set of conditions. It has been
defined as a budget which is designed to remain unchanged irrespective of the volume
of output or turnover attained. It is rigid budget and is drawn on the assumption
that there will be no change in the budgeted level of activity. A fixed budget will,
therefore, be useful only when the actual level of activity corresponds to the budgeted
level of activity. A master budget tailored to a single output level of (say) 20,000
units of sales is a typical example of a fixed budget. But in practice, the level of
activity and set conditions will change as a result of internal limitations and external
factors like changes in demand and price, shortage of materials and power, acute
competition etc. It is hardly of any use as a mechanism of budgetary control because
it does not make any distinction between fixed, variable and semi-variable costs and
provides for no adjustment in the budget fixed as result of change in cost due to
change in level of activity. It is also not helpful at all in the fixation of price and
submission of tenders.
Flexible Budget:
The Chartered Institute of Management Accountants, defines a flexible budget also
called sliding scale budget as a budget which, by recognizing the difference in
behavior between field an d variable costs in relation to fluctuations in output,

43
turnover, or other variable factors such a number of employees, is designed to change
appropriately with such fluctuations. This, a flexible budget gives different budgeted
costs for different levels of activity. A flexible budget making an intelligent
classification of all expenses between fixed, semi-variable and variable because the
usefulness of such a budget depend upon the accuracy with which the expenses can be
classified. Such a budget is prescribed in the following cases.

 Where the level of activity during the year varies from period, either due to the
seasonal nature of the industry or to variation in demand.
 Where the business is a new one and it is difficult to foresee the demand.
 Where the undertaking is suffering from shortage of a factor of production such as
materials, labour, plant, capacity etc. The level of activity depends upon the
availability of such a factor of production.
 Where an industry is influenced by changes in fashion.
 Where there are general changes in sales.
 Where the business units keep on introducing new products or make changes in
the design of its products frequently.
 Where the industries are engaged in make to order business like shipbuilding.

Basic Budget:
A Basic budget has been defined as a budget which is prepared for use unaltered over
a long period of time. This does not take into consideration current conditions and
can be attainable under standard conditions.
Current Budget:
A Current budget can be defined a budget which is related to the current conditions
and is prepared for use over a short period of time. This budget is more useful than a
basic budget, as a target of lays down will be corrected to current conditions.

Long-Term Budget:
A Long-term budget can be defined as a budget which is prepared for periods longer
than a year. These budgets help in business forecasting and forward planning.
Capital Expenditure Budget and Research and Development Budget are examples of
long-term budgets.

44
Short- Term Budget:

This budget is defined as a budget which is prepared for period less than year and is
very useful to lower levels of management for control purposes. Such budgets are
prepared for those activities the trend in which is difficult to foresee over longer
periods. Cash budget and material budget are examples of short term budget.

Performance Budget:
Performance Budgeting has its origin in U.S.A. after second World War. It tries to
rectify some of the shortcoming in the traditional budget. In the traditional budget
amount are earmarked for the objects of expenditures such as salaries, travel, office
expenses, grant in aid etc. In such system of budgeting the money concept was given
more prominence i.e. estimating or projecting rupee value for the various accounting
heads or classification of revenue and cost. Such system of budgeting was more
popularly used in government department and many business enterprises. But is such
system of budgeting control of performance in terms of physical units or the related
costs cannot be achieved.
Zero Based Budgets:

This budge is the preparation of budget starting from Zero or from a clean state. As a
new technique it was proposed by Patter Peal of Texas Instruments Inc., U.S.A. This
technique was introduced in the budgeting in the state of Georgia by Mr. Jimmy
Carter who was then the Government of that state. ZBB was tried in federal
budgeting as a means of controlling state expenditures.

The use of zero-based budgeting as a managerial tool has become increasingly

popular since the early 1970’s It is steadily gaining acceptance e in the business
world because it is providing it utility as a tool integrating the managerial function of
planning and control. ZBB is not based on the incremental approach and previous
year’s figures are not adopted as a base. Rather, zero is taken as a base aw the name
goes. Taking zero as a base, a budget is developed on the basis of likely activities for
the future period. In ZBB, by declining the budget from the past, the past mistakes
are not repeated. Funds required for any for the next budget period should be obtained
by presenting a convincing case. Funds will not be available as a matter of course.

45
ADVANTAGES OF BUDGETARY CONTROL:
The most important advantage of a budgetary control is to enable management to
conduct business in the most efficient manner because budgets are prepared to get the
effective utilization of resources and the realization of objectives as efficiently.
It lies down as objective for the business as a whole. Even though a monetary reward
is not offered the budget becomes a game – a goal to achieve or a target to shoot at –
and hence it is more likely to be achieved or hit that if there was no predetermined
goal or target. The budget is an impersonal policeman that maintains ordered effort
and brings about efficiency in result. It ensures effective utilization of men, materials,
machines and money because production is planned according to the availability of
these items.
Everyone working in the concern knows what exactly to do because budgetary control
laid emphasis on the staff organization. It ensures that individual responsibilities are
clearly defined and that the required authority commensurate with the responsibility is
delegated so that buck passing ay is prevented when the budgeted results are not
achieved. Budgetary control takes the help of different levels of management in the
preparations of the budget. Budget finally approved represents the judgment of the
entire organization and not merely that of an individual or a group of individuals.
Thus, it ensures team work.
Management by exception is possible because the comparison of actual and budgeted
results points out weak spots so that remedial action is taken against weak spots which
are not in conformity with the budgeted performance.
Budgetary control creates conditions for setting up a system of standard costing.
It is helpful in reviewing current trends in the business and in determining further
policy of the business because current and future trends are studied in the preparation
of the budget.
DIS-ADVANTAGES OF A BUDGET:
While budgets may be essential part of activity they do have number of
disadvantages, particularly in perception terms.
Budgets can be seen pressure devices imposed by management, thus resulting in:

a) bad labor relations

b) Inaccurate record-keeping.

46
Departmental conflict arises due to:
a) dispute over resources allocation
b) Departmental blaming each other if targets are not attained. It is difficult to
reconcile personal\individual and corporate goals. Waste may arise as managers
adopt the view, “we had better sped it or we will lose it”. This is often coupled with
“empire building” in order to enhance the prestige of department. Responsibility
versus controlling, i.e. some costs are under the influence of more than one person,
eg. Power costs.

47
 CHAPTER IV

DATA ANALYSIS
&
INTERPRETATION

48
 DATA ANALYSIS AND INTERPRETATION

CALCULATION OF REVENUE RECEIPTS BUDGET FOR

THE YEAR 2016-2017
(Rs……
)
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Sales and other receipts 60,66,25,179 55,14,77,436 5,51,47,743

2. Other Income 35,96,102 32,69,184 3,26,918

3. Increase in Inventory (-) 1,59,33,057 (-) 1,44,84,597 (-) 14,48,460

Total 59,42,88,224 54,02,62,023 5,40,26,201

In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actuals are beyond budget
estimates due to revision in pay scales. Which can be ignored, because in total budget
estimates are more then the actual.
In revenue receipts, the actuals are below the budgeted. Except in increase in
inventory value is negative. The budget estimates with a good variation percentage.

49
CALCULATION OF REVENNUE EXPENDITURE BUDGET FOR
THE YEAR 2017-2018

S. DESCRIPTION BUDGETED ACTUALS VARIANCE

No.
1. Materials 25,16,39,707 22,87,63,370 2,28,76,337

2. Consumed 2,05,89,260 1,87,17,509 18,71,751

3. Consumable stores 32,40,003 29,45,458 2,94,545
Employee
Remuneration &

4. Benefits 8,78,97,229 7,99,06,572 79,90,657

Administrative
&Operation
2,74,36,923 2,49,42,658 24,94,265
Expenses
5.
Banking Expenses
1,78,56,564 1,62,33,240 16,23,324
6.
Depreciation

Total 40,86,59,686 37,15,08,807 3,71,50,879

50
 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE
YEAR 2017-2018

(Rs……)
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Sales and other receipts 40,68,80,342 36,98,91,220 3,69,89,122

2. Other Income 28,00,738 25,46,126 2,54,612

3. Increase in Inventory (-) 7,807 (-) 7,098 (-) 709

Total 40,96,73,273 37,24,30,248 3,72,43,025

In this year, the budgeted are above the actuals. Material consumed is high value the
budget estimates among all items and in total that shows a good budgeting effort
makes the actuals.
In revenue receipts, the budgeted are above the actuals, but with a minimum
percentage of variation as compared with previous year.

51
 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR
THE YEAR 2018-2019
S. DESCRIPTION BUDGETED ACTUALS VARIANCE
No.
1. Materials Consumed 56,21,68,072 51,10,61,883 5,11,06,189

2. Consumable stores 4,77,76,051 4,34,32,773 43,43,278

3. Employee 58,97,375 53,61,250 5,36,125
Remuneration &
Benefits

4. Administrative 5,60,64,572 5,09,67,793 50,96,779

&Operation
Expenses
Banking Expenses 9,98,08,181 9,07,34,710 90,73,471
5.

6. Depreciation 2,39,11,697 2,17,37,907 21,73,790

Total 79,56,25,948 72,32,96,316 7,23,29,632

(Rs…..)

52
 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE
YEAR 2018-2019
(Rs……)

S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Sales and other 79,43,88,636 72,21,71,487 7,22,17,149

receipts
2. 28,95,385 26,32,169 2,63,216
Other Income
3. (-) 2,73,515 (-) 2,48,650 (-) 24,865
Increase in Inventory

Total 79,70,10,506 72,45,55,006 7,24,55,500

During this year budget estimates are above actuals are below. The budgets and
actuals increasing in compared to previous year.
In revenue receipts budget estimates are above the actuals which indicates a good
variation.

CALCULATION OF REVENUE EXPENDITURE BUDGET FOR

THE YEAR 2019-2020

53
 (Rs……)
1. Materials Consumed 32,76,69,430 29,78,81,300 2,97,88,130

2. Consumable stores 2,34,74,752 2,13,40,684 21,34,060

3. Employee 1,00,08,138 9,09,830
90,98,308
Remuneration &
Benefits

4. Administrative 2,64,40,645 2,40,36,950 24,03,695

&Operation
Expenses
Banking 8,40,70,526 7,64,27,751 76,42,775
5.
Expenses
6. Depreciation 2,27,69,641 2,06,99,674 20,69,967

Total 49,44,33,132 44,94,84,667 4,49,48,465

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE

YEAR 2019-2020
(Rs……)

54
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Sales and other receipts 49,73,20,694 45,21,09,721 4,52,10,973

2. Other Income 31,48,358 28,62,144 2,86,214

3. Increase in Inventory (-) 36,71,613 (-) 33,37,830 (-) 3,33,783

Total 49,67,97,439 45,16,34,035 4,51,63,404

Interpretation
This year budgets and actuals estimates are below compared to the 2017-2018 except
in employee remuneration and benefits.
In revenue receipts, the budgeted are above the actuals. Increase in inventors value in
negative the budget estimates with a good percentage of variation.

CALCULATION OF REVENUE EXPENDITURE BUDG THE

YEAR 2020-2021 FOR

55
 (Rs……)
S. DESCRIPTION BUDGETED ACTUALS VARIANCE
No.
1. Materials 54,62,62,961 49,66,02,692 4,96,60,269

2. Consumed 95,94,838 87,22,580 8,72,258

3. Consumable stores 1,25,35,153 1,13,95,594 11,39,559

Employee
Remuneration &

4. Benefits 8,48,91,273 7,71,73,885 78,17,388

Administrative
&Operation
Expenses 13,48,25,637 12,25,68,761 1,22,56,876
5.
Banking .

6. Expenses 2,28,97,612 2,08,16,011 20,81,601

Depreciation

Total 81,11,087,474 73,72,79,523 7,38,27,951

CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE

YEAR 2020-2021
(Rs……)

56
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Sales and other receipts 79,52,53,505 72,29,57,732 7,22,95,773

2. Other Income 32,10,311 29,18,465 2,91,846

3. Increase in Inventory (-) 1,53,54,455 (-) 1,39,58,596 (- )13,95,859

Total 78,31,09,361 71,19,17,601 7,11,91,760

Interpretation
In this year the budgets are above the previous year and all expenditures and in all it
shows a good signification of budget techniques.
It we see the revenue receipts, budget are above the actual, with minimum difference.
Increase in inventory total five year’s values is negative

MATERIAL CONSUMED
YEAR BUDGETED ACTUALS
2016-2017 41,06,22,773 37,32,93,430

57
 2017-2018 25,16,39,707 22,87,63,370
2018-2019 56,21,68,072 51,10,61,883
2019-2020 32,76,69,430 29,78,81,300
2020-2021 54,62,62,961 49,66,02,692

Interpretation:
It is observed from the above graph the materiel consumption is fluctuating from

2016-2021.

So the company needs effective budget technique to get targeted actual.

CONSUMABLE STORES

YEAR BUDGETED ACTUALS

58
 2016-2017 3,72,07,068 3,38,24,607
2017-2018 2,05,89,206 1,87,17,509
2018-2019 4,77,76,051 4,34,32,773
2019-2020 2,34,74,752 2,13,40,684
2020-2021 95,94,838 87,22,580

Interpretation:
It is observed from the above graph the consumable stores are fluctuating from 2016-
2021. The value is decreased from 3, 38, 24,607 in 2016 to 87, and 22,580 in 2020 so
the company needs effective budget techniques to get targeted actual.

EMPLOYEE REMUNERATION & BENEFITS

YEAR BUDGETED ACTUALS

59
 2016-2017 10,22,353 9,29,412
2017-2018 32,40,003 29,45,458
2018-2019 58,97,375 53,61,250
2019-2020 1,00,08,138 90,98,308
2020-2021 1,25,35,153 1,13,95,594

Interpretation:
It is observed from the above graph the employee remuneration and benefits are
fluctuating from 2016 to 2021. There is an increase in the values from 9, 29,412 in
2018 to 1, 13, and 95,594 in 2021. So the company should follow the same technique
and also improve to get targeted actual.

ADMINISTRATIVE & OPERATION EXPENSES

60
 YEAR BUDGETED ACTUALS
2016-2017 10,01,60,814 9,10,55,285
2017-2018 8,78,97,229 7,99,06,572
2018-2019 5,60,64,572 5,09,67,793
2019-2020 2,64,40,645 2,40,36,950
2020-2021 8,48,91,273 7,71,73,885

Interpretation:
It is observed from the above graph the administrative and operation expenses are
fluctuating from 2016 to 2020. there is an decrease in the values from 9,10,55,285 in
2017 to 7,71,73,885 in 2021 so the company need effective budget techniques to get
targeted actual.

BANKING EXPENSES

61
 YEAR BUDGETED ACTUALS
2016-2017 2,95,12,360 2,68,29,419
2017-2018 2,74,36,923 2,49,42,658
2018-2019 9,98,08,181 9,07,34,710
2019-2020 8,40,70,526 7,64,27,751
2020-2021 13,48,25,637 12,25,68,761

Interpretation:
It is observed from the above graph the Banking expenses are fluctuating from 2016-
2021 there is a increase in the values from 2,68,29,419 in 2017 to 12,25,68,761 in
2021. so the company should follow the same technique and also improve to get
targeted actual.

DEPRECIATION

62
 YEAR BUDGETED ACTUALS
2016-2017 1,47,38,772 1,33,98,884
2017-2018 1,78,56,564 1,62,33,240
2018-2019 2,39,11,697 2,17,37,907
2019-2020 2,27,69,641 2,06,99,674
2020-2021 2,28,97,612 2,08,16,011

Interpretation:
It is observed from the above graph the depreciation values are fluctuating from 2016-
2021. There is an increase in the values from 1, 33, 98,884 in 2016 to 16,011 2021 so
the company need effective budget techniques to get targeted actual.

SALES AND OTHER RECEIPTS

63
 YEAR BUDGETED ACTUALS
2016-2017 60,66,25,179 55,14,77,436
2017-2018 40,68,80,342 36,98,91,220
2018-2019 79,43,88,636 72,21,71,487
2019-2020 49,73,20,694 45,21,09,721
2020-2021 79,52,53,505 72,29,57,732

Interpretation:
It is observed the above graph the sales and other receipts are fluctuating from 2016-
2021.there is an increase in the values from 55,14, 77,436 in 2016 to 72,29,57,732 in
2021. There is an increase in the actual so the company need effective budget
techniques to increase the sale of targeted actual.

OTHER INCOME

64
 YEAR BUDGETED ACTUALS
2016-2017 35,96,102 32,69,184
2017-2018 28,00,738 25,46,126
2018-2019 28,95,385 26,32,169
2019-2020 31,48,358 28,62,144
2020-2021 32,10,311 29,18,465

Interpretation:
It is observed from the above graph the other incomes are also fluctuating from 2016-
2021 there is a decrease in the value 32,69,184 in 2016 to 29,18,465 in 2021 so the
company need effective budget techniques to get targeted actual.

65
 CHAPTER V

FINDINGS
SUGGESTIONS
CONCLUSION

FINDINGS

66
1. The budget and budgetary control of ICICI. Was found to be very effective

when considered all categories of items.

2. In spite of having techniques many techniques of budget system, the company

is not following any of the system to control budget.

3. In the 2016-2021 the total budgets value was high. Whereas in the next two

years it has come down drastically.

4. In all the five years budget expenditure was of high consumption in value.

5. Material consumed which is one of the inputs for the production.

SUGGESTIONS

67
1. It is recommended to the company that every item to be considered when

categorizing the items into budgets.

2. As company is not using any budget techniques we can suggest the company

to follow budget techniques for better and effective budget and budgetary

control.

3. Pre audit of all expenditure proposals before issue of order and to check

whether the expenditure is legitimate, approved by appropriate authority and

availability of funds for the above items.

4. The budget estimations should be made that they will reach with the actual for

every year with very less variation.

5. In ICICI revenue expenditure and revenue receipts are not interdependent on

each other.

6. The revenue expenditure will be spent based on the production target

irrespective of the revenue receipts.

7. In this proves the effective financial performance of budget department in the

organization

CONCLUSION

68
1. All the production units in ICICI. Will run perpetually throughout the year, there
will be minimum variations in the revenue expenditure budget estimates and actual.

2. As the expenditure will be incurred more or less to the estimations made by the
organization.

3. In concern with overhead expenses, it will also be with minimum variations

between budget estimates and actual.

4. The production process will be consistent. Any change in the items of expenditure,
will lead to the review in the budget estimates by the accounts and finance
department.

69
BIBLIOGRAPHY

BIBLIOGRAPHY

70
Books referred:

 M.Y. Khan & P. K. Jain , Financial Management Fourth edition, published

 by TATA McGraw HILL.
 Prof. Satish Inamdar, Financial Management published by Symbiosis center for
distance learning, Pune.
o M. Pandey, Financial Management Second edition published by TATA McGraw
HILL publishing company.
 Prasannachandra , Financial Management
 S.N.Maheswari , Management Accounting and control.

Internet sites:
 www.icici.com
 www.yahoofinance.com
 www.google.com

Journals & Magazines:

 Financial Budget.
 Times of India.
 Financial cornices.

71