WHAT DO YOU KNOW ABOUT BUDGETARY CONTROL?

Budgetary control is how manajemen controlling the operations company. This control consist of the
steps taken by manajemen to see that planned objective are met.

HOW TO CONTROL? With compare an actual result with planned objective we can see in budget
report.

To reporting system is based on formalize reporting system :

1. the first is identify the name of the budget report, for example sales , overhead,or labor,
2. and then determine the frequency for example yearly, monthly, weekly, or daily,
3. then define the purpose of the report
4. and identify the main recipients of the report.( ex; top manajemen or sales manajemen)

WHO CONTROLing ? management responsible for budget control

WHERE and WHEN? From each company, Prepared as frequenly as needed(disiapkan sesering
mungkin yang membutuhkan)

The budged report has 2 type:

1. Static budget report is a system of planning and budgeting that is based on fixed production
or sales in one level of activity.
2. flexible budget is a system for planning and compiling a company's budget if the output of
operational activities is variable and can calculate various levels of expenditure for variable
costs.

how to determine a static budget report :

1. the first thing to do is classify each cost as variable or fixed,
2. then determine the difference whether it is profitable or not and
3. determine the total difference between variable costs, fixed costs and total costs.

Use and limitation on static budget is when the actual level of activty closely from approximates the
master budget activity and the behavior of the costs in response to changes in activity is fixed.

Kenapa dibandingkan dengan master budget? Karna anggaran ini tdk mempertimbangkan data
untuk tingat level aktivitas yang berbeda tetapi hanya satu tingkat aktivitas yang digunakan.
(Why compare to master budget? Because this budget does not consider data for different activity
levels but only one activity level is used.)

. In preparing a flexible budget, here are some basic steps to take:

a) Identify the relevant activity index and range, The selected activity index should significantly
affect the budgeted costs.
b) Identify variable costs, and determine budgeted variable costs per unit of activity for each
cost
c) Identify fixed costs, and determine the budgeted amount for each cost.
d) Prepare a budget for the selected activity increase in the relevant range.
The flexible budget report consists of two parts,
1.Production data for the selected activity index such as direct labor hours,
2.Cost data for variable costs and fixed costs.
This flexible report provides a basis for evaluating a manager's performance in production control
and cost control.

Responsibility accounting is an important part of any effective budget control system, therefore
every management budget preparation must account for every budget plan implemented as the
basis for its work assessment.

Hubungannya anggaran dan ak.pertanggungjawaban

dalam akuntansi pertanggungjawaban setiap pusat pertanggungjawaban harus ikut serta dalam
penyusunan anggaran karena anggaran merupakan gambaran rencana kerja para manajer yang akan
dilaksanakan dan sebagai dasar dalam penilaian kerjanya.
(In accountability accounting, each responsibility center must participate in budgeting because the
budget is a description of the work plans of managers to be implemented and as a basis for
evaluating their work.)

In responsibility accounting each level of management can be used in any of the following
conditions:

a) Can be associated with a certain level of management responsibility if costs and revenues
are received directly.
b) Employees related to their level of responsibility can control costs and revenues.
c) This budget data can be developed to evaluate the effectiveness of managers in controlling
costs and revenues.

This responsibility can be assessed from the principle of performance evaluation, the principle of
performance evaluation is the center of responsibility accounting, because this principle involves
two aspects, namely the principle of behavior and reporting.

The first is the behavioral principle, this behavior depends on the environment of each individual,
while the behavioral principles in evaluating performance are:

a) Responsibility center managers should have direct input into the budget targeting process in
their area of responsibility.
b) Performance evaluation should be based entirely on things that can be controlled by the
evaluated manager
c) Top management must support the evaluation process.
d) The evaluation process should allow managers to respond to their evaluations.
e) Evaluation should identify good and bad performance
 The second is the reporting principles, these principles relate to internal reports that
provide a basis for evaluating performance. This performance report must contain data that can be
controlled by the responsible manager, accurate and reliable budget data to measure performance.
In order for each higher level of responsibility to obtain detailed reports for each lower level of
responsibility, an accountability reporting system is needed which involves the preparation of
reports for each level of responsibility on the existing company organizational chart.

There are three types of responsibility centers; cost center, profit center, investment center. These
responsibility centers are usually from the production and service departments:
1. The cost center compares actual costs that can be controlled with flexible budget data.
2. The profit center shows the actual revenues and expenses that can be controlled and
budgeted.
3. The investment center can control the investment funds available for use. The main basis for
evaluating the performance of investment center managers is the return on investment
(ROI), this measure is useful in showing the effectiveness of managers in utilizing their
assets. To find the return on investment of the investment center using the formula : ROI=
Control label margin / Average operating assets.