EXPLAIN BUDGET AND

TECHNIQUES OF BUDGETORY
CONTROL; COST AUDIT AND
COST ACCOUNTING STANDARDS.
Guide: Prepared by :
Mittal ma’am
Kaushal Vyas
Sagar Solanki
Submitted to:
Department of business administration, Ankit Vajani
M.K. bhavnagar University
Munira Vohra
 Introduction

→ Planning has become the primary function of

management these days. Most of the" planning
relates to individual situations and individual
proposals.

→ Budgets are nothing but expressions, largely in

financial terms, of management's plans for
operating and managing the enterprise during
specific periods of time.
 MEANING & DEFINITION OF
BUDGET & BUDGETARY CONTROL

• What is Budget?

A statement of estimated annual receipt

and expenditure whether, on capital or revenue
account of central government is prepared by
the railway board.
MEANING OF A BUDGET
• A budget is a detailed plan of operations of some
specific future period.

• According to Gordon and Shilling law budget may be

defined as "a predetermined detailed plan of action
developed and distributed as-a guide to current
operations and as a partial basis for subsequent
evaluation of performance.
 CONT…

• "The Chartered Institute of Management Accountants,

London, defines a budget as "a financial and/ or
quantitative statement, prepared prior for a defined
period of time, of the policy to pursued during that
period for the purpose of attaining a given objective."
 Meaning of Budgetary Control

“Budgetary control is the

establishment of budgets relating to the
responsibilities of executives of a policy
and the continues comparison of the
actual with the budgeted results, either to
secure by individual action the objective
of the policy or to provide a basis for its
revision.”
 NATURE OF BUDGETARY CONTROL

• Budgetary control is the process of determining various

budgeted figures for the enterprise for the future period and
then comparing the budgeted figures with the
actual performance for calculating variances, if any.
• According to J.A. Scott, "it is the system of management
control and accounting inwhich all operations are forecasted
and so far as possible planned ahead, and the actualresults
compared with forecasted and planned ones."
 BUDGET, BUDGETING AND BUDGETARY
CONTROL

• A budget is a blue print of a plan expressed in

quantitative terms.
• Budgeting is a technique for formulating budgets.
• Budgetary control refers to the principles, procedures
and practices of achieving given objectives through
budgets.
DIFFERENCE BETWEEN BUDGET
& BUDGETTARY CONTROL

1.The budget is an act of planning whereas budgetary

control is an act of controlling.

2.The budget concerns itself with the future.

Budgetary control is however concerned with the
present activities although it is prepared on the basis
of data collected from the past budget.
 CONT…

3.The budget fixes the target and budgetary control

helps to arrive at that target.

4.The actual performance is measured -not by the

budget but by the budgetary control.
 OBJECTIVES OF BUDGETARY
CONTROL
• To ensure planning for future by setting up various budgets.
• To co-ordinate the activities at different departments.
• To operate various cost centers and departments with efficiency and
economy.
• Elimination of wastes and increase in profitability.
• To anticipate capital expenditures for future.
• To centralize the control system.
• Correction of deviations from the established standards.
• Fixation of responsibility of various individuals in the organization.
 CHARACTERISTICS OF BUDGETING
• A good budgeting system should involve persons at different
levels while preparing the budgets.
• There should be a proper fixation of authority and
responsibility.
• The targets of the budgets should be realistic.
• A good system of accounting is also essential to move the
budgetary successful.
• The budgeting system should have a whole-hearted support
of the top management.
• The employees should be imparted budgeting education.
• A proper reporting system should be introduced.
 CLASSIFICATION AND TYPES OF
BUDGETS
a)Classification According to Time:
1.Long-term Budgets
2.Short-term Budgets
3.Current Budget
b)Classification of the Basis of Function:
1.Operating Budgets
2.Financial Budgets
3.Master Budgets
c)Classification on the basis of Flexibility:
1.Fixed Budget
2.Flexible Budget
 ZERO-BASED BUDGETING

• Zero-base Budgeting is a view technique designed to

revitalize budgeting.
• This technique was first used by the U.S. Department of
Agriculture in 1961.Texas Instruments, a multinational
company, pioneered is use in the private sector. It was Peter
A. Pyhrr who designed its logical framework in 1970.
 CONT…

• The technique suggests that an organization should

not only make decision about the proposed
new programmers but it should also, from time to
time, review the appropriateness of the existing
programmers.
 ADVANTAGES OF BUDGETARY
CONTROL
• Maximization of Profit.
• Co-ordination.
• Economy.
• Corrective Action.
• Cost Reduction.
 LIMITATIONS OF BUDGETARY
CONTROL
• i. Opposition against the very spirit of budgeting.
• ii. Budgeting and changing economy.
• iii. Time factor.
• iv. Not a substitute for management.
 BUDGETARY CONTROL
TECHNIQUES

• In budgetary control, we use following

techniques:
• 1. Variance Analysis.
• 2. Responsibility Accounting.
• 3. Adjustment of Funds.
• 4. Zero Base Budgeting (ZBB).
 CONT…

• 1. Variance Analysis
First of all, budgets of different departments are
made with estimated figures. After this, it is
compared with actual accounting figures. In this
technique, we find variances. These variances may
be favorable and unfavorable
 CONT…

• 2. Responsibility Accounting.
Responsibility accounting is also a good budgetary control
technique. In this technique, we create cost centre, profit
centre and investment centre. All these centers are just like
department of any organization. Now, we classify our all
employees work on the basis of their centers. Every
employee’s responsibility is fixed on the basis of his target
or performance. After this, we record their performance
manually. Then, we fix their accountability.
 CONT…

• 3. Adjustment of Funds.
In this technique of budgetary control, top management take
the decision to adjust fund from one project to other project.

• 4. Zero Base Budgeting (ZBB).

These days zero base budgeting is popular technique of
budgetary control. In this technique, every next year budget
is made on nil base.
 DEFINITION OF COST AUDIT

• “Verification of cost records and accounts and

check on the adherence to the prescribe cost
accounting procedures and the continuing
relevance of such procedures.”
 ADVANTAGE OF COST AUDIT

• Useful to the management

• Useful to the government
• Useful to the shareholders
 OBJECTIVES OF COST AUDIT

1) Protective
2) Constructive
 TYPES OF COST AUDIT

1) Efficiency Audit
2) Propriety Audit
3) Statutory Audit
Thank You…