Thulasi Mani Selvin

Sasidharan Sivakumar Naveen

y Organizational Control y Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals .

Managers must monitor and evaluate: y Is the firm efficiently converting inputs into outputs? y Are units of inputs and outputs measured accurately? y Is product quality improving? y Is the firm s quality competitive with other firms? y Are employees responsive to customers? y Are customers satisfied with the services offered? y Are our managers innovative in outlook? y Does the control system encourage risk-taking? .

evaluation and feedback systems that provide managers with information about whether the organization¶s strategy and structure are working efficiently and effectively. . monitoring.y Control Systems y Formal. target-setting.

y provide information in a timely manner.y A good control system should: y be flexible so managers can respond as needed. . y provide accurate information about the organization.


y Feed forward Controls y Used to anticipate problems before they arise so that problems do not occur later during the conversion process y Giving stringent product specifications to suppliers in advance y IT can be used to keep in contact with suppliers and to monitor their progress .

y Concurrent Controls y Give managers immediate feedback on how efficiently inputs are being transformed into outputs y Allows managers to correct problems as they arise .

y Feedback Controls y Used to provide information at the output stage about customers reactions to goods and services so that corrective action can be taken if necessary .


1. Establish standards of performance. goals. or targets against which performance is to be evaluated. . y Managers at each organizational level need to set their own standards.

The more non-routine the task. Measure actual performance y y Managers can measure outputs resulting from worker behavior or they can measure the behavior themselves.2. the harder it is to measure behavior or outputs .

3. Compare actual performance against chosen standards of performance y Managers evaluate whether and to what extent performance deviates from the standards of performance chosen in step 1 .

4. they must try to change the way work activities are performed to solve the problem . y Evaluate result and initiate corrective action if the standard is not being achieved If managers decide that the level of performance is unacceptable.


BUDGETING: *INTRODUCTION *TYPES * METHODS *Capital Budgeting *Working Capital Management .

management must know: ‡ ‡ ‡ ‡ where it intends to go i. organizational objectives How it intends to accomplish its objective i.e.e. coordination whether operations conform to the plan of operations relating to that period i. i.e. plans whether individual plans fit in the overall organizational objective. control ³Budgetary control is the device that a company uses for all these purposes.INTRODUCTION: For effective running of a business.e.´ .

expenditure and the capital to be employed.´ . It is prepared and approved prior to the budget period and may show income.WHAT IS A BUDGET? ³ A plan expressed in money.

 Preparation of separate budgets for each ³budget centre´. This system involves:  Division of organization on functional basis into different sections known as a budget centre. coordination and control. Comparison of actual level of performance against budgets.  Reporting the variances with proper analysis to provide basis for future course of action.WHAT IS BUDGETARY CONTROL? Budgetary control is the use of the comprehensive system of budgeting to aid management in carrying out its functions like planning.  Consolidation of all functional budgets to present overall organizational objectives during the forthcoming budget period. .

Sales Budget 2. Master Budget 1. Personnel Budget 6. Production Budget 3. Purchase Budget 5. Short term Budget 3. Long term budget 2. Cash Budget 9. Current Budget 4. Capital expenditure Budget 8. Flexible budget . Fixed Budget 2. Cost of production Budget 4. R & D Budget 7.ACCORDING TO TIME ACCORDING TO FUNCTION ACCORDING TO FLEXIBILITY 1. Rolling Budget 1.

This budget is a forecast of quantities and values of sales to be achieved in a budget period. What is to be produced? When is it to be produced? How is it to be produced? Where is it to be produced? . 2.1. c. b. SALES BUDGET: Sales budget is the most important budget based on which all the other budgets are built up. d. PRODUCTION BUDGET: Production budget involves planning the level of production which in turn involves the answer to the following questions: a.

.3. 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 ‡ Labour Cost Budget ‡ Overhead Cost Budget 4. PURCHASE BUDGET: This budget provides information about the materials to be acquired from the market during the budget period.

A R&D budget is prepared taking into consideration the research projects in hand and new R & D projects to be taken up.5. This budget may be classified into ± a. RESEARCH AND DEVELOPMENT BUDGET: This budget provides an estimate of expenditure to be incurred on R & D during the budget period. . PERSONNEL BUDGET: This budget gives an estimate of the requirements of direct labour essential to meet the production target. Labour requirement budget b. Labour recruitment budget 6.

7. Replacement of existing assets. CASH BUDGET: This budget gives an estimate of the anticipated receipts and payments of cash during the budget period. . Purchase of additional assets to meet increased production c. Installation of improved type of machinery to reduce costs. 8. CAPITAL EXPENDITURE BUDGET: This is an important budget providing for acquisition of assets necessitated by the following factors: a. b. Cash budget makes the provision for minimum cash balance to be maintained at all times.

FIXED BUDGET: This is defined as a budget which is designed to remain unchanged irrespective of the volume of output or turnover attained. Thus master budget is a summary of all functional budgets in capsule form available in one report.9. MASTER BUDGET: CIMA defines this budget as ³ The summary budget incorporating its component functional budget and which is finally approved. This budget will. be useful only when the actual level of activity corresponds to the budgeted level of activity. adopted and employed´. therefore. 10. .

by recognizing the difference in behavior between fixed and variable costs in relation to fluctuations in output. 12.11. FLEXIBLE BUDGET: CIMA defines this budget as one ³ which. PERFORMANCE BUDGETING: These days budgets are established in such a way so that each item of expenditure is related to specific responsibility centre and is closely linked with the performance of that standard. turnover or other variable factors such as number of employees. . is designed to change appropriately with such fluctuations´.

on what activities would we spent out money and to what activities would we give the highest priority?´ . ³Suppose we are to start our business from scratch. Zero is taken as the base and a budget is developed on the basis of likely activities for the future period. ZERO BASE BUDGETING: The zero base budgeting is not based on the incremental approach and previous figures are not adopted as the base.13. A unique feature of ZBB is that it tries to help management answer the question.

Profit centre c. RESPONSIBILITY ACCOUNTING: Responsibility accounting fixes responsibility for cost control purposes by establishing responsibility centres namely ± a. Fixation of targets for each responsibility centre 2. Taking corrective action. The variances therein are analyzed so as to fix the responsibility of centres. Actual performance is compared with the target 3. Investment centre Principles of responsibility accounting are as follows: 1.14. . 4. Cost centre b.

But preparation and implementation of budgets alone will not achieve much unless a comparison is made regularly between the actual performance and the budgeted performance. To ensure the success of budgetary control system. Continuous and proper reporting makes this possible.CONCLUSION: Preparation of budgets is the first step in the budgetary control system. Implementation of budgets is the second phase. . proper follow up action has to be taken immediately for the reports submitted.

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