University of lucknow

Accounting For Planning and Control

Submitted by : shubhangi sonkar

Submitted to : Dr. Tejas Yaduvanshi
Class : MBA 1 st semester section B
Serial number :6
Roll number:2310019025198
CONTENT
 Budget
 Budgetary control
 Operating budgets and its types
 Financial budgets
 Flexible budgeting
 Rolling budget
 Zero based budgeting
 Management control system
 Responsibility accounting
A budget is an estimation of revenue and expenses over a specified future period of time and
is utilized by governments, businesses, and individuals at any income level.

A budget is basically a financial plan for a defined period, normally a year that is known to
greatly enhance the success of any financial undertaking.

Corporate budgets are essential for operating at peak efficiency.

Aside from earmarking resources, a budget can also aid in setting goals, measuring
outcomes, and planning contingencies.

Personal budgets are extremely useful in managing an individual's or family's finances over
both the short and long-term horizon.
 BUDGETARY CONTROL
Budgetary control is the process of planning,
controlling, and monitoring the organization’s
revenue and expenses to ensure that they are
according to the budget . It involves creating
budgets for various business activities, monitoring
actual performance against the budget, identifying
variations, and taking corrective actions to bring
the budget back on track.
 Operating Budgets
 An operating or operational budget outlines the funds you need to make
your business run efficiently and successfully during a period. It consists of
all revenues and expenses your company expects to use for its operations.

 Components :

 sales
 Production
 Direct material
 Direct labour
 Overhead
 Financial budgeting
Financial budgeting is the process of creating a plan
for how you will manage your money. It involves
estimating your income and expenses over a specific
period, typically a month or a year, and allocating
funds accordingly. The main goal of financial
budgeting is to help individuals, families, or
businesses achieve their financial objectives and
ensure that they can cover their needs while working
towards their financial goals.
Rolling budget

A rolling budget is a financial planning approach in

which the budget is continuously updated by adding a
new budget period (e.g., month, quarter) as the
current period expires. This allows organizations to
have a constant forward-looking perspective and adapt
their budget based on the most recent information
and changing circumstances. Rolling budgets are often
used to provide more flexibility and responsiveness in
dynamic business environments.
Zero Based Budgeting

Zero-based budgeting (ZBB) is a budgeting approach

in which each financial year's budget starts from
scratch, assuming zero dollars for all activities and
expenses. In other words, the budget is not based on
the previous year's budget; instead, every expense
must be justified and approved, regardless of whether
it was included in the previous budget.
Management Control System
A Management Control System (MCS) is a set of tools,
processes, and structures designed to help an
organization achieve its objectives. The primary
purpose of a management control system is to monitor
and influence the behavior of people within the
organization and ensure that their actions are in line
with the overall goals and strategies of the
organization.
 Components

Strategic Planning:

Mission and Objectives: Clearly defined mission and objectives provide

the foundation for the entire management control system.

Performance Measurement:

Key Performance Indicators (KPIs): Identifying and measuring key

performance indicators that reflect progress toward organizational goals.
Benchmarking: Comparing performance against industry standards or
competitors.
Budgeting:

Financial Planning: Developing budgets that allocate resources to different

departments or activities.
Budgetary Control: Monitoring actual performance against budgeted figures.

Management Information System (MIS):

Data Collection and Reporting: Gathering relevant data and providing timely and
accurate reports to management.
Decision Support Systems (DSS): Systems that provide information to support
managerial decision-making

Organizational Structure:

Responsibility Centers: Designing the organization into responsibility centers, such

as cost centers, profit centers, and investment centers.
Delegation of Authority: Clearly defining levels of authority and responsibility
within the organization.
Performance Evaluation:

Performance Appraisal: Assessing individual and organizational performance

against predetermined standards.

Reward Systems: Linking performance to rewards and incentives.

Feedback and Control:

Feedback Mechanisms: Establishing mechanisms to provide feedback on

performance and deviations from plans.

Corrective Action: Taking corrective action when actual performance deviates

significantly from planned performance.

Risk Management:

Risk Identification and Mitigation: Identifying potential risks to the organization and
implementing strategies to mitigate them.
Ethics and Compliance:

Code of Conduct: Establishing ethical guidelines and ensuring compliance with legal
and regulatory requirements.

Continuous Improvement:

Learning and Adaptation: Encouraging a culture of continuous learning and

adaptation to changes in the internal and external environment.

A well-designed management control system helps

organizations align their activities with their strategic goals,
monitor performance, and adapt to changes in the business
environment. It provides a framework for decision-making,
accountability, and continuous improvement
Responsibility Accounting
Responsibility accounting is a management control
system that involves the delegation of authority and
responsibility for performance to various levels of
management within an organization. The primary goal
of responsibility accounting is to measure the
performance of individuals, departments, or other
organizational units in terms of their assigned
responsibilities. This helps in evaluating how well each
unit is meeting its goals and objectives.