Budgetary Control & Objectives of Budgetary Control

What is Budget?

Budget is an estimate of future costs.

Essential features of a budget are as follows:

  • It is a statement expressed in monetary and / or physical units.
  • It is laid down prior to the budget period during which it is followed.
  • Prepared for definite future period.
  • The policy to be followed to attain the given objective must be laid before the budget is prepared.

Budgetary Control

A budgetary control system secures control over performance and costs in the different part of a business.

  • By establishing budgets
  • By comparing actual attainments against the budget ; and
  • By taking corrective action and remedial measures or revision of the budgets, if necessary.

It is an excellent system for decentralization of authority without losing control over the operation of the firm.

It is one of the systems whereby dynamism is infused into an organization through the process of targets & the achievements. In short, budgetary control means lying down in momentary and quantitative term what exactly has to be done and how exactly it has to be done over the coming period and then to ensure that actual results do not diverge from the planned course more than necessary.

Objectives of Budgetary Control

The objectives of budgetary control are as follows:

  • To use different levels of management for achievement of the objective of the firm.
  • To facilitate centralized control with delegated authority and responsibility.
  • To achieve maximum profitability by planning income and expenditure through optimum use of the available resources.
  • To ensure adequate working capital in other resources for efficient operation of business.
  • To reduce losses and wastes to the minimum.
  • Bring out clearly where effort is needed to remedy the situation.
  • Various activities like production, sales, purchase of materials etc. are coordinated with the help of budgetary control.