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Budgeting and budgetary control: - Budgeting as a tool of management control- steps in budget preparation-Functional budget (simple Problems on Sales, Production, Material ), flexible budgets. (does not include Master budget & Cash budget)
Budget
A Budget is a financial and/or quantitative Statement, prepared prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining given Objective.
 A budget is prepared prior to a defined period of time
 It is prepared for the definite future period.
 The policy to be followed to attain the given objectives must be laid before budget is prepared.
 The budget is monetary and /or quantitative statement of that policy.
Budgetary Control
Budgetary Control is the establishment of Budgets relating to the responsibilities of executives to the requirement of a policy, and the continuous comparison of the actual with the budgeted results, either to secure by individual action the objective of the policy or to provide a firm basis for its revision.
Characteristics
 Establishment of Budgets
 Continuous comparison
 Analysis Of Variation
 Taking Remedial Action
 Revision Of Budgets
Preliminaries for Installation
Organization Chart
Creating Budget Centre
Budget Committee
Budget Manual
Budget Period
Key Factor
Accounting Records
 Fixed Budget:
Prepared for a given level of activity.
It does not take into consideration any changes in expenditure arising out of changes in the level of activity.
 Flexible Budget:
Budget designed to change in accordance with the level of activity actually attained. It gives different budgeted costs for different level of activity
 Basic Budget:
A budget which is prepared for use, unaltered over a long period of time.
 Current Budget:
Budget which is related to the current conditions and is prepared for use over a short period of time.
 Long Term Budget:
Budgets prepared for a periods longer than a year.
 Short Term Budget:
Prepared for a period less than a year.
Functional Budgets
 SALES BUDGET
 PRODUCTION BUDGET
Raw material, Labour, Plant utilization
 SELLING & DISTRIBUTION
 PURCHASE BUDGET
 ADMINISTRATION COST
 R & D BUDGET
 CAPITAL EXPENDITURE
 CASH BUDGET