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Managerial Accounting Assignment

I agree that budgetary control is part of overall organisation control and is concerned primarily with the control of performance. Also, the use of budgetary control in performance management has of late taken on greater importance especially as a more integrative control mechanism for the organisation. A budget is defined as an estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.

Being as one of the most important administrative tools, a budget serves as a plan of action for achieving measured goals, standard for measuring performance and device for coping with probable adverse situations. In short, it is a blue print of projected plan of an action of a business for a definite period of time. A budget is prepared to have effective utilization of funds and for the realization of objective as efficiently as possible. Budgeting is a powerful tool to the management for performing its functions, such as formulation plans, coordination activities and controlling operations efficiently.

Budget and budgetary control provide a set of basic techniques for planning and control. According to Institute of Charted Management Accountants, England “ A plan quantified in monetary term prepared and approved prior to a defined period of time usually showing planned income to be generated and to be incurred during that period and the capital to be employed to attain a given objective. ” Organisational control is the process of establishing and maintaining authority over and throughout an enterprise.

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The organisational control process within a larger business typically requires the use of systems that assist a manager in analysing considerable amounts of data about how the business and its employees are functioning in order to make appropriate administrative decisions. No system of planning can be successful without having an effective and efficient system of control. Budgeting is closely connected with control. The exercise of control in the organization with the help of budgets is known as budgetary control.

The process of budgetary control includes establishment of budget for each function and section of the organization. It is the management responsibility to perform the specific tasks so that objectives of the enterprise may be attained. Continues comparison of the actual performance with that of the budget and placing the responsibility of executives for failure to achieve the desired result a given in the budget. The management might consider taking suitable remedial action to achieve the desired objective if there is a variation of the actual performance from the budgeted performance.

Revision of budgets in the light of changed circumstances. Good budgeting control for the company basically means that the management is in control and fully aware of which aspect is using up more funds than expected. They can better manage it by using Activity Based Budgeting (ABB) and do allocation. Companies who do not have god budgeting control usually see the surface; whether they are within their forecasted budget for the year or they exceed. In this case, they will never know where and what uses up more resources and eventually it will affect the overall performance for the company.

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