1. Can you please explain the advantages of Budgetary Control?
Advantages of Budgetary Control:
- It is a powerful tool for the purpose of cost control and profit maximization.
- It enables the management to maximise the use of available resources in a most profitable manner.
- As a budgetary control is based on a budget which sets the plan of action in respect of various functional areas of operations. Thus, it acts as a means of declaration of the policies of the management.
- It acts as means of communication.
- It acts as a means of improving co-ordination by developing team spirit in the organisation.
- It enables the management to take proper actions in regard to the adverse variations in the actual and budgeted results.
- It enables the delegation of authority.
- It is a powerful tool with the management for performance appraisal.
- It also provides a basis for the establishment of the incentive systems
2. Explain what are Budgetary Control characteristics?
Following are the characteristics of Budgetary control:
-It deals with the establishment of the budgets.
-A control technique where actual results are extracted from the organisation's operations and compared with the budget prepared.
-Any differences or variations are computed and made the responsibility of key individual who can either take actions for maintain the favourable variations or revise the budgets.
3. Explain what is Budgetary Control?
Budgetary Control is a methodical control technique whereby budgets are prepared relating the responsibilities of budget holders. It is a continuous comparison of actual results with budgeted results, to ensure that the objectives of the company's policy are achieved; or to provide a basis for the change of those objectives. In simple terms, it is the analysis of the plans which the organisation has made; what was the result when those plans were implemented practically. After practical implementation of the budget if any variation is seen in the actual result to the budget result then the reasons for the variations are fount out and corrective actions are taken to correct variations.
4. Tell me what are the major categories under which budgets are divided?
There are major four categories under which budgets are divided:
Sales/Marketing Budget:
- Sales Budget
- Selling and Distribution Cost Budget
- Advertising Cost Budget
Production Budget:
- Production Budget
- Purchases Budget
Finance Cash budget is the budget which is prepared under this functional area. It is an estimation of the expected cash receipts and cash payments during the budget period.
Personnel budget - The budget which is prepared under this area takes the form of a personnel budget, which indicates the requirement of personnel or labour force to conform to the production budget.
Miscellaneous
-Overheads Cost Budget
-Capital Expenditure Budget
Personnel budget - The budget which is prepared under this area takes the form of a personnel budget, which indicates the requirement of personnel or labour force to conform to the production budget.
6. Explain Finance Cash budget?
Finance Cash budget is the budget which is prepared under this functional area. It is an estimation of the expected cash receipts and cash payments during the budget period.
- Production Budget
- Purchases Budget
8. What is Sales/Marketing Budget?
- Sales Budget
- Selling and Distribution Cost Budget
- Advertising Cost Budget
9. Do you know what are the pre-requisites to implement Budgetary Control?
Following are the pre-requisites to implement Budgetary Control:
-First a Budget Centre which is that section of the organisation for which the budget will be prepared should be clearly defined.
-Budget Period or the time period for which the budget will be prepared and operated should be decided carefully. It should neither be too long nor too short.
-An efficient and proper system of accounting should be established so that the information required for the proper implementation for the budgetary control can be available on time.
-A proper organisational chart should be prepared properly, clearly depicting the responsibilities and duties of each level of executive.
-A budget manual, an important document in relation to the budgetary control. It should be well written, indexed and divided into sections. It should include principles and objectives of budgetary control, duties and responsibilities of each executive in the organisation, accounts codes, budget diagrams, etc.
-A budget key factor should be assessed before preparing other functional budgets to ensure that other functional budgets are capable of fulfilment.
10. Tell me What is what factors are taken into consideration while preparing it?
Following factors are taken into consideration while forecasting for sales quantity:
-Analysis of Past Trend
-Reports by Salesmen
-Market Research and Market Survey
-General Economic Conditions
Following factors are taken into account while forecasting for selling price:
-Cost price of the product
-Expected amount of profits
-Selling price charged by the competitors
-Advertisement and sales promotion techniques used by the company.
