Part C Accounting and auditing; Budgetary Control:
Definition: Budgetary control is the process by which budgets are prepared for the future period and are compared with the actual performance for finding out variance.
Obj. of BC:
- Define the objectives of the organisation
- Providing plans to achieve the objectives
- Coordinating the activities of various departments
- Operating various department and cost centres economically and efficiently.
- Increasing the profitability by eliminating waste
- Centralising the control system
- Correcting variance from set standards.
- Fixing the responsibility of various individuals and making them accountable.
Advantage of Budgetary control:
- Helps to define goals, plans and policies
- It helps to control the activities of various departments.
- It helps to secure better coordination.
- It helps to find irresponsible centres.
- It helps in decreasing cost of production by eliminating the wasteful expenditure.
- It helps to increase efficiency.
- Facilitate centralised control and helps in smooth functioning.
Disadvantage of BC:
- Not a viable method for a small enterprise,
- Difficult to predict future as it is highly uncertain and guided by myriad forces.
- Success depend upon the cooperation of top management.
Expected question:
- What is budgetary control?
- What are the advantages of Budgetary control?
- Disadvantages of BC?
- Objectives of BC?