Budgetary Control

6356 Words Mar 4th, 2011 26 Pages

MEANING AND NEED FOR BUDGET A budget is prepared to have effective utilisation of funds and for the realisation of objectives as efficiently as possible. Budgeting is a powerful tool to the management for performing its functions efficiently.

The Chartered Institute of Management Accountants, ENGLAND defines budget as under, A plan quantified in monetary terms prepared and approved prior to a defined period of time usually showing planned income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain a given objective.

Thus a budget fixes a target in terms of rupees or quantities against
…show more content…
11. The budget should cover all phases.
12. Top management approval is necessary in order to get full cooperation and acceptance of the system of budgetary control.


ICMA England defines a budget manual as ‘a document schedule or booklet which sets out, the responsibilities of the persons engaged in the routine of and the forms and records required for budgetary control’. Thus it’s a return document which guides the executives in preparing various budgets. Budgets are to be drawn keeping in view the objectives of the organisations given in the budget manual.


Different types of budgets have been developed keeping in view the different purpose they serve. Budgets can be classified according to:

I Coverage

A. Functional budgets B. Master budget

2. The capacity to which they are related;

A. Fixed budget
B. Flexible budget

3. The periods which they cover;

A. Long term budgets
B. Short term budgets

1(a) Functional budgets

It is a budget which relates to any of the functions of an organisation.eg: sales, research and development, cash etc. The following functional budgets are generally prepared: Budget Prepared by

• Sales budget including Selling and Sales Manager Distribution Cost budget
• Production budget
Open Document