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Control Methods in Budget Management

The document defines controlling as ensuring actual activities conform to planned activities. The control process involves establishing standards, measuring performance against the standards, and taking corrective action if needed. There are different types of control methods including pre-action controls ensuring resources are budgeted, post-action controls measuring completed activities, and steering controls detecting deviations and allowing corrections. Budgets are a widely used control method stating plans in monetary terms for comparison to actual performance. Effective control incorporates both top-down planning with factors like goals and resources, and bottom-up planning with specific operational details. The master budget integrates multiple subordinate budgets into a comprehensive plan.

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Ngurah Ari Samitha
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16 views7 pages

Control Methods in Budget Management

The document defines controlling as ensuring actual activities conform to planned activities. The control process involves establishing standards, measuring performance against the standards, and taking corrective action if needed. There are different types of control methods including pre-action controls ensuring resources are budgeted, post-action controls measuring completed activities, and steering controls detecting deviations and allowing corrections. Budgets are a widely used control method stating plans in monetary terms for comparison to actual performance. Effective control incorporates both top-down planning with factors like goals and resources, and bottom-up planning with specific operational details. The master budget integrates multiple subordinate budgets into a comprehensive plan.

Uploaded by

Ngurah Ari Samitha
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

CONTROLLING

DEFINITION: THE PROCESS OF ENSURING THAT ACTUAL ACTIVITIES CONFORM TO PLANNED ACTIVITIES

STEPS in the CONTROL PROCESS

ESTABLISH STANDARDS AND METHODS FOR MEASURING PERFORMANCE

MEASURE PERFORMANCE

DOES PERFORMANCE MATCH THE STANDARDS?

NO

TAKE CORRECTIVE ACTION

YES

RELATED CONCEPT: MANAGEMENT BY EXCEPTION

DO NOTHING

TYPES OF CONTROL METHODS

Pre-Action Controls: A control method ensuring that human, material, and financial resources have been budgeted. Post-Action Controls: A control method for measuring the result of a completed activity. Steering Controls: A control method designed to detect deviations from some standard goal and to permit corrective measures. Yes/No or Screening Controls: A control method for screening procedures that must be followed or conditions that must be met before operations continue.

TYPES OF CONTROL
Steering Controls Yes/No Controls Information Corrective Action

INPUTS

PROCESS

OUTPUTS

Pre-action Controls

Post-action Controls

BUDGETARY CONTROL

Budgets are the most widely used means for planning and controlling activities at every level of the organization. Budgets are stated in monetary terms, which are easily used as a common denominator for a wide variety of organizational activities, such as hiring and training personnel, purchasing equipment, manufacturing, advertising, and selling. The monetary aspect of budgets means that they can directly convey information on a key organizational resource (capital) and on a key organizational goal (profit). Budgets establish clear and unambiguous standards of performance for a set time period, usually a year. At stated intervals during that time period, actual performance will be compared directly with the budget. Frequently, deviations can quickly be detected and acted upon.

TOP-DOWN and BOTTOM-UP


What Top-Down Budgeting Incorporates Best? Economic industry projections Company planning parameters Corporate goals Overall resource availability What Bottom-Up Budgeting Incorporates Best? Operational plans Information on competition, products, and markets Alternative courses of action Specific resource requirements

THE MASTER BUDGET


STARTS WITH LONG-RANGE FORECAST
ENDING INVENTORY BUDGET

SALES BUDGET

LONG-RANGE SALES FORECAST

PRODUCTION BUDGET

SELLING & ADM. EXPENSE BUDGET

DIRECT MATERIALS BUDGET

DIRECT LABOR BUDGET

OVERHEAD BUDGET

CASH BUDGET

CAPITAL EXPENDITURE S BUDGET

BUDGETED INCOME STATEMENT

BUDGETED BALANCE SHEET

BUDGETED CASH FLOW STATEMENT

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