RANI CHANNAMMA
UNIVERSITY BELGAVI
PG. Department Of Business Administration
Presentation On
budgetary control system
Prepared By
Suraj
Nataliya
Babu
Maseera Guided By
Prajwal Dr. Mahantesh kuri Sir
CONTENT
1. Budgetary Control System.
2. Types of Budget.
3. Zero Based Budget.
4. Performance Budgeting.
5. Flexible Budgeting.
BUDGET CONTROL SYSTEM
BUDGET :
A budget is an estimate or forecast about various economic activities of a business.
Budget may be related to
Revenue , Expenses
Cash , Production
BUDGETORY CONTROL SYSTEM :
Budgetary control system is a system of controlling costs which includes the
preparation of budgets, coordinating the departments and establishing responsibilities,
comparing actual performance with the budgeted acting upon results to achieve
maximum profitability.
Budget helps in :- 1) Planning
2) Control
3) Coordination
CHARACTERISTICS OF BUDGETARY CONTROL
Establishment of budgets for each dept | function of organization.
Comparison of actual performance with the budgets on continuous basis.
Analysis of variance
Taking the suitable remedial action
Revision of budgets in view of change in conditions
OBJECTIVES OF BUDGETARY CONTROL
Cost control
Analysis of income and expenditure
Increase in profitability
Performance evaluation
Efficiency in production
Estimate the cost requirement
Budgetary Control
Advantages Disadvantage
Tool for measuring Uncertain future, revision
performance required
Discourage efficient
Provides specific aims
persons
Creates budget Problem of Co-
consciousness ordination
To make COST Depends on Top
accounting more reliable management
Classification of Budget
Based on Based on Based on Based on
Time Condition Functions Flexibility
• Long-term • Basic • Master • Fixed
Budget. Budget. Budget. Budget.
• Short-term • Current • Functional • Flexible
Budget. Budget. Budget. Budget.
ZERO BASED BUDGETING
It was developed by Peter Pyhrr in the 1970s.
Zero-based budgeting (ZBB) is a budgeting method that requires all
expenses to be justified and approved in each new budget period
typically each year.
Zero-Based Budgeting Definition
Zero-based budgeting starts from zero and does not consider historical data.
The income is categorized into fixed costs, variable costs, and savings in such
a manner that the balance results in a zero.
The steps of Zero-based budgeting process are as follows
1. Begin budgeting with zero balance.
2. Decide the objective of budgeting.
3. Analyze business activities.
4. Study the budget components to determine the relevance of expenses, cost reduction,
and the scope for saving.
5. Prioritize the activities that need cost reduction.
6. Finalize a budget plan.
7. Prepare a report and convey roles, responsibilities, and activities to relevant parties.
ADVANTAGES AND DISADVANTAGES OF ZERO BASED
BUDGETING
PERFORMANCE BUDGETING:
Performance budgeting is a budgeting approach that focuses on achieving specific
outcomes or performance targets rather than simply allocating funds based on input or
historical spending pattern.
CHARACTERISTICS OF PERFORMANCE BUDGETING:
1. Focus on outcomes.
2. Results based management.
3. Clear performance goal.
4. Accountability and transparency.
5. Evidence based decision-making.
6. Flexibility.
7. Continuous improvement.
STEPS IN PERFORMANCE BUDGETING:
FLEXIBLE BUDGET
MEANING
Flexible budgets are essentially budgets that can be adjusted depending upon
revenue and cost changes throughout the fiscal year, accounting for expected
unpredictability.
Organizations such as restaurants, manufacturing firms and even hotels use
flexible budgets because they react rapidly to keep the organization's
business
profitable.
THERE ARE 3 TYPES OF FLEXIBLE BUDGETS :
1. Basic flexible budget
2. Intermediate flexible budget
3. Advanced flexible budget
AdvantagesOFofA FLEXIBLE
ADVANTAGES a flexible budget:
BUDGET:
[Link] based on profit margins and costs
[Link] to maximize revenue
[Link] cost controls
[Link] efficiency
DISADVANTAGES OF A FLEXIBLE BUDGET:
[Link] of revenue comparison
[Link]
[Link] formula
[Link]
PREPARATION OF FLEXIBLE BUDGET:
1. Very important is making the difference between fixed cost & variable cost.
2. Fixed cost total amount will remains same at any level of output. But, fixed cost per
unit will change with level of outputs. It decreases when output increases when output
increases and vice versa.
3. Variable cost total amount will change with the level of outputs. But variable cost per
unit will remains same at any level output.
4. Semi variable cost should be separated into fixed cost & variable cost. Fixed cost will
not change with the output & variable cost will change with output.
CONCLUSION
Preparation of budgets is the first step in the budgetary control system.
Implementation of budgets is a second phase.
But preparation and implementation of budgets alone will not achieve much unless a
comparison is made regularly between the actual performance and the budgeted
performance.
Continues and proper reporting makes this possible.
To ensure the success of budgetary control system, proper follow up
action to be taken immediately for the reports submitted.
THANK YOU