Budgetary control is the process of ascertaining several budgeted figures for the future of a business enterprise and then making comparison of these budgeted figures with the actual results for finding out discrepancies, if any. The comparison of budgeted and actual figures will allow the management to take curative actions at a proper time.
Budgetary control can be defined as, “A means of achieving the financial control of an entity whereby the actual results for a defined period of time are compared with the budgeted results, any differences (or variances) being noted, and some corrective action taken to bring the actual activities back into line with the budgeted ones if such variances need to be dealt with.”
The budgetary control is a continuous process that helps in planning, coordination and controlling of business decisions. A budget is a means and budgetary control is the end-result. The budgetary control system assists an organization in setting up the goals and efforts are made for its achievements. It enables economies in the enterprise. The main objectives of budgetary control are as follows:
- It is essential for planning, controlling and also acts as an instrument of coordination.
- It coordinates the actions of various departments.
- Budgetary control helps in eliminating wastes and raises the profitability position of a business enterprise.
- It makes a prediction about capital expenditure for future.
- It helps in amending deviations from the established standards.
- It centralizes the control system.
- Budgetary control operates various cost centres and departments with efficiency and economy.
Budgetary control compels business administration to think about the future that is most likely the crucial characteristic of this system. It coerces management to look into future, to outline thorough plans for attaining the objectives for each department, operation and each manager, to predict and grant the organization purpose and direction.
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