Quick points: Accounting and auditing; Budgetary Control

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:

1. Helps to define goals, plans and policies
2. It helps to control the activities of various departments.

• It helps to secure better coordination.

1. It helps to find irresponsible centres.
2. It helps in decreasing cost of production by eliminating the wasteful expenditure.
3. It helps to increase efficiency.

• Facilitate centralised control and helps in smooth functioning.

 

Disadvantage of BC:

1. Not a viable method for a small enterprise,
2. Difficult to predict future as it is highly uncertain and guided by myriad forces.
3. Success depend upon the cooperation of top management.

 

 

Expected question:

1. What is budgetary control?
2. What are the advantages of Budgetary control?
3. Disadvantages of BC?
4. Objectives of BC?

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