ACCOUNTING

Budgetary Control

Table of Content

Budgetary Control and its Salient Features1

Budgetary Control is a Part of Organizational Control2

Planning3

Control3

Co-ordination3

Communication4

Performance Evaluation4

Motivation4

Importance of Budgetary Control in Performance Management4

Fix the Responsibility of Departments5

Performance Objectives5

Determining Weaknesses6

Corrective Actions7

Consciousness7

Performance Management by Incentive Schemes7

Integration and Coordination8

Conclusion9

References10

Budgetary Control

Budgetary Control and its Salient Features

Budgetary control basically refers to the development of budgets, relating the policy requirements with the responsibilities of executives, and the on-going evaluation of actual results by comparing it with budgeted results in order to secure the policy objective by individual action or to provide a base for its review (www.gntmasterminds.com). Budgetary control holds salient features, highlighted below:

Objectives: The basic goal of budgetary control is to determine the objectives that are required to be achieved, over the period of budget, and also determines the policy or policies that are required to be adopted for achieving established objectives (www.gntmasterminds.com).

Activities: Budgetary control determines and governs the activities that must be undertaken to achieve the established goals (www.gntmasterminds.com).

Plans: Budgetary control draws up a scheme or a plan of operation in accordance with each class of activity, in monetary as well as physical terms for full budgeting period and its parts (www.gntmasterminds.com).

Performance evaluation: Budgetary control provides a system for comparing the actual performance by each person department or section with the related budget and determines the reasons behind any discrepancy or discrepancies (www.gntmasterminds.com).

Control Action: Finally, budgetary control makes sure that corrective actions must be taken if the plans are not achieved; and also ensures the revision of plans and attainment of goals in case corrective action is not possible.

Thus, budgetary control holds immense importance in any organization; as it clearly portrays overall aims of business and then determines performance targets of each and every section or department of the company, points out the responsibilities of each and every individual so that they should know what is expected from them and how they will be evaluated, and offers comparing the actual performance with the predetermined targets and investigate any deviations presented. Further, it coordinates variety of business activities and centralizes the control, but also facilitates the management in decentralizing responsibilities and delegating authorities; and facilitates in careful planning for future of the business.

Budgetary Control is a Part of Organizational Control

Budgetary control is a method of controlling operations of overall business through establishing targets and standards for income and expenditure, and on-going administration and adjustment of performance against established objectives (www.businessdictionary.com). Where, an organizational control can be described as the combination of mechanisms for controlling that can make workers behave in manners consistent with the objectives of an organization (Anonymous, 2010, p.1). Control basically means applying the procedures and policies to direct, regulate, and coordinate administration, production, and other activities of a business for achieving the corporation's objectives. Where, budgetary control is one of those management accounting systems; which effectively considers planning and control together for a business to grow (Anonymous, 2010, p.1). Thus, budgetary control is an influential factor of organizational control.

All the organizations involve planning and control, which ...