Journal of Business Management & Social Sciences Research (JBM&SSR) ISSN No: 2319-5614 Volume 5, No.6, June 2016 © The Author © Blue Ocean Research Journals www.borjournals.com Open Access Journals Blue Ocean Research Journals 193 Budgets and Budgetary Control Dr. Abhijit Pandit, Professor Genesis Institute of Management and Technology, Kolkata Abstract This study deals with budget, budgeting and budgetary control. Also pros and cons of budgetary control, steps of prepar- ing budget and finally different types of budgets are discussed. Keywords: budget, budgetary control Budget A budget is a formal expression of policies, plans, objec- tives and goals laid down for a definite period in the fu- ture. The budget expresses revenue goals in the sales budget and expense limitations in the expense budgets that must be attained in order to realize the desired profit objective. The Institute of Cost and Management Accountants, London, defines budgets as, "Financial and/or quantita- tive statements, prepared prior to a definite period of time, of the policy to be pursued during that period for the purpose of attaining a given objective." The basic elements of a budget are: a) It is a future plan of activity for a specified period of time. b) It is expressed in physical or monetary units or in both. c) It is prepared in advance, i.e., before the period dur- ing which it is to operate. d) The objectives to be attained and the policy to be pursued to achieve those objectives are required to be laid down before its preparation. Budgetary Control Budgetary control involves the use of budgets and bud- getary reports throughout the period of budget to co- ordinate, evaluate and control day-to-day operations in accordance with the goals specified by the budget. Bud- getary control involves a constant checking and evalua- tion of actual results compared with the budgeted goals, which should result in corrective action where indicated. The Institute of Cost and Management Accountants, London, defines budgetary control as, "The establish- ment of budgets relating the responsibilities of execu- tives to the requirements of a policy, and the continuous comparison of actual with budgeted results, either to secure by individual action the objective of that policy or to provide a basis for its revision." The process of budgetary control involves the following steps: a) Defining and specifying the objectives to be achieved by the business. b) Preparing business plans in order to ensure that the desired objectives are accomplished. c) Translating the plans into budgets, and relating the responsibilities of individual executives and manag- ers to particular sections of the budget. d) Continuous comparison of actual results with the budget, and the calculation of differences between the budgeted and actual performance. e) Investigating major differences in order to establish the causes. f) Presentation of the information to management in a suitable form, relating the variances to individual re- sponsibility. g) Corrective action by the management in order to avoid a repetition of any wastage or over- expenditure. Alternatively, where it is not possible to achieve the budgeted targets due to change in cir- cumstances, the revision of the budget. Difference between Budget, Budgeting and Budgetary Control The difference between budget, budgeting and budgetary control may be stated thus — Budgets arc the individual objectives of a department, etc. whereas budgeting may be said to be the act of setting budgets. Budgetary con- trol embraces ail and includes the science of planning the budgets themselves and utilisation of such budgets as an overall management tool for the business planning and control. Thus, the term budgetary control is wider in meaning and it includes both budget and budgeting. Objectives of budgetary control are a) To Compel Planning. This is the most important feature of budgetary control, because management is forced to look ahead, set targets, anticipate problems and give the organisation purpose and direction. b) To communicate ideas and plans to everyone af- fected by them. It is necessary c) To have a formal system to make sure that each per- son is aware of what he is supposed to be doing.