Factors influencing a and b include: · production requirements · planning stock levels · storage space · trends of material prices. After a budgeting system has been in operation for some time, there is a tendency for next year's budget to be justified by reference to the actual levels being achieved at present. Tracking Progress Budgetary control gives a business a clear means of tracking its progress internally. In a worst-business scenario, management may still be able to meet the conservative goals set in a contingent budget. Characteristics of a budget A good budget is characterised by the following: · Participation: involve as many people as possible in drawing up a budget.
On preparation of sales budget, it can be easily noted that the same has got strong links with the stock budget and the stock budget has strong links with the cash budget. If the budgets are revised frequently, the employees can lose their faith in budgeting. When a business uses its existing operating budgets and financial statements to perform budgetary control, the cost is reduced. This keeps everybody always alert and encourages the optimum use of the enterprise resources. A budget is a short-term financial plan of income and expenses expected over a certain period of time usually one year used to achieve a businesses objective. It can be effective only when there is a correlation between the cost of the system and the benefits to be derived from it. Coordination: Budgets are helpful in coordination of business activities.
It becomes difficult to make changes in budgets to suit the changing circumstances. Decentralisation got a greater efficiency and also greater output. Objectives of Budgetary Control: Budgetary control is inevitable for policy formulation, planning, control and coordination. In order to make effective decisions and coordinate the decisions and actions of the various departments, a business needs to have a plan for its operations. Effective Coordination: Performance and working of various activities is effectively coordinated through budgetary control. These are: a preparation of budgets b communicating and agreeing budgets with all concerned c having an accounting system that will record all actual costs d preparing statements that will compare actual costs with budgets, showing any variances and disclosing the reasons for them, and e taking any appropriate action based on the analysis of the variances in d above.
With reference to academic work on groups and teams provide a review of 500 words which outlines the advantages and disadvantages of working in a group The aim of this essay is to show how group work can be very useful with many benefits; however, it does have downfalls which can prove individual work to be more satisfying. These things lead to low morale among the employees. On the other hand, working in a group can also be frustrating and cause conflict. · The materials purchases budget is both quantitative and financial. They fail to understand those budget adjustments are necessary to meet the challenges of changing circumstances.
Budget can e termed as an accounting concept, whereby, an organization and its members, try to define the trend of activities of an organization during a course of time, depending on the past experience. It aids in directing the total efforts of the firm into the most profitable channels. Hence in simple words, budgetary control only helps in controlling expenses and as far as revenue generation is concerned it has no role to play. Actual performance is compared with standards and deviations are reported to top management for action against unfavourable deviations. It is a servant and not a master. If there is lack of support from top management, then this will fail. Thus budget is a means and budgetary control is the end result.
Thus, we see that Budgetary control system is advantageous for all types of organizations whether large or small. However, they can be used to influence managerial action in future periods. This chapter concentrates on budgetary control only. There are five parts to an effective cost control system. Corrective action is initiated to set right the unfavourable deviations. Management may lose interest and confidence in budgeting, where quick results are expected.
However it has certain limitations while operating it as a technique. It aids in implementing corrective measures for improving the situation. But the principal reason for this is the attitude of rigidity towards system. Interrelationships of budgets As mentioned, different budget centres get their specific budget and according to them they plan their activities. Both these process helps an organization to attain its organizational goal.
Receipts of cash may come from one of the following: · cash sales · payments by debtors · the sale of fixed assets · the issue of new shares · the receipt of interest and dividends from investments. Budgetary control identifies discrepancies between projected costs and revenue and the actual numbers. But, we hope that the report will provide a brief idea about the subject. Budgets tend to grow from the precedent. Therefore, when any of the budgets are changed it has its direct impact on the other related budgets.
This process helps in finding deviations and the reasons behind them. This is influenced by: · production requirements · man-hours available · grades of labour required · wage rates union agreements · the need for incentives. Interrelationships of budgetsAs mentioned, different budget centres get their specific budget and according to them they plan their activities. Undoubtedly, budgeted performance is a more important standard for comparison than past performance, since past performance is historical factors, which are constantly changing. This generally reduces the efficacy of budgets as future cannot be predicted with certainty. If a department does not achieve its budgeted results, the department manager may blame any other departments that provide services to it for not having adequately supported his department.