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Budgetary control is an important technique of management accounting used for planning, coordinating, controlling and evaluating the activities of an organisation. It involves the preparation of budgets for different functions of a business, comparing actual performance with budgeted performance, identifying deviations and taking corrective action. It provides management with a systematic framework for achieving organisational objectives by ensuring that available resources are used efficiently and economically. A budget is a quantitative statement prepared for a future period showing the planned activities and expected results of an organisation. Budgetary control is broader than merely preparing budgets. It establishes a continuous process in which actual results are compared with predetermined standards or budgets, significant variances are analysed and appropriate corrective measures are taken. Thus, budgetary control connects planning with control and helps management translate business objectives into practical operating plans. The main objective of budgetary control is to ensure the effective achievement of organisational goals. It helps management determine in advance what is to be done, how it is to be done and what resources will be required. By establishing targets for different departments, it provides a clear direction to employees and managers. It also facilitates coordination among various functional areas such as production, sales, purchasing, finance and human resources. Budgetary control serves several important purposes. First, it facilitates proper planning. Management must consider future sales, production requirements, costs, cash flows and investments while preparing budgets. This encourages managers to anticipate future opportunities and problems rather than simply reacting to them. Second, it promotes coordination. Different departmental budgets are interrelated, and the preparation of one budget often depends upon information from another. For example, the production budget is based on the sales budget, while the purchase budget depends upon production requirements. Third, budgetary control provides a basis for performance evaluation. Actual performance can be compared with budgeted performance to determine whether departmental objectives have been achieved. Variances can be identified and investigated. Fourth, it promotes cost control by establishing expenditure limits and encouraging managers ________ _________ ________ ______ ___ ________ ____ ___.
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