Distinguish between Budgets and Budgetary Control
A budget is a formal written statement of management’s plans for a specified future time period, expressed in financial terms. Budgetary control is a methodical control of an organization’s operations throw establishment of standards and targets regarding income and expenditure, and a continuous monitoring and adjustment of performance against them. It refers to how well managers utilize budgets to monitor and control costs and operations in a given accounting period.
It’s important to control costs before they spiral. Our detailed budgeting breakdowns will enable you to make necessary financial management decisions with the confidence that the costs will remain within your budget.
A Budget –
- Is a predetermined statement of a company’s objectives during a period of time.
- The budget is like a plan which guides the managers who are responsible for achieving certain business objectives.
- The budget normally has an overall or master budget which is made up of sectional/subsidiary budgets prepared by the different sections in the company.
- Be careful that a budget is a plan but a forecast is merely a prediction of what will happen as a result of a given set of circumstances.
Budgetary Control –
- Is a system which uses the budgets for planning and controlling a business activity.
- It quantifies and is financially oriented to guides the managers to achieve certain business objectives.
- Managers will compare the actual with the budgeted figures and the variances will then be investigated and corrective actions are taken.