control_budgeting.ppsx

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17 September 2013 CONTROLLING 1

CHAPTER 17

CONTROLLING


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Introduction

Control is the last function ofmanagement. The controlling functionwill be unnecessary to the managementif other functions of management areperformed properly. Planning identifiesthe activities and controlling regulates

the activities. Success or failure ofplanning depends upon the results ofsuccess or failure of controlling.


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Definition

Control is any process that guides activity

towards some pre-determined goal. The

essence of the concept is in determining

whether the activity is the achieving desire

results


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Areas or scope pf control

Control over the policies of the concern,organization, the personnel employed in anorganization, capital available to the

concern, capital expenditure, production,wages and salaries paid to the employed,the cost of production, public relation,research and development, tools andequipment and overall control.


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Steps in Control process

Measuringperformance

Comparisonof

actualwith standards

Establishingstandards

Takingcorrective action


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Requirements of effective control system

Feedback

Objective

Suitability

Prompt reporting Pointing out exceptions

Flexible

Economy

Indelible

Suggest remedial action

Motivation


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Techniques of controlManagement

information

system

Critical path

method

personal

observation

Control

Statistical

control

reports

Cost accounting andcost control

Performance

evaluation

Standard

costing

Break even

analysis

Special controlrepots

return on

investments

Managerial

statistics

Responsibility

Accounting

management

audit Internal Audit

Productioncontrol

Gantt

milestone

chart

Zero-based

budgeting


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Characteristics or features of control

Controlling process

Universal

Dynamic

process

Forwardlooking

Influencing

factor

An Essence of

action

Control involves

management


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Need of control

Judging the accuracy of

standards:

Minimize dishonest behavior:

Better performance:


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Advantages of control

Adjustments in operation

verification of policy

managerial accountability

Psychological pressure Maintaining morality

Co-ordination

Efficiency


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Limitations of control

Absence of perfect standards

Uncontrollable factors

Difficulty in fixing responsibility

Expensive process


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Types of managerial control

Standardizing control

preserving control

Delegation of authority control

Measurement control

Motivating control


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Budget & Definition of budget

Budget is derived from the French word

Budgette which means small leather bag.

Budget is a financial and quantitative

statement. Budget is a plan for income or outgo or

both, of money, personal, purchased items,

sales items, or any other entity about whichthe manager believes that determining the

future course of action will assist in the

managerial efforts


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Budgetary control & Definition

of budgetary control

The term budgetary control is applied

to a system of management and

according control by which alloperations and output are forecast as

far ahead as possible and the actual

results when known are comparedwith the budge t estimates.


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Characteristics of budgetary control

The activities the organizations are

presented department-wise or section-wise.

Budgets give the extent of expenditure

though which cost control is achieved. The co-ordination of various departmental

activates helps to prepare the determined

standards. Clear-cut and specific requirement of the

organization are expressed in quantitative

terms.


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Characteristics of budgetary control

Determines the deviations by comparisons

and causes of such deviations.

Recommends and implements the

corrective actions when ever necessary.

The future is planned on the basis of past

experience.

Recording the present performance for

comparing purpose with the pre-determined

standards.


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Advantages of budgetary control

Tool for planningthe activities

Thinking in advance

Control of

expenditure

Co-ordination

of efforts

Delegation ofauthority

Better utilization

of resources

Solving financial

difficulties

promotion ofefficiency

Achievement

of goalsCriteria of self-

examination

Promotersbalanced

activities

Budgetary

Ensures proper

communication

Fixation of

responsibility

Encourages

exchange of

information


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Disadvantages, Limitations or

problems of budgetary control

Inaccuracy

personal bias

Non-availability of Co-operation

Rigidity Results are not attainable


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Disadvantages, Limitations or

problems of budgetary control

Consistency

Time Consuming process

Ineffective budgetary control

Discourage the initiative

More paperwork


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Essentials of Effective budgeting system

Efficient organization

Preparing master budget

Quick reporting

Flexible


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Essentials of Effective budgeting system

Support of top management

Based on reasonable

assumption Reward and punishment

Appropriate authority


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Techniques of controlManagement

information

system

Critical path

method

personal

observation

Control

Statistical

control

reports

Cost accounting andcost control

Performance

evaluation

Standard

costing

Break even

analysis

Special controlrepots

return on

investments

Managerialstatistics

Responsibility

Accounting

management

audit Internal Audit

Productioncontrol

Gantt

milestone

chart

Zero-based

budgeting


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Types of budgets

Sales budget

Types of

budgets

Master

budget

Cash budget Research

and

development

budget

Selling and

distribution

cost budget

Production

budget

Physical property

budget

Supplies budget

Production

overhead

budget

Productioncost budget

Time and

material

budget

Balance

sheet budget


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Budget can also be classified as

Fixed budget

Flexible budgets


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Preparation of a budget

Sound forecasting

Developed accounting system

Fixation of responsibilitycenters

Formation of budgetcommittees


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Preparation of a budget

Clear definition of businesspolicies

Statistical information Support of top management

Budget period

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