Meaning of Budgetary Control:
Budgetary control is a system of management control in which budgets are prepared for different activities of an organization, and actual performance is compared with the budgeted figures to identify deviations. It helps management take corrective actions whenever necessary to achieve organizational objectives.
In simple words, budgetary control means planning income and expenditure in advance and then checking whether the actual results match the planned targets.
Explanation:
1. Preparation of Budgets:
Budgets are prepared for various departments such as sales, production, purchase, and finance for a specific period.
2. Comparison with Actual Performance:
After implementation, actual results are compared with the budgeted targets.
3. Identification of Variances:
Any difference between budgeted and actual performance is called variance.
4. Corrective Measures:
Management takes necessary corrective actions to control costs and improve performance.
Objectives of Budgetary Control:
– To control expenses and avoid wastage.
– To coordinate different departments.
– To improve efficiency and profitability.
– To ensure proper planning and control.
Conclusion:
Budgetary control is an important tool of managerial control that helps in proper planning, monitoring performance, and achieving organizational goals efficiently.