Define Budget and Budgetary Control.State and Explain various types of Budges.
Answers
A budget is an instrument of management used as an aid in the planning, programming and control of business activity. A budget may be defined as a financial and/or quantitative statement, prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective. It may include income, expenditure and employment of capital.
The budget is a statement showing the way the person plans to spend Rs. 121.50.
Thus budget is a written plan of action. A budget is used for cost control purposes and it is one of the most important overall control devices employed by management. A budget represents the financial requirements of different sections of the business during a given period to achieve an estimated profit based upon a given volume of sales.
Budgetary control makes use of budgets for planning and controlling all aspects of producing and/ or selling products or services. Budgetary control attempts to show the plans in financial terms. Budgetary control is the planning in advance of the various functions of a business so that the business can be controlled. Budgetary control relates expenditure to a section or department who incurs the expenditure, so that the actual expenses can be compared with the budgeted ones, thus providing a convenient method of control.