Budgetary Control

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Topics: Budget, Management
BUDGETARY CONTROL METHODS
a) Budget:
 Budget is the process of stating quantitavely, set aside for carrying out specific activities in a given period of time.
 It helps to co-ordinate the activities of the organisation. Budgets are prepared for the whole company and for sub units.
Tapal Pvt. Limited designs budget for each department in the organization and each department head is required to give their respective budget to the Cost and Budgeting Department.

b) Budgetary control:
 A control technique whereby actual results are compared with budgets.
 Any differences (variances) are made the responsibility of key individuals who can either exercise control action or revise the original budgets.
The Cost and Budgetting Unit under the Finance Department is responsible for controlling the budget and approving the cost submitted by each department of Tapal Pvt. Limited.

RESPONSIBILITY CENTRES
A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit.
There are four types of responsibility centres which are followed by Tapal Pvt.Ltd:
a) Revenue centres
A revenue centre is where budgetary outcome is measured by ability to generate set revenue level.
Tapal Pvt. Ltd operates as a revenue centre for eg. In the sales and marketting department for the sales generated in relation to the allocated resources.

b) Expense centres
Expense center is a center where budgetary outcomes are based on achieving goals by operating within expense limit set by managerial judgement and discretion.
Tapal Pvt. Ltd has departments like production, marketing, information technology and human resources and they have their expenses as purchases of raw material, advertising, maintanence and salaries etc.

c) Profit centres
Profit centres measure the budgetary outcome as the difference between revenues (outputs) and expenditure (inputs)
Tapal Pvt. Ltd works wholly as a profit centre

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