There are five parts to an effective cost control system. Departures from budget can then be investigated and the reasons for the differences can be divided into controllable and non-controllable factors. It also ensure that actual results are positively in accordance with the overall financial and policy objectives of an establishment. . These Steps are described below; 1.
These are just philosophies and arguments as to whether it is better to get managers involved or not. Budgeting ensures coordination in the absence of which different departments in an organisation may act in a manner which is beneficial only to their individual departments but not to the firm objectives as a whole. Budget at every level of government is seen as a tool that assists in calculating and meeting the cost associated with social events. The comparison of budgeted and actual figures will enable the management to find out discrepancies and take remedial measures at a proper time. Subordinates and executives can exercise initiative and judgment within the budgetary limits.
All the functional heads are entrusted with the responsibility of ensuring proper implementation of their respective departmental budgets. The vice chairman then carries out the responsibility assigned to him by the chairman, Secretary to the local government. They also inform managers of the resources available to achieve objectives and targets. To provide an organised procedure for planning. This to a certain extent explains the inability of the fiscal policy to upgrade the efficiency or effectiveness of the public service.
The place of the management is not taken by it; rather it is a tool of the management. Cost structure refers to corporate manufacturing costs and administrative expenses, such as salaries, rent and utilities. Coordinating the activities of various departments. Online Advantages, Limitations of Budgetary Control Help: If you are stuck with an Advantages, Limitations of Budgetary Control Homework problem and need help, we have excellent tutors who can provide you with Homework Help. There is no company or business that does not have constraint in one way or the other. · Standards: base it on established standards of performance. There is a difference in forecast and budgeting, the former is just a statement of a fact likely to occur, but the later is a target.
Advantages of Budgetary Control: Budgetary control is helpful in setting targets for the whole concern and achievement of the targets. If discrepancies are found, key players within a company have two choices. Brought to you by Management Accounting Function Management accounting provides insight into a firm's cost structure and revenue processes. To know whether poor application of budget and budgetary control is the cause of failure in the local government system. This fact must be identified and addressed in the budgetary control system if it is to be effective.
Performance Budgeting: This method lays emphasis on the performance of a particular periods before embarking on a new budget for example a firm budgeted for a profit plan of 8m with expenditure proposal of N4. This makes the business to be prepared beforehand for any situation. A responsibility centre can be defined as any functional unit headed by a manager who is responsible for the activities of that unit. The chapter looks at the concept of responsibility centres, and the advantages and disadvantages of budgetary control. Hence, accounting records should be properly maintained.
Formulation of Hypothesis Ho: Effective budget and budgetary control cannot bring about efficiency in the local government system H 1: Effective budget and budgetary control can bring about efficiency in the local government system. This system enables the introduction of management by exception. Materials The variance for materials cost could also be split into price and usage elements: i Material price variance: arises when the actual unit price is greater or lower than budgeted. Hence, it highlights monthly surpluses and deficits of actual cash. H : Poor application of budget and budgetary control does not cause failure in the local government system. This is helpful in closing down of loss making divisions to improve the overall profitability.
Integration of Departments: All the departments in the business are inter-connected. Advantages of having Budgetary Control in the Business: 1. The procedures used to develop a budget constitute a budgeting system. Though the chairman is not a signatory to the accounts of the local government but has the general duty to ensure that the financial instruction as contained in the government guidelines regulations and financial memorandum are observed. The benefits are extended to the industry and then to national economy.
It must also be working documents, which forms the basis for action. It requires budgetary officer to oversee the integration of various activities to successfully implement the budgets. If so, they can know their authority and responsibility that are highly useful for control through budgets. All my friends were eager to know behind my progress and improving grades and I can proudly tell them about this site. Budget Manual: A budget manual is a document which spells out the duties and also the responsibilities of various executives concerned with the budgets.