It is a tool of management for planning its future activities including estimate of sales, expenditure and production etc. it is done for indicating the expected results of the business of the business and the and the possible future lines of action to be followed for the attainment of such results. Expected results are projected in financial terms or other numerical terms like units of products, man hours, machine hours etc. Budgeting or Budget making may be defined "as a forecast of program of operations based on expected operating efficiency".

Budget should be based on estimated future requirement for a definite period of time. It should be prepared by taking the help of previous statistical data. Thus, budgeting can also be defined, as "forecasting and preplanning for the next period, used past experience market trends and present position".

Budget provides predetermined standards of performance for the guidance of the efforts and activities in the business. As budgets provide standards of performance, they usually become the basis for control.

Control used for the execution of budgets is what is called "budgetary control". Thus budgeting is concerned with the planning function of management, while "budgetary control" involves the function of controlling in the organization.


Budgetary Control

As we have already discussed the budget as an "estimate of future requirement about the activities of the concern for a particular period", therefore, a process of comparing the actual result with the corresponding budget data so as to know the actual cause of differences.

It can be also defined "as the process which keeps the actual standard as nearly as possible to the predetermined standard by strict supervision".

Budgetary control is useful to know about the extent of profit or losses being made.

Next Chapters

Estimating Procedure
Difference between Estimating & Costing
Depreciation & Obsolescence
Material Cost Calculation
Calculating Labor Cost
Direct and Indirect Expenses
Component Cost
Machine Shop Estimating
Forging and Forging Types
Starting an Organization
Welding Cost Estimation
Jigs and Fixtures
Qualities of an Entrepreneur
Starting Small Scale Industries
Budget and Budgetary Control
Supply & Law of Supply
Exchange and Barter Exchange
Classification of Market
Money and Types of Money
Trade Cycle
Break Even Analysis
Financial Management

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