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INTRODUCTION

Budget is essential in every walk of our life – national, domestic and

business. A budget is prepared to have effective utilization of funds and for the

realization of objectives as efficiently, as possible. Budget is a widely practiced

technique and most of us use budgets in some way or the other.

Budget is one of the emphasized terms used in efficient methods of

planning and control. It is employed, no doubt, in large business houses, but even the

small businesses are using it, in some informal manner. Budget in common parlance

is understood as planning for expenditure.

A budget is defined as a comprehensive and Co-ordinate plan expressed in

financial terms, for the operations and resources of an enterprise for some specified

period in the future.

In the views of E. H. Graham of the Chrysler Corporation, “Of the

management tools used by Chrysler Corporation, including computers, PERT,

Operations Research (OR) and system analysis and so on, budgets are un doubly the

most important tool”.

Budget is always expressed in terms of money and quantity. The

techniques of budgeting are important applications of Management accounting.

Budgets are set in large business houses as well as in families. It is

basically a statement of expected income & expense under certain anticipated

operating conditions.

OBJECTIVES OF THE STUDY

1. To study the various aspects of budget and budgetary control.

2. To study the performance of the organization in terms of profitability.

3. To study revenue receipt and revenue expenditure of the organization

4. To study the actual performance with budget performance.

5. To facilitate centralized control with delegated authority and responsibility.

SCOPE OF THE STUDY

The scope of the study is very wide as it ranges from the various specific

budgets of each department to the Master Budget and Performance Budget of the

organization.

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Master Budget is a “Summary of the budget schedules in capsule form

made for the purpose of presenting in one report the highlights of the budget

forecast”. Performance Budget involves evaluation of the performance of the

organization in the context of both specific as well as overall objectives of the

organization. According to the National Institute of bank Management Performance

Budgeting technique is, “The process of analyzing, identifying, simplifying and

crystallizing specific performance objectives of a job to be achieved over a period in

the frame work of the organization objectives, the purpose and objectives of the job.

The technique is characteristic by its specific directions towards the business

objectives of the organization”.

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RESEARCH METHODOLOGY

Case study method has been adopted to carry out the study. Both primary and

secondary data have been used to complete the study. Primary data was collected

through interaction with personnel who are working in finance and Accounts

Departments of the organization.

Secondary data was collected from the company annual reports & other

relevant records. Afterwards, the data collected is processed and analyzed by using

appropriate analytical tools and techniques so as to examine the efficiency. The

present study was carried out for a period of thirty days in a prestigious organization

i.e. Bevcon Wayors Pvt. Ltd.

LIMITATION – BULLET POINTS

This comparative study limits its coverage to 7 years. Information presented

is limited to the secondary data in the form of annual reports geographically; the field

research is limited to the city Hyderabad and Secunderabad.

The proposed study may not be free from certain limitation. For instance the

limitation of time and cost cannot be ignored. At the time, the findings of the study

can be applied to comparable firms and not to incomparable ones. Besides this,

budgeted amounts calculated at one point of time may not be informative as they

suffer from short- fluctuations.

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Evidence required of interaction with personnel

DEFINITION OF BUDGET

The term “Budget” appears to have been derived from the French word

“Baguette” which means “Little Bag” or a container of documents and accounts. A

budget can be seen as an “Economic plan” for a given period of time.

CONCEPT OF BUDGET

Budget is as quantified plan for future activities – quantitative blueprint for

action. It is referred as a plan relating to period of time expressed in monetary and in

quantitative terms.

The Charted Institute of Management Accountants, (CIMA) defined budget

as follows: -

A plan expressed in money. It is prepared and approved prior to the budget

period and may show income, expenditure of the capital to be employed, may be

drawn up showing incremental effects a former budgeted or actual figures.

According to Gordon shilling law, “A business budget is pre-determined

detailed plan of action, developed and distributed as a guide to current operations

and as a partial basis for subsequent evaluation of performance”.

Definitions by at least 5 authors to be included

The Essentials of a Budget are :

Financial and quantitative statement of the action plan.

It is planning device and also serves as a bases for performance evaluation and

control.

It is laid down prior to the budget period during which it is followed and based

on rights policy.

BUDGET MANUAL

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A budget Manual lays down the details of the organizational set up, the

routine procedures and programmers to be followed for developing budgets for

various items and the duties and responsibilities of the executives regarding the

operation of the budgetary control system.

A budget manual is defined as a document schedule or booklet which sets

out, inter alia, the responsibilities or the persons engaged in the routine of and the

forms and records required for budgetary control. Budgets are to be drawn keeping in

view the objectives of the organization given in the budget manual.

The following are some of the most important matters covered in a Budget

Manual.

Introduction and brief explanation of the objectives, benefits and principles of

budgetary control.

Organization chart giving the titles of different personnel’s with full

explanation of the duties and each to operating systems and preparation of

departmental and functional budgets.

The entire process of budgeting programmer including the timetable for

periodical reporting.

Length of budget periods and control periods should be clearly states.

Procedures to be followed throughout the system should be explained in clear

terms.

Outline of main budgets and their accounting relationships.

Explanation of Key budgets.The advantages to be derived from the use of budget manual are:

Every one knows in writing that what is his role, what is to be done and how it is to be done in the system of budgetary control.

As every thing is in writing. Ambiguity is avoided and reliance on memory is eliminated.

As one of the objectives of budgeting is communication, it is important to have budget manual so that everyone in the organization can refer to it for guidance and information about the budgetary process.

ADMINISTRATION OF BUDGETS

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Budgeting takes up a lot of management time. Top managers want lower

level managers to participate in the budget process, because lower – level managers

have valuable knowledge about the day – to – day aspects of running the business.

Participator also. Creates greater commitment and responsibility towards the budget

among lower level manages.

The widespread prevalence of budgets indicates that the advantages of

budgeting systems outweigh their cost. To gain the benefits of budgeting.

Management at all levels of the company should understand and support the budget

and all aspects of the management control system.

Budgets should not be administered rigidly. Changing conditions usually

call for changes in plans. A manager may commit to the budget, but a situation might

develop in which some unplanned repairs or an unplanned advertising program would

better serve the in interest of the company. The managers should not defer the repairs

of the advertising as a way of meeting the budget – not if doing so will hart the

company in the long run. Attaining the budget should not be an end in itself.

BUDGETING

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It is concerned with the implementation of the approved programmed

within the long-range plan. It is the act of preparing budgets. Budgeting is a way of

managing Business and Industry.

CLASSIFICATION AND TYPES OF BUDGETS

The budgets are usually classified to their nature. The following are the

types of budgets, which are commonly used.

1. Classification according to Time

Long – term Budgets

Short – term Budgets

Current Budgets

2. Classification on the basis of Functions

Operating Budgets

Financial Budgets

Master Budgets

3. Classifications on the basis of Flexibility

Fixed Budgets

Flexible Budgets

1) CLASSIFICATION ACCORDING TO TIME

Long – term Budgets: the budgets are prepared to depict long-term planning of

the business. The period of long-term budgets varies from five to ten years. The

long-term planning is done by top level management. Long time budgets are

prepared for some sectors of the concern such as capital expenditure, research and

development, long-term finances etc. These budgets are useful for those industries

where gestation period is ling i.e. machinery, electricity, engineering etc.

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Short-term Budgets: These budgets are generally for one or two years and

are in the form of monetary terms. The consumer’s goods industries like sugar,

cotton, etc. Use short-term budgets.

Current Budgets: The period of current budget is generally of months and

weeks. These budgets relate to the current activities of the business. According

to Institute of cost and Works Accounts, London “Current Budget is a budget

which is established for use over a short period of time and is related to

current conditions.

2) CLASSIFICATION ON THE BASIS OF FUNCTIONS

Operating Budget: These budget relate to different activities or operations of a

firm. The number of such budget depends upon the size and nature of the

business. The commonly used operating budgets are:

Sales Budget

Production Budget

Production cost Budget

Purchase Budget

Raw Material Budget

Labour Budget

Plan Utilization Budget

Manufacturing Expense or Works Overhead Budget

Administration and Selling Expenses Budget etc.

The Operating Budget for a firm may be constructed in terms of programme

or responsibility areas, and hence consists of:

Programme Budget

Responsibility Budget.

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Programme Budget: It consists of expected revenue and costs of various products or

projects that are termed as the major programmes of the firm such as budget can

prepared for each product line or project showing revenues, costs and the relative

profitability of the various programmes. Programme Budgets are, thus, useful in

locating areas where efforts may be required to reduce costs and increase revenues.

They are also useful in determining imbalances and inadequacies in programme so

that corrective action may be taken in future.

Responsibility Budget: When the budget of a firm is constructed in terms of

responsibility areas it is called the responsibility budget. Such shows the plan in terms

of persons responsible for achieving them. It is used by the management as a control

device to evaluate the performance of executives who are in – charge of various cost

centers. Their performance is compared to the targets (Budgets), set for them and

proper action is taken for adverse result, if any. The kinds of responsibility areas

depend upon the size and nature of business activities and the organizational structure.

However, responsibility area may be classified under three broad categories:

Cost / Expense Centre

Profit Centre

Investment Centre

Financial Budget: Financial Budgets are concerned with case receipt and

disbursements, working capital expenditure, financial position and results of business

operations. The commonly used financial budgets are:

Cash Budget

Working Capital Budget

Capital Expenditure Budget

Income statement Budget

Statement or Retained Earnings budget

Budgeted Balance Sheet or position statement Budget

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Master Budget: Various functional budgets are integrated into Master

Budget. The Budget is prepared by the ultimate integration of separate

functional Budget. According to Institute of Cost and Works Accounts,

London, “The Master Budget is the summary Budget incorporating its

functional Budget”. The Budget Officer prepares Master Budget and it

remains with the top-level management. This budget is used to co-ordinate the

activities of various functional department and also to help as a control device.

3) CLASSIFICATION ON THE BASIS OF FLEXIBILITY

Fixed Budget: The fixed budgets are prepared for a given level of activity; the

budget is prepared before beginning of the financial year. If the financial year

starts in January then budget will be prepare a month or two earlier, November

or December. The changes in expenditure arising out of the anticipate changes

will not be adjusted in the Budget. These is a difference of about twelve

months in the budgeted an actual figures. According Institute of Cost and

works Accounts, London, “Fixed Budget is a budget which is designed to

remain unchanged irrespective of the level of the level f activity actually

attained”. Fixed budget are suitable under static conditions. If sales expenses

and costs can be forecasted with greater accuracy then this budget can be

advantageously used.

Flexible Budget: A flexible budget consists of series of Budgets for

difference level of activity. It therefore, varies with the level of activity

attained. A flexible Budget is prepared after taking into consideration

unforeseen changes in the conditions of the business.

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A flexible Budget is defined as Budget which by recognizing the

difference between fixed, semi-fixed and variable cost is designed to change in

relation to the level of activity. The flexible budgets will be useful where level of

activity changes form time to time. When the forecasting of demand is uncertain and

the undertaking operate under shortage of materials, labour etc. this Budget will be

more suited.

OPERATING BUDGETS

1) Sales Budget: A Sales Budget is an estimate of expected sales during a Budget

period. A sales Budget is known as a nerve center or backbone of the enterprise. The

degree of accuracy with which sales are estimated will determine the practicability of

operating Budgets. A sales Budget is the starting points on which other budgets are

also bases. A sales Budget lay down potential sales figures in value as in quantity. It

lays down a comprehensive plan and programme for sales department. The sales

manger is made responsible for preparing Sale Budget. He uses all possible factors to

be taken into account while preparing a sales Budget.

2) Production Budget: Production Budget is built up in terms of quantities and

money. The quantities are entered at the beginnings and when the remainder of the

Budget has been built up and the cost of production calculated the costs are entered to

compile a production cost Budget. In preparing the production Budget the following

factors should be considered.

Principal Budget factor, e.g. if the sales be the key factor then sales Budget,

otherwise other Budget.

Production planning and determination of optimum capacity.

The opening and closing stocks.

Management policy regarding make or buy of components.

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3) Production Cost Budget: A purchase Budget gives the details of the purchases

which must be made to meet the needs of the business. It includes all items of

purchase, such as raw materials, indirect materials and other equipment. However,

purchase Budget for raw materials is the most important and the following are

required to be considering in preparing this Budget.

4) Purchase Budget: A Purchase budget gives the details of the purchases which

must be made to meet the needs of the business. It includes all items of purchase, such

as raw materials, indirect materials and other equipments. However, purchase Budget

for raw materials is the most important and the following factors are required to be

considering in preparing this Budget.

Opening and closing stocks

Unfulfilled orders at the beginning of the budget period.

Storage space, economic buying quantity and financial resources.

The prices to be paid.

4) Material Budget: A Materials Budget shows the estimated quantities as well

costs of raw materials and components required for producing goods as per

production Budget. At the stage of preparation of materials Budget is used to

obtain the cost of each material consumed. It serves the following purposes.

It assists purchasing department in planning the purchases.

It helps in the preparation of purchase Budget

It provides data for raw materials control.

.6) Labour Budget: This Budget gives and estimates the requirements of directs

labour essential to meet the production target. This Budget may be classified into

“Labour requirement budget” and “Labour Requirement Budget”. The purpose of

Labour Budget is to assist in the provision of the correct number and type of

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Employee for the projected output. Once the preliminary classification of labour into

its principal grades has been carried out, the labour requirements for each product are

then set with the help of time and motion studies. From the total mean-hour required

for production labour requirements are ascertained and from the estimated rate per

hour, labour cost per hour, labour cost per unit is determined.

7) Plant Utilization Budget: This budget indicates that the plan and machinery

requirement to meet the budgeted production during the period. Such a budget will

detail the machine load in every department and indicate the extent of under or over

loading. Thus management may get useful information regarding the effective

utilization of plants and machinery in an organization.

8) Manufacturing Overheads Budget: This Budget gives an estimate of the works

overhead expenses to be incurred in a budget period to achieve the production target.

The budget includes the cost of indirect materials, indirect labour and indirect works

expenses. The budget may be classified into fixed cost, variable cost and semi-

variable cost. It can be broken into departmental overhead can be estimated on the

basis of past information after taking into consideration the expected changes which

may occur during the Budget period. Variable expenses are estimated on the basis of

the budgeted output because these expenses are bound to change with the changes in

output.

9) Administration Cost Budget: All the administration costs relating to each Budget

center should be separately and then incorporated in the administration cost Budget. A

very important aspect of predetermining administration costs is to make sure that all

administrative functions are carried out as effectively as possible. Thus, this budget

represents forecast of the cost of selling and Distribution for Budget represents

forecast of the cost of selling and distribution of budget period and is clearly related to

the sales Budget. All expenses relating to selling and distribution of the various

products as indicated in the sales budget are included in it. These expenses are based

on the volume of sales distribution overhead. Long-term expenses advertisement are

divided into fixed and variable categories with reference to volume of sale, separate

Budgets are of selling and distribution costs as cost of transport department are

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included in the departmental production cost Budget form control point view rather

than including in selling and distribution costs Budget.

FINANCIAL BUDGET

1) Cash Budget: This Budget gives and estimate of the anticipated receipts and

payment of each during the Budget period. So, this Budget is divided into two parts,

one showing the estimated cash receipt on account of cash sales, credit collections and

miscellaneous receipt and the other showing the estimate disbursement on account of

cash purchases, amount payable to creditors, wages payable to workers, indirect

expenses payable, Budgeted, wages payable to workers, indirect expenses payable,

budgeted capital expenditure etc. In short, every factor which affects the receipts and

payments of cash are taken into accounts in the preparation of this Budget.

2) Capital Expenditure Budget: The Capital Expenditure Budget gives an estimate

of the amount of capital that may be needed for acquiring the fixed assets required for

fulfilling production requirements as specified in the production budget. The Budget

is prepared after taking into consideration the available productive capacities,

probable reallocation of the existing assets and possible improvement in production

techniques. Separates Budget may be prepared for different items of assets such as

plant and equipment Budget, building budget, etc.

The capital expenditure Budget is an important Budget providing for

acquisition of assets, necessitated by the following factors:

Replacement of existing assets.

Purchase of additional assets because of starting up of new lines of

production.

Purchase of additional assets to meet a proposed increases in

production due to increase in demand.

Installation of an improved type of machinery so as to reduce cost of

production.

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Thus, Capital Expenditure Budget enables one to know what new fixed assets

are needed and what will their costs rate of return.

Purposes: The objectives of Capital Expenditure Budget are stated below:

To enable the company to establish system of priorities in expenditure

To correct capacity imbalances.

To provide a tool for controlling capital expenditure.

To make proper financial provision to meet planned expenditure.

To provide Budget of depreciation and maintenance costs for inclusion

in the department expense Budgets.

PERFORMANCE BUDGETING:

“Performance Budgeting” had its origin in the U.S.A after Second

World War. It tries to rectify some of the shortcomings in the traditional Budget. In

the traditional Budgets amounts are earmarked for the objects of expenditures such as

salaries, travel, office expenses, grant-in-aid etc. In such system of Budgeting the

money concept was given more prominence i.e. estimating or projecting rupee value

for the various accounting heads or classification of revenue and cost. Such system of

budgeting was more popularly used in government department and many business

enterprises. But such system Budgeting control of performance in terms of physical

units or the related costs cannot be achieved.

These days Budgets are established in such a way so that item of expenditure

is related to specific responsibility center and is closely linked with performance of

that standard. Developing work programs and performance expectations by assigned

responsibility is the achievement and objects of the enterprise. Thus, in performance

Budgeting classification of expenditure follows a three-tier pattern viz. Function-

Programme-Activity.

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Advantages of Performance Budgeting: The following are the main advantages of

performance Budgeting.

It presents clearly the purpose and objectives for which funds are required.

It gives better appreciation of Budgeting by legislature.

It improves Budget formulation process.

It enhances accountability of the executives.

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A Systematic Approach to develop the performance budget

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Objective Structure

Develop Physical Targets & Resources

Involvement: Performance Ratios

DevelopFunctionPrograms

Execution&

Record Keeping

Review &

Control

Organizational

Structure

ZERO BASE BUDGETING

Under Zero Base Budgeting methods, before preparing a Budget a base

determined form which the Budget process begins. Quite often current year’s Budget

is taken as the base or the starting point for preparing the next year’s Budget. The

figures in the base are charged as per the plan for the next year. This approach of

preparing Budget is called “Incremental Budgeting” since the Budget process is

concerned mainly with the increases or changes in operations that are likely to occur

during the Budget period. For example, sales of the current year’s Budget for sales

will be current year’s sales plus and allowance for price increases and expected

changes in sales volumes. The man drawback of this approach is that it perpetuates

the past inefficiencies.

Zero Base Budgeting is an alternative to Incremental Budgeting. It was

introduced at Texas Instruments in USA in 1969 by peter phyrr, who is known as the

father of Zero Base Budgeting. It is managerial tool and is steadily gaining acceptance

in the business community. Zero Base Budgeting is not based on Incremental

approach and precious figures are not taken as the base for preparing next year’s

budget. Instead, the Budget figures are developed with zero as the base, which means

that a budget will be prepared as if it is being prepare for a new company for the first

time.

In Zero Base budgeting, budget requests for appropriation are accepted on the

basis of cost / benefit approach, which ensures vale for money. If question long-

standing assumptions and systematically examines and perhaps abandons any

unproductive projects.

This means that those activities which are of no value find no value in the

forthcoming Budget even though these might have been an integral part of the past

budget prepared under the traditional approach. Zero Base budgeting in way are tries

to locate those activities not essential.

The important steps in Zero Base Budgeting are:

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Identification of decision units in order to justify expenditure in their proposed

Budget.

Preparation of Decision Packages. Each package is a separate and identifiable

activity. These packages are linked with corporate objectives.

Ranking of decision packages based on cost benefit analysis

Allotment of funds based on the above resulting by following pyramid-ranking

system to ensure optimum results.

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ZERO BASED BUDGETING

TRADITIONAL BUDGETING

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This is my previous level of expenditure

MANAGER

These are the Additions requires to meet the inflationary effects and expansion programs.

This is what I want for forth coming period, for reasons enumerated.

TOP MANAGEMENT

A Certain amount to Sanction for a decision Unit.

MANAGER

TOP MANAGEMENT

This Expenditure will lead to these AdvertisementsIf the Proposal is discarded, the result

ORGANIZATION CHART FOR BUDGETARY CONTROL

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MANAGING DIRECTOR

BUDGET COMMITEEBUDGET DIRECTOR

PRELIMINARIES IN THE INSTALLATION OF BUDGET SYSTEM

Prerequisites for the successful implementation of a budgetary control

system are follows:

1) Establishment of Budget Centers: A Budget center is a section of entity for

which control of exercised and budget prepared. A Budget center may be a

department or part there of. Budget center must be clearly defined because a separate

Budget has to be set for each such center with the help of the department concerned.

2) Linking of Budget requirements with chart of Accounts: Budgets for different

budget centers are prepared on standard forms. If requirements of forms are linked

with chart of accounts information of different Budget centers which is consistently

compiled involving minimum loss of time. Suppose advertisement Budget is being

compiled and information for miscellaneous expenditure is to be collected. It will be

an essay exercise together this information, if code heads to be referred to in this

connection are specified in the form on which information for Budgets is being

collected.

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SALES MANAGER

PURCHASE MANAGER

PRODUCTION MANAGER

PERSONAL MANAGER

CHIEF MANAGER

Sales Budget

Advertising Budget

Selling Cost

Distribution Budget

Purchase BudgetProduction Budget

Plant Utilization Budget

Labor Cost BudgetCost Budget

Maser Budget

Capital Expenditure Budget

3) Preparation of Organizational Chart: An Organization Chart should be prepared

which clearly shows the plan of the organization. Each member of management

should know the exact scope of his authority and responsibility and his relationship to

others members. An organizational chart is statement defining functional

responsibilities of executives. Each member of management should know the exact

scope of his authority and responsibility and his relationship with other members.

The Organization Chart shows:

Functional responsibility of a particular executive

Delegation of authority to various levels, and

Relative position of a functional head with heads of other functions.

4) Establishment of Budget Committee: In small organization and in big

organizations having different units at different places, a Budget committee is formed

having representation having different units at different places., executive, budget

officer and heads of all Budgets centers. The Budget Officer acts as a secretary to

chairman. Other members of the Budget committee usually comprise various heads of

functional departments, like sales manager, purchase manager, production manager,

chief accountant etc. as shown in the above Organizational Chart.

5) Preparation of Budget Manual: A Budget manual has been defined by C.I.M.A.

London as “A document which sets out the responsibilities for the persons engaged in

the routine of the forms and records required for budgetary control”. A budget manual

is thus a statement of budget policies. It lay down the details the organizational set up

with duties and responsibilities of executives including the Budget committee and

budget Director and the procedures and programmes to be followed for developing

Budgets for various activities. The contents of a budget manual are summarized as

follows:

Description of the budget system and its objectives.

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Procedure and forms to be used in budget preparation.

Responsibilities of Operational Executives, Budget Committee and budget

Director.

Budget calendar, specifying definite dates for completion of each part of the

Budget and submission of the report.

Methods of accounting and account codes in use.

Procedure to be adopted in operating the system.

Follow – up procedure.

6) Budget Period: Budget period is the length of time for which a Budget is prepared

and operated. Budget periods vary between short-term and long-term and no specific

period can be laid down for all budgets. It varies among concerns and industries for

several factors. Whether a budget is long-termed or short-termed, it is to decide

primary these two factors:

Type of business.

Amount of control required.

7) Determination of the key Factor: Also known as limiting factor, governing factor

and principal Budget factor, the key factor means the factor, which limits the size of

output. It is defined as “the factor the extent of whose influence must first be assessed

in order to ensure that functional Budgets are capable of fulfillment”. Such a factor is

of vital important and effects all Budgets to large extent.

8) Budget Officer: The Chief Executive, who is at the top of the organization,

appoints some person as a budget Officer. The Budget Officer is empowered to

scrutinize the Budgets prepare by different functional heads and to make changes in

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them, if the situation so demands. The actual performance of different departments is

communicated to the budget Officer. He determines the departments are

communicated to the Budget Officer. He determines the deviations in the Budgets and

takes necessary steps to rectify the deficiencies if any. He works as co-coordinator

among different departments and monitors the relevant information. He also informs

the top management about the performance of different departments. The Budget

Officer will be able to carry out his work fully well only if he is conversant with the

working of the department.

9) Patronage from Top Management: For the true success of budgetary activities,

impetus and direction must come from the top management. If involvement of top

management is missing, it will be difficult for Budget Officer to bring round the

reluctant line managers to this way of thinking. Thus, right form the start, activities

should be initiated in such a manner that involvement of top management in

budgetary activities becomes apparent.

CONCEPT OF BUDGETARY CONTROL

Budgetary Control and Budgeting are often used inter changeably to refer to a

system of management control. “Budgetary Control” implies the use of a

comprehensive system of budgeting to aid management in carrying out its functions

like planning, co-ordination and control. According to C.I.M.A, London “Budgetary

Control is the establishment of budget relating to the responsibilities of executive of a

policy and to continuous comparison of the actual with the budgeted results, either to

secure by individual action the objection of policy or to provide a basis for its

revision”.

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According to Brown and Howard “Budgetary Control is a system of

controlling costs which includes the preparation of budgets, co-ordinating the debts

and establishing responsibilities, comparing actual performance with the Budget and

acting upon results to achieve maximum profitability.

Characteristics of Budgetary Control: The main characteristics are as follows:

Establishment of Budgets for each function or department f the

organization.

Comparison of actual performance with the Budgets on continuous basis.

Analysis of variations of actual performance form that of the budgeted

performance to know the reasons there of.

Co-Ordinal Features: The three co-ordinal features of a “Budgetary Control” are as

follows:

Planning

Co-ordination

Control

Therefore, Budgetary control embraces all and in addition includes sciences

of planning the Budgets to effects an overall management tool for the business

planning and control, quotes Rowland and William.

Objective of Budgeting Control

Budgetary control improves planning and in co-ordination and helps in

control. The reasons for producing budgets are as follows:

1) To aid planning of annual operation.

2) To co-ordinate the activities of various parts and to ensure harmonious

conditions prevails in the organization with each other

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3) To communicates plans to the various responsibility center managers.

4) To motivate managers to strive to achieve the organizational goals.

5) To control activities.

6) To evaluate the performance of managers.

Characteristics of a good budgeting

1) Budgeting process should be backed and supported by the chief executive of

an organization.

2) The Organization goal should be qualified and clearly stated. These goals

should be within the frame work of organization in plans.

3) There should be proper fixation and delegation of authority and responsibility.

4) The persons for execution of budget should participate in budget preparation.

5) The Budget should be realistic. It should present goals that are reasonably

attainable.

6) A good system of accounting is also essential to make the budgeting

successful.

7) The budget should cover all the phases of the organization and be continuous

exercise.

8) Periodic report should be prepared. Comparing budget and actual results i.e..,

there should be effective follow up.

9) Clear-cut organizational lines should be established and the employees should

be impaired budgeting education.

10) The budgeting system should be bases on information, communication and

participation.

Requisites for a Successful Budgetary Control System

1) The budgets are used to realize objectives of the business. In the absence of

clear goals, the budgets will also be unrealistic.

2) Budget preparation and control is done at every level of management. Every

though budgets are finalized at top level but the involvement of person form

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lower levels of management is essential for their success. This necessitates

proper delegations of authority and responsibility.

3) An effective system of communication is required for a successful budgetary

control.

4) Budgetary control may not be taken only as control device by the employees

but it should be used as a tool improves their efficiency.

5) Budgeting is done4 for every segment of the business. It will also require the

active participation and involvement of all employees. The success of

budgetary control systems depends upon the participation of all employees of

the organizations.

6) Flexibility in budgets is required to make them suitable under changed

circumstances. Budgets are prepared for the future, which is always uncertain.

Flexibility will make the budgets more appropriate and realistic.

7) All persons should be motivated to improve their working so that budgeting is

successful. A proper system of motivation should be introduced for making

this system a success.

Advantages of Budgetary Control

The Budget programme forces the managers into plan ahead.

In forces early consideration of basic policies.

All members of top management participate in budget committee. For this

reason even planning a departmental level gets benefits of experience of

seasoned executives.

Management is forces to put down in cold figures, what is means by

satisfactory results.

It demands the most economical use of labour, materials, facilities and capital.

In inculcates a habit of timely, careful, adequate considerations of all factors

before reaching important decisions.

The use of budget promotes understanding of the problems of co-workers.

It facilitates period self-analysis of the organization.

The use of budgets removes clouds of uncertainties for lower levels of

management regarding basic policies and objectives.

29

Management is forced to give timely and adequate attention to the effect of

changing business conditions.

Budgeting co-ordinates the activities of various department and functions of

the business.

Budgeting control aims at maximization of profits through careful planning

and control.

It directs capital expenditure in maximization of profits through careful

planning and control

It directs capital expenditure in the most profitable direction.

Budgetary control system creates necessary conditions for the introduction of

standard casting techniques.

A budgetary control system assists in delegation of authority and assignment

of responsibility.

Limitations of Budgeting

Budgeting cannot take place of management but is only a tool of management

the budget should be regarded not as a master, but as a servant.

A budget programme must be dynamic and continuously deal with the

chaining business conditions. Budgets will lose much of their usefulness if

they acquire rigidity and are not revised with the changing circumstances

Budgeting is an expensive technique. The installation and operation of the

budgetary control system is costly affair as it requires the employment of

specialized staff and involves other expenditure which small concern may find

difficult to incur.

Estimates are used as basis for budget plan and estimates are based mostly on

available facts and beset managerial judgments. Since a lot of human element

is involved in exercising managerial judgment. It is but natural to give some

allowance interpretation and utilization of estimated results. Budgeting based

30

on inaccurate forecasts is use less as a yardstick for the measuring of the actual

performance.

The circumstances are constantly changing and therefore budgets and

budgetary techniques will not be useful, till they are continually adapted.

Budgetary control cannot reduce the managerial function to a formals. It is

only a managerial tool, which increase effectiveness of managerial control.

The use of budgets may lead to restricted use of resources. Budgets are often

taken as limits. Efforts may, therefore, not be made to exceed the performance

beyond the budgeted targets, even though it may be physically possible..

THE BUDGETING PROCESS IN NON-PROFIT MAKING ORGANIZATION

It normally begins with the mangers of the various activities calculating the

expected cost of maintaining current ongoing activities and then adding to those,

which are considered desirable.

Churches, hospitals, charities and other no-profit making organizations

produce estimates for understanding activities and later find the means to finances

then, or even adjust the activities to the available financial resources. Once difficulty

in it is that output cannot be measured in monetary terms i.e., we cannot measure

quality amount and services rendered.

31

Bevcon Wayors Pvt Ltd, Hyderabad is a major player / manufacturer of

Material Handling Equipments in the India. Bevcon is also one of the fastest growing

SME.

Established in 1991, Bevcon had a steady growth and now have established

as one of the leading Material Handling, Crushing and Screening Systems Company

in India.

EquipmentsManufactured Bevcon Wayors is into the Business of Bulk Material Handling, Crushing,

and Screening Equipment for all sectors of industries. Bevcon Wayors Designs,

Manufactures, Supplies and undertakes Erection & commissioning at customers site.

32

All Equipments and products undergo rigorous quality control checks and are

manufactured to the highest Engineering Standards.

VISION & MISSION OF THE ORGANIZATION

We envisage being a market leader by 2010 in Bulk Material Processing &

Handling Solutions through satisfying Customers, Stakeholders and Employee needs.

Our Outlook for the vision:

As a part of our vision we are bringing in the business & manufacturing

expertise from Global Players and forge new business alliances to bring in Futuristic

Technologies to Indian Markets. We have Technology tie-ups with companies such as

Burwell Technologies of Australia, Sunland - China, Friedrich & Noma - Germany,

Statec – Austria, Nergeco France-Australia, Thermo stop - Canada.

Bevcon has the Professional and Competent Staff with Skills on par with

International Standards to gear up for the above.

Our Mission is to create Smarter Engineering Solutions evolved by a

technology driven team. The Mission is achieved by the following edicts

Strong Engineering and Design base.

Strict conformance and compliance to quality of equipment and work

procedures.

Excellence in service to customers

Honesty, integrity and transparency in all relationships.

Respect for the individual.

Quality is not a mere label for us but it is an Organic Reality.

33

We provide Turnkey Solutions for Your Bulk Material Handling needs for Crushing | Screening | Conveying

OUR PROMOTORS

P SUNEEL LAKSHMAN

Managing Director

A Mechanical Engineer from BITS Pilani with 25 years of experience in Engineering

Sector, especially in Material Handling Industry.

He is the driving force behind the company and has a clear vision of making our

organization as the best Project Engineering Company in Bulk Material Handling,

Dust Extraction and Pneumatic Handling.

Y.SRINIVASREDDY

Technical Director

A Mechanical Engineer with 20 years experience in material handling

equipments technology. He is the founder director of the company and heads our

manufacturing facility.

His forte is Design and Engineering for complex Material Handling requirements.

He is also the key force in new product development at our company

34

OUR COLLABORATORS

As part of merging the business & manufacturing expertise with global players and forge new business

alliances to bring in Futuristic Technologies to Indian Markets, Bevcon Wayors has formed JV/Technology

tie-up with companies like Burwell- Australia, Nergeco Australia, Sunland - China, Friedrich & Noma -

Germany, Statec – Austria, SBS Belting - UK, Airtec Systems - Italy, Aero belt - Australia

36

BEVCON WAYORS ORGANISATION STRUCTURE

Budget Department of BEVCON

37

BW MANAGEMENT

BEVCON WAYORS

Cherlapalli

Bevcon Wayors Regulatory Board

Complete Aided institute

Research & Development

Sector

Industrial Sector Services support Sector

DEPARTMENTS OF BW

A concern must have an organization chart. This necessary in order to have

clear idea of authority and responsibility of Chief Executive so that they may be no

conflicts among Function Executive for shrinking responsibility and making other’s

responsibilities for poor performances. In preparing Maintaining and administrating

the Budget section at SSE consists of an Accounts Officer and two assistants guided

by one Deputy Controller of Accounts who will be supervised by joint controller

(F&A) who is the responsible person from Finance Wing to present the Budget to the

Executive Committee and the Head of Unit Viz, Chief Executive.

After the approval of the Chief Executive, the Budget proposals will be placed

before Bevcon Board the Budget proposals will be submitted to the Department of

Atomic Energy, Mumbai for approval.

The Department after receipt of proposals scrutinize the requirements of each

unit and after a detailed discussion, compiled proposal of the department as a whole

will be places before Atomic Energy Commission. In respect of the capital projects

the approval of the planning Commission. In respect of the capital projects the

approval of the planning Commission has to be obtained before execution of any

ongoing for new project.

Function of Budget Wing at SSE

Issue of Budget Circular.

Collection of data relating to actual Receipts and Expenditure of previous year.

Compilation of estimates of Receipts and Expenditure received from various authorities

Preparation of various supporting break-up statement of Receipts and Expenditure

Compilation of budget Estimates in respect of Receipts, Revenue Expenditure,

Capital Expenditure, Loans and advances, Provident Fund (Receipts and

Payments) etc.

Monthly/Quarterly phasing of receipts and expenditure for periodical review

and financial control.

38

Preparation of monthly report of Receipts and Expenditure with supportive

breakup statements.

Preparation of Annual plan proposals in respect of Capital Projects (both

ongoing and new) for approval of Department as well as planning

Commission.

Intimation of progress of expenditure in respect of Capital Projects to the

concerned project Co-ordinates.

Review of receipts Expenditure for final grant of expenditure and surrender of

funds. If any.

Preparation of Appropriation Account (budget Estimate and Actual

Expenditure and Variations and the reasons there of)

Correspondence with concerned authorities in respect of all the above.

Preparation of budget at Bevcon

The Budget of the organization is being prepared for the following. A detailed

estimate of the following is taken into consideration.

Receipts

Expenditure on Revenue Account

The Expenditure on Capital Account

The Budget estimates shall give the anticipated receipts and expenditure for

the ensuring financial year under each major, minor, sub and detailed heads of

accounts.

Budget Proposal at Bevcon

39

The proposals for the ensuring year have to be submitted to the department by

middle of August every year under various prescribed formats to enable the

departments to consolidate the proposals of all the units of Department of Atomic

Energy and submission to the units of Department of Atomic Energy and submission

to the budget and planning Division. Ministry of finance, New Delhi by the end of

November. After scrutiny and discussions, budget and planning Division will finalize

the overall budget for the department tentatively this has to be vote by the parliament,

Ministry-wise.

While submitting the budget proposals, review of the current year’s

expenditure with regard to allocated funds (voted by the parliament) has to be made

by each unit and assess:

1) Whether the provisions approved are sufficient to meet the expenditure under each

object head.

2) Whether any additional provisions required due to unforeseen circumstances like

steep hike in prices of supplies and materials, Additional expenditure on account of

revision in pay scale etc. Or any urgent requirement of machinery or equipment or

supplies has arisen which was not contemplated earlier and which is now inevitable

for running the unit etc.

3) Whether any saving is possible from the approved provision due to delay in arrival

of any of the machinery or the material, postponement of any major expenditure or

project implementation etc.

4) Revise the provision accordingly and revise requirement under each object head

like salaries, over-time travel, machinery supplies and materials etc.., has to be made

and submitted to the department for approval. This is called Revised Estimates of the

current year.

40

The department after receiving of proposals scrutinize the requirements of

each unit and after discussions provisionally approves the revised estimates and

allocates either by transferring the unspent amount from other units if available or

if no funds could be augmented within the department requests the Ministry or

Finance for grant of additional funds giving the valid reasons for revised

Estimates of the department

The ministry after due scrutiny allocates additional provision to the

department by making the overall adjustments in the voted budget of the Union

Government’s provisions and gets the approval of the parliament after completion

of the year before submission of the current year’s Budget to the parliament. This

is known as “Appropriation Bill” (Reappropriation of funds) which will be

approved by the president on passing of the bill by the parliament.

Separate budget proposals will be submitted under research sectors Viz..,

Industry and Mineral Sectors, separately for both plan Expenditure (Capital

Projects) and Non-Plan (Revenue) Expenditure. The plan Expenditure provisions

are to be approved by the planning Commission for utilization of funds as

proposed by the units or the department well in advance.

The planning Commission will scrutinize all plan proposals during December

or January for the ensuring year taking into account the necessity of project (For

new ones) and status of the project in respect of on-going project. Department /

Ministry – wise for which different formats were prescribed.

41

Budget Period in Bevcon

Budget period is the period for which a budget is prepared and employed. In

terms of time, budget can be short and Long-terms Budget. Short-term Budget is

prepared on the basis of day-to-day administrations. They are generally prepared in

physical as well as in monitory. Long-term Budget is designed for a long period. This

is prepared in the case of major projects schemes to know in advances the probable

capital commitments.

In SSE, Budget is prepared for both Long-term (Five years plan), short-term

(One year Plan) and is reviewed periodically.

The Long-terms Budget is made generally for the capital projects both for

ongoing and new projects and action plans will be drawn up for setting up of

new projects with a view to attain the predetermined objects to meet the future

requirements. The plan project, have to be first approved for the projects, will

be as need based and revised as per the availability of funds.

While preparing the Budget estimates for the ensuring year, a review of

Budget proposals made for the current year will be taken up during mid July

and August or each year. Any revision in the estimates will be proposed based

on the anticipated expenditure till end of financial year, this is known as

Revised Estimates for the current year.

42

Pre-requisites Met By Bevcon for Effective budgetary Control System

In order to ensure effective and successful implementation of budgetary

control system in organization, Bevcon Management has fulfilled the following pre-

requisites.

The objectives, plans and polices of the organization are spelt out in clear cut

terms without ambiguity.

The organization chart in SSE, clearly defines the duties and responsibilities

for each level of executives.

In Bevcon the output level for which Budgets are fixed are spelled out clearly.

A Budget committee is constituted for effective functioning of Budgeting and

budgetary control system.

There is a well defined system of communication and reporting between

various levels of managements

Management has nominated Head of Finance as Budget Controller who is

capable to share his ideas with various authorities and. Co-ordinates the

activities.

There is a Budget manual in Bevcon, clearly defining the plans, procedures

etc., for operation of Budget and control.

The Budget will be prepared for all related activates tasks in the firm, that they

represent completeness.

Budgets are prepared for all related activities / tasks in the firm, tat they

represent completeness.

Support of top management for effective implementation of budgetary system

and controls also exists at Bevcon.

43

Types of Budgets Prepared in Bevcon

Types of Budgets prepared in Bevcon, Hyderabad are:

1) Capital budget

2) Revenue budget and Receipt Budget.

3) Public Accounts Budget.

1. Capital Budget: This consists of expenditure in capital projects proposals by

Bevcon. The Capital Budget is prepared based on the sanctioned cost of the project

approved in the five year plan quality. Capital payments consist of capital expenditure

on acquisition of assets like land, building, machinery, equipment and other

establishment charges. For Capital Projects the approval of the planning Commission

has to be obtained before execution of any Ongoing/New Project.

The Budget Estimates under the Capital Head will have to be made

separately for each project according to the aims and objects of the project and

necessary requirements for the same. The allocation of funds will depending upon the

progress of the

2. Revenue and Receipt Budget: Revenue Budget consists of the expenditure in

connection with operating the plants. It consists of the expenditure relating to the

following items:

Purchase of raw materials.

Purchase of Consumables

Purchase of Spares and tools.

Establishment Charges.

Cost of fuel and maintenance of Vehicles.

Depreciation.

Interest.

Revenue budget is proposed on a yearly basis. It is prepared based on the production schedule for a particular year.

44

In Bevcon, the Revenue Expenditure is made for various operational facilities,

they are:

Fuel fabrication Facilities: This deals with manufacture of Fuel

components.

Tube plants: - Which deals with manufacture of Zircalloy and Structural

Tubes for the fuel requirements.

Estate Management: - This deals with the expenditure to wares

maintenance of Housing Colony of the employees.

Department Canteen: - the expenditure to wares manpower and other

related expenditure Budget in maintaining canteen for the employees will

be classified under this head.

In addition to the above, expenditure towards security and transportation

of the employees etc., will fall under Revenue Head of the Organization.

Revenue Receipts: Revenue Receipts Budget is prepared based on the production

schedule and anticipated scale of products for the year. The receipts are projected

based on the requirement of the fuel boundless (PHWR & BWR) by the operating

reactors of Nuclear Power Corporation and likely job works from private parties and

sale of effluents, special material etc.

3. Public Account budget: Besides the normal Receipts and Expenditure,

Government of India acts as custodian in respect of funds collected form its

employees and also from public.

For example, transaction relating to provident funds, small savings

collections and other security deposits etc., the money thus received is kept in the

public account till their final settlement as the money, generally speaking, does not

belong to the government and has to be paid back sometime or the other to the person

and authorities who deposited on fulfillments of the rules and regulation laid down by

the government.

45

Action at Bevcon at Unit Level

Since the time of submission of the Budget proposals is standard, the unit has

to initiate action well in advance by calling for the requirements for the various

agencies during June of each year and collect the data by the end of the month.

Various performs are designed for the collection data. The important ones are:

1) Man Power Budget

2) Machinery and Equipment

3) Supplies and materials

4) Motor Vehicles

5) Minor/Maintenance Works

6) Major Civil/Electrical Works for construction of capital projects.

7) Office and other administrative expenditure.

8) Interest and Depreciation Reserves etc.

The requirement of data in respect of machinery items, supplies and

materials, major works are being obtained form plants through online in various

formats, which will be compiled to assess the total expenditure under these heads for

the unit as while. All the information on plan projects is distinctive and will be

scrutinized for utilization.

The Revenue Expenditure is granted for utilizations within the year ending

31st March of every year and any unspent amount will lapse and not available for the

next unless provided afresh while submission of revised proposals.

Whereas in respect of capital project the project cost is sanctioned for

completion of the project and the unspent could be spilled over to next year by

making provision in Revised Estimates. The revenue Expenditure depends upon the

requirement during the year towards the operational cost of the complete projects and

there are no lower or upper limits whereas the Capital Expenditure is limited to the

sanctioned cost of the project as well as the approved outlay during the Five year

period.

46

Compilation of all the information object-wise and the draft proposals of

provisions required by each plant with reference to the draft proposals of provision

required by each plant with reference to the proposed production and overall

requirement for the unit will be submitted for approval of Chief Executive.

The major requirements for the unit are:

Raw materials for production.

Toward power and Water expenditure payable to the local municipal.

Towards Transportation of staff, payment of APSRTC/PVT transporters.

Towards Diesel Oil required for both plants, power unit and also for vehicles.

Magnesium, zircon Sand, Zirconium Sponge etc.

Provision for these items will be cross matched with the production targets,

previous year, stock available, prevailing rates and likely time taken for delivery of

items etc. All general expenditure like office and administrative expenditure, taxed

etc., Will be assessed based on the actual requirement for the financial year and

comparison will also be made with the actual expenditure during the previous

financial year.

Requirement of overtime will be provided as per the production targets and

manpower availability and will be restricted based on the direction of the Ministry of

Finance etc. The requirement of each plant will be reviewed and discussed with the

concerned authorities, possibility of incurring expenditure, postponement of

requirement of next year etc., and finally the entire requirement the unit will be

formulated.

Manufacture seamless stainless steel an special alloy tubes for atomic Energy,

Defense, space and other private industries, Zirconium Alloy Components for Non-

Nuclear application such as fertilizer and heavy chemical industries and also high

purity and advanced materials for various hi-tech applications

47

Nearly decades of experience in the manufacture of products meeting stringent

quality requirement and continuous in house technology up-gradation has developed

expertise in design, has build a number of sophisticated equipment such as special

chemical process reactor high temperature sintering finances and pilger mills, made

rapid strides furnaces in the field of mechanical material handling and process

automation. A few of this equipment have been supplied to interested customers.

Bevcon has a continuous HRD programmes for upgrading the skills and

knowledge of manpower. It has evolved and implemented sound occupational health,

safety and environment management systems. The green environs of the premises

evolved and implemented sound occupational health, safety and environment

management systems. As an employer, provides housing assistance, medical care and

educational facilities

It has drawn up plans for strengthening corporate R&D and is passed to meet

the future requirement of the Power Progamme. As regards capital projects, review of

the expenditure up to date will be taken as base for revision in the requirement and

progress of work and arrival of major equipment shipment will be discussed and the

provision will be formulated project-wise.

Revenue receipts of the unit from the sale of products produced will be

assessed based on requirement of various units, and other private parties. The

requirement of the unit as a whole under both Revenue and Capital heads would be

submitted to the Board and on approval of the same proposal will be sent to

department for consideration.

48

STUDY ON BUDGET PREPARATION AT BEVCON WAYORS PVT. LTD.

The study involves various aspects of budgetary done at SSE, which consists

of Revenue Expenditure for the past seven years and to identify the process involved

in control of expenditure to maximize the efficiency of Revenue Expenditure.

The Revenue Expenditure on SSE for the past five years with break-up under

expenditure are tabulated below form Table No.1 to Table No.7

49

TABLE NO.1

SHOWING REVENUE EXPENDITURE BUDGET

2004-2005

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

6231 5918.98 312.02 5

2. Travel

Expenses(Foreign

Trips)

100.1 48.45 41.65 41.55

3. Supplies and

Materials

19421 18558.61 862.39 4.44

4. Minor works 1984.1 1922.61 61.49 3.09

5. Interest and

Depreciation

16 16 - -

6. Motor Vehicle 120 76.64 43.36 36.13

7. Expenses 415 403.04 11.96 2.88

8. Administrative

Expenses

45.8 22.15 23.65 51.64

9. Rent, Rates

And Taxes

25 28.03 -3.03 -12.12

10. Others 1011 854.55 156.45 15.47

Totals 45,353 43,843.06 1509.94 3.32

50

rgk, 03/23/13,

SOURCE OF DATA??????

REVENUE EXPENDITURE BUDGET FOR YEAR 2004 -2005

Reasons for Variations between Budget estimate & Actual Expenditure 2004-

2005

Increase in the cost of raw materials/prime consumables.

Download revision in the power-tariff by state.

Saving on account of deferment of Leave Concession for employees by the

Government.

51

TABLE NO. 2


2005-2006

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

6274 6087.90 186.10 2.96

2. Travel

Expenses(Foreign

Trips)

100 61.26 38.74 38.74

3. Supplies and

Materials

19515 16744.60 2770.4 14.19

4. Minor works 2481 2057.72 423.28 17.06

5. Interest and

Depreciation

16000 16000 - -

6. Motor Vehicle 90 109.20 -19.2 -21.33

7. Expenses 427 441.34 -14.34 -3.35

8. Administrative

Expenses

45 23.17 21.83 48.51

9. Rent, Rates

And Taxes

30 12.57 17.43 58.10

10. Others 1148 956.86 191.14 16.64

Totals 46,110 42,494.62 3615.38 7.84

52


Reasons for Variations between Budget Estimate & Actual Expenditure 2005-

2006

Non-revisions of the rate of prime raw materials which was anticipated and

also short supply of the same by the supplier.

Partial withdrawal of increased power tariff by the State Government Non-

filling of vacant and new posts as per policy of the Government

53

TABLE NO. 3


2006-2007

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

6241 6686.20 -445.2 -7.13

2. Travel

Expenses(Foreign

Trips)

120 72.88 47.12 39.26

3. Supplies and

Materials

21162 20844.36 317.64 1.50

4. Minor works 2234 1889.79 344.21 15.40

5. Interest and

Depreciation

28200 28200 - -

6. Motor Vehicle 135 51.96 83.04 61.50

7. Expenses 500 470.98 29.02 5.80

8. Administrative

Expenses

30 29.69 0.31 1.03

9. Rent, Rates

And Taxes

17 25.57 -8.57 -50.4

10. Others 732 652.34 79.66 10.88

Totals 59,371 58,923.77 447.23 0.75

54


Reasons for Variations between Budget Estimate & Actual Expenditure 2006- 2007

Excess under salaries due to payment of updating allowance.

Saving under the head minor works due to less rates claimed by M/s.

APGPCL.

Saving under supplies and materials for postponement of procurement of

certain materials.

55

TABLE NO. 4


2007-2008

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

6231 5682.13 548.87 8.8

2. Travel

Expenses(Foreign

Trips)

116 73.53 42.47 36.61

3. Supplies and

Materials

22078 25452.56 -3374.56 -15.28

4. Minor works 2288 1560.31 727.69 31.80

5. Interest and

Depreciation

7500 9850 -2350 -31.33

6. Motor Vehicle 125 46.76 78.24 62.59

7. Expenses 506 424.35 81.65 16.13

8. Administrative

Expenses

35 33.58 1.42 4.05

9. Rent, Rates

And Taxes

18 26.80 -8.8 -48.88

10. Others 1289 1303.07 -14.07 -1.09

Totals 40,186 44,453.09 -4267.09 -10.61

56


Reasons for Variations between Budget Estimate & Actual Expenditure 2006-

2007

Saving under the head Salaries due to shifting due to shifting of provision to

new cities head.

Saving under the Head Traveling Expenses, Office Expenses, foreign

Expenses, due to economy.

Increase under supplies and materials due to upward revision of manuals

Savings under the head of motor vehicles due to postponement of replacement

of same vehicles for the next year.

57

TABLE NO. 5


2008 - 2009

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

6100 6216.18 -116.18 -1.90

2. Travel

Expenses(Foreign

Trips)

83 34.1 48.90 58.91

3. Supplies and

Materials

28349 25497.79 2851.21 10.05

4. Minor works 2040 2102.44 -62.44 -3.06

5. Interest and

Depreciation

9850 8896 954 9.68

6. Motor Vehicle 125 53.92 71.08 58.86

7. Office Expenses 506 445.90 60.1 11.87

8. Administrative

Expenses

35 35.31 -0.31 -0.88

9. Rent, Rates

And Taxes

26 26.20 -0.2 -0.76

10. Others 1286 1335.27 -49.27 -3.83

Totals 48,400 44,643.11 3,756.89 7.76

58


Reasons for Variations between Budget Estimate & Actual Expenditure (2007 –

2008)

Increase in Salaries due to merger of 50% of Dearness allowance on 01-04-

2008.

Saving under the head traveling Expenses, Office expenses due to Economy

measure.

Decrease is mainly due to MDU supply and other materials based on

production schedule.

Savings under Motor vehicles due to non-receipt of sanctions.

59

TABLE NO. 6


2009 - 2010

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

6650 6743.42 -93.42 -1.40

2. Travel

Expenses(Foreign

Trips)

78 75.83 2.17 2.78

3. Supplies and

Materials

27052 30947 -3895 -14.39

4. Minor works 2102 2373.98 -271.98 -12.93

5. Interest and

Depreciation

7300 5500 1800 24.65

6. Motor Vehicle 103 52.47 50.53 49.05

7. Office Expenses 475 503.69 -28.69 -6.04

8. Administrative

Expenses

35 36.53 -1.53 -4.37

9. Rent, Rates

And Taxes

35 38.5 -3.5 -4.37

10. Others 1507 1544..82 -37.82 -2.50

60

Totals 45,337 47,816.24 -2,479.24 -5.46


Reasons for Variations between Budget Estimate & Actual Expenditure (2009-

2010)

Increase in salaries on Account of liberated LTC provision

Increase in Office Expenses on Account of increases Transport and issue of

Uniform for Ministerial Staff

Increase in Rent, Rates & Taxes as per demand for property Tax.

61

TABLE NO. 7


2010 - 2011

(Rupees

in Lakhs)

S.No. Item Budget

Estimates

Actual Variation

(Amount)

Variation

(Percentage)

1. Salaries and

Other

Establishment

Charges

7150 7032.21 117.79 1.64

2. Travel

Expenses(Foreign

Trips)

70 74.40 -4.4 -6.28

3. Supplies and

Materials

26872 37477.15 -10605.15 -39.46

4. Minor works 2600 2191.55 408.45 15.70

5. Interest and

Depreciation

2000 2000 0 0

6. Motor Vehicle 150 66.17 83.83 55.88

7. Office Expenses 35 36.53 -1.53 -4.37

8. Administrative

Expenses

35 36.53 -1.53 -4.37

9. Rent, Rates

And Taxes

35 28.60 6.4 18.28

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10. Others 39 33.31 5.69 14.58

Totals 39,489 49,495.88 -10,006.88 -25.34


Reasons for Variation between Budget Estimate & Actual Expenditure (2009-

2010)

Saving under the Head Salaries due to shifting of provision of shifting of

provision to new cities head.

Increase under supplies and materials due to upwards revision of manuals.

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Saving under the head of motor vehicles due to postponement of replacement

of same vehicles for the next year.

Salaries

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation amount 312.02 186.1 -445.2 548.87 116.18 -93.42 111.79

VariationPercentage 5 2.96 -7.13 8.8 -1.9 -1.4 1.64

Interpretation

The variations that need to be commented are those falling in a range above +(or) 5 percentage The years in which such variations occurred are 2004-05 where the variation is +5 percentage on account of liberated LTC provisions and it has increased to 8.8% in 2007-08.

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Travel expenses

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation amount 41.65 38.74 47.12 42.47 48.9 2.17 -4.4

Variation Percentage 41.6 38.74 39.26 36.61 58.91 2.78 -6.28

Interpretation

The travel expenses had over short the budget consistently five out of seven years

under study. The range was 36 percent to 59 percent which indicated lack of control

and absence of economy measures. The company realized these facts in 2005-2006

and put in place a package of economy measures which raised the bar for out of

budget expenditure. The measures have worked well and as a result the variance of

travel expenses over and above budget was controlled almost in 2009-2010 and more

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than expected 2010-2011. The control was so effective that a negative variance have

set in year 2010-2011of the order of -6.28

Supplies and materials

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation 82.39 2770.4 317.64 -3374.56 2851.21 1853 0605.2 Amount

Variation 4.44 14.19 1.5 -15.28 10.05 2863 4439.46Percentage

Interpretation

It signifies that the trend of increase in the negative variation in last 2 years is on

account of postponement of procurement of materials in the year 2004-2005, 2006-

2007, 2007- 2008 which is not a healthy sign. Under procurements of materials points

out to delay in implementation of projects and impartial negative effects on

profitability which needs to be probed into in detail.

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Minor works

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation Amount 61.49 423.28 344.21 727.69 -62.44 -271.98 408.45

VariationPercentage 3.09 17.06 15.4 31.8 -3.06 -12.93 15.7

Interpretation

The acceptable range is + (or) - 5%. In general the variation was with in the rage only

in 2 out of 7 years. In 4 out of 7 years it was positive variation of 15% to 31% which

is indicative of the fact that the budgetary process was not being diligently adhered to

in the case of budgets for minor works. There is thus a need to fine-tune budgetary

process implementation in this category.

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Interest and Depreciation

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation amount 0 0 0 -2350 954 1800 0

VariationPercentage 0 0 0 -31.33 9.68 24.65 0

Interpretation

Acceptable range is + (or) - 10%. The variation beyond the above range is observed in

case of 2004-2005 and 2009-2010. The reason was on account of general and rapid

reduction in rates of interest charged by banks

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Motor vehicle

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation Amount 43.36 -19.2 83.04 78.24 71.08 50.53 83.83

VariationPercentage 36.13 -21.33 61.5 62.59 56.86 49.05 55.88

Interpretation

The acceptable range is + (or) – 25%., As the age of vehicles stock is more, allowing

for increased expenditure in repairs and maintenance on account of age of vehicle

stock it was found that the expenditure under the head was “uncontrollable”. With the

range of over expenditure being from 36% to 63%. There is and urgent need to

formulate and implement a cost reduction program.

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Office Expenses

Year 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Variation Amount 11.96 -14.34 29.02 81.65 60.1 -28.69 -1.53

VariationPercentage 2.88 -3.35 5.8 16.13 11.87 -6.04 -4.37

Interpretation

The acceptable range is + (or)-5%. The variation above the range was found to be

sizable in the case of 2004-2005 and 2005-2006 due to issue of uniform to ministerial

staff and increase transport

70

rgk, 03/23/13,

From where you got this material??? ANNUAL REPORT???

Administrative Expenses

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

VariationAmount 23.65 21.83 0.31 1.42 -0.31 -1.53 -1.53

Variation Percentage 51.64 48.51 1.03 4.05 -0.88 -4.37 -4.37

Interpretation

The acceptable range is + (or)-5%. It was observed that the budget for administrative expenses was periodically increased to accommodate the positive variation in previous year during period 2003-2006. Thus the budget peaked in year 2005-2006, while the variation is high in 2004-2005 and 2005-2006.

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Rent, Rates and Taxes

Year 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Variation Amount -3.03 17.43 -8.57 -8.8 -0.2 -3.5 6.4

VariationPercentage -12.12 58.1 -50.41 -48.88 -0.76 -10 18.28

Interpretation:

The acceptable range is + (or) - 20%. The abnormal years were observed to be 2004-2011 which a positive variation of 58% in 2005-2006 to negative variation of around 50% in 2006-2007 and 2007-2008. This is and account of changes in government / taxes / municipal polices and changes in valuations during the relevant years.

Others

Year 2000-01 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

VariationAmount 156.45 191.14 79.66 -14.07 -49.27 -37.82 5.69

Variation Percentage 15.47 16.64 10.88 -1.09 -3.83 -2.5 14.58

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Interpretation:

The acceptable range is + (or) - 20% as the item indicates miscellaneous of expenditure the variance is found to be with in the acceptable range.

FINDINDINGS

– SUGGESSSTIONS-

CONCLUSION

CONCLUSION

In conclusion, I wish to summarize the budget and budgetary control process

and how each manger can draw out of the budgetary planning and control

system concrete objective to improve the operating performance and

profitability of the business.

This is some times called Management by objectives, but it is also, in a very

real sense, managing for practical result. A good system of Budgeting is two-

sided affair that provides.

A formal planning process leading to an overall goal to departmental

objectives within goal.

Control reports and procedures that leading management to assure that such

objectives become accomplished results.

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At the beginning, it is emphasized that budgeting is simply and extension of

the basic management process of planning, execution and control. Also

stressed was the importance of broad participation on a grass root basis of all

levels of management in budgetary planning and control process.

It should be evident that the effect of this is to enlarge the abilities of all levels

of management to carry out their basic management functions.

Its is also evident that good budgeting is more than financial exercise and that,

in fact the role of the budget director and of accounting personnel is largely

one of the role of the Budget director and of accounting personal is largely one

of administrative and coordinate guidance, combined with the rather routine

job of translating operating plans results into the language of the dollar.

Bevcon Wayors Pvt. Ltd. has been achieving highest production year over the

year by rescuing the corresponding expenditure and attained no only self

sufficiency but also been supportive to the nuclear power Plants spread all

over India.

With the help of proper budgetary planning and control system, Bevcon has

been able to improve operating performance and profitability of the

Organization.

The financial system in Bevcon has been very quick and well planned one,

which could be implanted in other such government organization.

The organization have followed effective budget system and control for

maintaining the expenditure within the appeared Budget and it also kept the

profile high and achieving the targeted production within the appeared Budget

and it also kept the profile high and achieving the targeted production by

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minimum expenditure which expenditure which is evident form the last seven

years Revenue Expenditure Budget.

Form the variations between Budget Estimates and Actual Expenditure of last

five years it may be seen that the percentage of variation is becoming marginal

from year to year which reflects improved system of Budgeting as well as

control of Expenditure.

FINDINGS AND SUGGESTIONS

Suggestions must be taken from all departments of the organization for proper

planning and control of budgets.

There is an urgent need to formulate and implement cost reduction program.

It is important to have budget manual so that every one in Bevcon can refer to

it for guidance and information about the budgetary process.

The variances arising out of each factor should be correctly segregated, and

reported to the management.

There is under procurement of materials with consequences for profitability,

which needs to be proved into in detail.

Uncontrollable variances are beyond the control of the organization.

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Controllable variances should be reported immediately, so that responsibility

can be fixed and action taken against the individuals responsible.

Budgetary process has been effective in case of travel expenses and in

effective in case of motor vehicle repairs and maintenance and minor works.

Budget process has worked well in controlling travel expenses

BIBLIOGRAPHY

1. Advance Cost Accountancy, S.P. Jain and K.L. Narang, Kalyani

Publishers.

2. Advance Cost Accountancy, Lall Nigam, G.L. Sharma, Himalaya

Publishers.

3. Management Accountancy, M.Y. Khan and P.K.Jain, Tata Mc. Graw

Hill Ltd.,

4. Cost and Management Accountancy, S.N. Maheswari, S. Chand

Publishers.

5. Websites:

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Google Search Engine

www.Bevconwayors .com

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