Question

List two broad measures of budgetary control.

Answer 1

Solution:

Budgetarey control is a technique in which actual results are compared with planning budget. It highlights where are the gaps, whether cost is controlled during the year or not and adjustment required to take corrrective actions.

The broad measures of budgetary control are as under:

1. Variance analysis:

In this analysis, Budget is prepared for each and every department and actual results are prepared with budget and variances are found. Then variances are further divided into Favourable and Unfavourable Variances. This analysis helps in reducing cost and commonly used for budgetary control.

2. Responsibility accounting:

In this technique, cost center, profit centee and investment center are created in the company. These centres are department of the company. The performance of the employees is recorded and their accountability is fixed on the basis of achievement of goals. This technique helps in decision making regarding promotion based on employee’s performance.

3. Adjusment of funds:

In this technique, management takes decisions regarding adjustment of funds from one project to other. This technique helps proper allocation and adjustment of funds and prevents misuse.