Question
What is meant by ‘Budgetary Control’? State its four advantages.

Answer

Budgetary control is a technique of managerial control in which all operations are planned in advance in the form of budgets and actual results are compared with budgetary standards. This comparison reveals the necessary actions to be taken so that organisational objectives are accomplished.Advantages of budgetary control:
  1. Budgeting focuses on specific and time-bound targets and thus, helps in attainment of organisational objectives.
  2. Budgeting is a source of motivation to the employees who know the standards against which their performance will be appraised and thus, enables them to perform better.
  3. Budgeting helps in optimum utilisation of resources by allocating them according to the requirements of different departments.
  4. Budgeting is also used for achieving coordination among different departments of an organisation and highlights the interdependence between them. For instance, sales budget cannot be prepared without knowing production programmes and schedules.
  5. It facilitates management by exception by stressing on those operations which deviate from budgeted standards in a significant way.

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