In 1996, an additional 1182 local government areas were created. Â· It helps to co-ordinate the activities of the organisation. · Improves the allocation of scarce resources. Requires managers of budget centres to be made responsible for the achievement of budget targets for the operations under their personal control. The Budget Officer acts as convener of this committee. Budgets serve as job descriptions.
Budgetary control is introduced to state in figures an approved plan of 22 11. Its introduction enables the management to reduce time required for preparation of reports for pricing, control or quotation. Decisions relating to budgetary control will be taken at the end of the accounting period. Brought to you by Cost The costs of compiling data and analyzing budgets is another disadvantage of the budgetary control process. This thinking is not merely an estimate or guess work. The quantitative budget for harvesting may be calculated as shown in figure 4. The budgeted targets are compared to actual results and deviations are determined.
Activity based concepts should be introduced at the micro level for each function Forecasts should not be considered as a mere estimates. Hence, it highlights monthly surpluses and deficits of actual cash. How can effective budgetary control bring about efficiency in the local government system? Still they make little use of standard costing for managerial purposes. Zero-based Budgeting is ideal for small scale companies due to its detailed attention to cut costs and to invest scarce resources effectively. Some of the limitations are discussed as follows: 1. However while useful, budgets are heavily dependent on forecasts, which may or may not be predictable. Basically, when the customer is ready to buy the project from the vendors, a firm-bid has to be sent and then, a risk-review meeting with the financial controllers is mandatory or, at least, highly recommended.
The lack of co-ordination among different departments results in poor performance. Its use enables to find out the cost of finished goods immediately after completion. Limitations of Budgetary Control 1. The budgetary process compels managers to think and to prepare for changing conditions. Steps in preparing a cash budget i Step 1: set out a pro forma cash budget month by month.
He examines the monthly financial statements prepared by the treasurer and submits same to the legislative for consideration. Budget officer: The work of budget officer is to control the budget administration. Limitations of Historical Costing 1. Periodically, accountants compare the budget with actual expenditures, and take note of any discrepancies. This techniques makes reference from past data or activities that is believing that previous data exist it becomes a basis for the next budget preparation.
Budget vs Budgetary Control Budget is an estimation of revenues and costs for a period. If the anticipated profit figure is too small steps may be needed to increase the sales budget or cut the expense budget. Budgeting is closely associated with planning, organising and directing. In small companies, one person may prepare the entire budget. Johnson Arikawe who discussed the functions of local government that the chairman is the chief accounting officer of his local government. Similarly, other factors may also improve at different times.
It is the process of planning and evaluating proposals for investment in long-term projects. However by section 22 of decree No. Government and Private Industry Compared There are similarities and difference in the ways in which government and private industry uses budgetary control in the management of organization. The Key Purpose of Budgeting: Management and cost accounting in the views of Drary 2000 pointed directly to the view of the key purpose of budgeting, he said that budgeting is a detailed plan, expressed in a quantitative terms, that specifies how an organization will acquire and use resources during a particular period of time. . This means that the tender can be sent to the end customer without holding a risk-review meeting. Its use provides a yardstick for comparison of actual cost performance.
It will be very wasteful if the information once produced is not put into effective use. When all available funds are allocated to specific operating budgets, it may be impossible to get additional funds to take advantage of an unexpected opportunity. While budgeted annually, operating budgets are usually broken down into smaller reporting periods, such as weekly or monthly. For each event the 'critical path' is found, which is a sequence of events which takes the longest time and which involves the least slack time. For example, a department head who operates under her budget for the quarter may appear successful in a budgetary control analysis. For example, they will most likely review the original budget that was created and why certain goals were set. It may deprive the managers of the flexibility they require in managing their departments.