{"id":171,"date":"2023-12-18T08:28:00","date_gmt":"2023-12-18T08:28:00","guid":{"rendered":"https:\/\/www.henryharvin.com\/blogs\/?p=171"},"modified":"2026-01-01T05:45:14","modified_gmt":"2026-01-01T05:45:14","slug":"budgets-and-budgetary-controls","status":"publish","type":"post","link":"https:\/\/www.henryharvin.com\/blog\/budgets-and-budgetary-controls\/","title":{"rendered":"Explanation: Budgets and Budgetary Controls in 2026 | Updated"},"content":{"rendered":"

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BUDGET<\/h2>\n

Budget can be prepared at any level ranging from an individual to national level. It is basically the\u00a0estimation of revenue and expenses<\/em>.<\/p>\n

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Budget is Broadly Categorized into the following 3 categories<\/strong>:<\/h2>\n

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  1. Surplus Budget:\u00a0<\/strong>It usually means that the expected revenue is more than the estimated expenses. Thus,\u00a0profits are anticipated<\/em>.<\/li>\n
  2. Balanced Budget:<\/strong>\u00a0It means that the expected revenues almost equal the estimated expenses.\u00a0No profits as well as no losses are anticipated.<\/em><\/li>\n
  3. Deficit Budget:<\/strong>\u00a0It means that the expected revenue is less than the estimated expenses. Hence,\u00a0losses will be incurred<\/em>.<\/li>\n<\/ol>\n

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    PURPOSE OF BUDGET<\/strong><\/h2>\n

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    The purpose of budget includes the following 3 aspects:<\/p>\n

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    1. It is a\u00a0forecast of estimated income and expenditure<\/em>\u00a0to be incurred over the time period for which budget is planned.<\/li>\n
    2. It serves as a\u00a0tool for decision making<\/em>\u00a0as it provides clarity with respect to revenues and expenses.<\/li>\n
    3. It is an appropriate mean to\u00a0measure business performance<\/em>.<\/li>\n<\/ol>\n

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      BUDGETARY CONTROLS<\/strong><\/h3>\n

      \"BUDGETARY<\/p>\n

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      Budgetary Control<\/a> is basically a technique where the actual results i.e.\u00a0actual revenues and expenses are compared with the budget planned<\/em>\u00a0before the start of the financial year. It highlights the need for adjustment of the performance, if required. It also shows how well the managers have controlled costs and operations in an accounting period.<\/p>\n

      It analyses the budget after its implementation to know major deviations.<\/em><\/strong><\/p>\n

      BUDGETARY CONTROL TECHNIQUES<\/strong><\/h4>\n

      For the purpose of budgetary control, various techniques are used which are briefly explained as follows<\/p>\n

      1.Variance Analysis<\/strong><\/h3>\n

      \"\u00a0\u00a0\u00a0\u00a0\u00a0Variance<\/p>\n

      In the following analysis, Budget is prepared for each and every department. Further,\u00a0a comparison is made between the actual and estimated accounting figures<\/em>. With the help of this technique, variances are found. The variances are further divided into\u00a0Favourable and Unfavourable Variances<\/em>.<\/p>\n

      For instance, the difference between actual production cost and estimated production cost will be denoted by production variance.<\/p>\n

      This technique helps in\u00a0reducing cost<\/em>\u00a0and is commonly used for budgetary control.<\/p>\n

      2. Responsibility Accounting<\/strong><\/h3>\n

      \"\u00a0\u00a0Responsibility<\/p>\n

      It is considered to be a good technique for budgetary control. In this, 3 centres namely\u00a0Cost Centre, Profit Centre and Investment Centre<\/em>\u00a0is created. All these centres are like the department of the organisation and employees are classified on the basis of these centres.<\/p>\n

      The performance of the employees in manually recorded and their accountability is fixed regarding certain goals that might be quantitative or qualitative. This technique helps\u00a0to take decision regarding promotion or demotion<\/em><\/strong>\u00a0based on employee\u2019s performance.<\/p>\n

      3. Adjustment of funds<\/strong><\/h3>\n

      \"Adjustment<\/p>\n

      Under this technique, Top management\u00a0takes decisions regarding adjustment of funds<\/em>\u00a0from one project to another.<\/p>\n

      For instance, if a new project started by an organisation needs money and there is surplus money allocated to an already existing project, then the surplus funds can be adjusted against new project for its initial setup. This technique facilitates\u00a0proper allocation and adjustment of funds and prevents misuse.<\/em><\/strong><\/p>\n

      4. Zero Based Budgeting<\/strong><\/h3>\n

      \"\u00a0\u00a0Zero<\/p>\n

      Another technique which is immensely popular these days is zero based budgeting. Under this technique,\u00a0budget of next year is considered as nil<\/em>\u00a0which can be only possible if estimated revenue is equal to estimated expenses. At that time, difference between estimated revenue and estimated expenses will be zero. Any excess amount of money will be adjusted. This technique helps in\u00a0having control over each and every amount of money spent<\/em><\/strong>\u00a0during the year.<\/p>\n

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      Want to get more information on budgets and budgetary controls?<\/em><\/strong><\/p>\n

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      Email us now at\u00a0kounal@henryharvin.com<\/strong>\u00a0or call us at our centralized number:\u00a0901526626<\/strong><\/p>\n

      Recommend Reads:-<\/b><\/h2>\n