Test: Budgetary Control - UGC NET MCQ

• Assertion is true as capital expenditure budgets typically span over a longer duration, often ranging from 3 to 5 years, focusing on major investment decisions.
• Reason is also true because capital expenditure budgets involve strategic financial planning for significant assets or projects requiring long-term commitment.
• The Reason correctly explains the Assertion, as the nature of capital expenditure budgets necessitates extended planning and financial forecasting compared to shorter-term purchase or sales budgets.

Budgetary control in an enterprise involves comparing actual results with budgeted figures. This process allows management to identify discrepancies and take corrective actions when necessary. By analyzing variances between budgeted and actual figures, organizations can make informed decisions to improve performance and achieve financial goals effectively.

• Assertion is correct. Budgetary control does aim at maximizing profits through proper planning, coordination, and expenditure control.
• Reason is correct. Budgetary control does help in determining weaknesses through performance comparisons and taking corrective actions to address them.
• The Reason correctly explains why the Assertion is true, as the ability to identify weaknesses and take corrective actions is crucial for maximizing profits effectively.

• Assertion is true because the budget period indeed depends on various factors like the type of budget, nature of demand, financial availability, economic situation, and trade cycles.
• Reason is false because the statement regarding different industries and businesses having varying budget periods is also true, aligning with the assertion.
• The Reason cannot explain the Assertion fully as it offers a partial perspective on the variability of budget periods, which is one of the factors among many determining the budget period's length.

The Budget Officer plays a crucial role in scrutinizing the budgets prepared by different functional heads and making changes when required. This role involves ensuring that budgets align with organizational goals and making adjustments based on actual performance data. By actively monitoring budgetary discrepancies and coordinating with different departments, the Budget Officer helps maintain financial discipline and accountability within the organization.

Budgetary control, involves setting objectives by preparing budgets. This initial step is crucial as it aligns the business's goals with its financial planning. By establishing objectives through budget preparation, organizations can effectively coordinate departments, monitor performance, and take corrective actions to ensure maximum profitability.

• Assertion (A) is correct as budgetary control success indeed relies on the coordination among various budgets.
• Reason (R) is also accurate as constraints in one budget can impact others, with the Key Factor influencing them all.
• However, Reason (R) does not directly explain Assertion (A), as it only without clarifying why coordination is crucial for budgetary control success.

One of the main objectives of budgetary control, is to anticipate capital expenditure for the future. This aspect is crucial for organizations to plan and allocate their financial resources efficiently in order to support future growth and development. By forecasting and planning for capital expenditure, companies can ensure they have the necessary funds available for investments in assets, projects, or other long-term initiatives that contribute to their strategic objectives.

The correct answer is Option C: Budgetary control may discourage efficient individuals. This limitation where it mentions that under budgetary control, targets are given to every person in the organization, potentially discouraging efficient individuals who may feel contented by merely reaching the targets.

Statement 1: The future is always uncertain and the situation which is presumed to prevail in the future may change, reducing the utility of budgetary control.

Statement 2: Budgets may serve as constraints on managerial initiatives as people tend to achieve targets only, potentially discouraging efficient persons.

Both statements are correct as per the limitations, making Option C the correct answer.