Notes : Controlling Class 12 Notes | EduRev

Class 12 : Notes : Controlling Class 12 Notes | EduRev

 Page 1


5 8  XII –  Business Studies 
AK 
UNIT   8 
CONTROLLING 
Meaning & Definition 
Controlling means ensuring that activities in an organisation are performed 
as per the plans. Controlling also ensures that an organisation s resources are 
being used effectively and efficiently for the achievement of predetermined 
goals. 
It can be defined as  comparison of actual performance with the planned 
performance 
The controlling functions find out how far actual performance deviates from 
standards, analyses the causes of such deviations and attempts to take 
corrective actions based on the same. 
Importance of Controlling :- 
1. Controlling helps in achieving organisational goals :- The controlling 
function measures progress towards the organisational goals and brings to 
light/indicates corrective action. 
2. Judging accuracy of standards : A good control system enables 
management to verify whether the standards set are accurate or not. 
3. Making efficient use to resources - By the process of control, a manager 
seeks to reduce wastage of resources. 
4. Improves employees motivations : A good control system ensures that 
employees know well in advance what they are expected to do & also the 
standard of performance. It thus motivates & help them to give better 
performance. 
5. Facilitating Coordination in action : In controlling each department and 
employee is governed by predetermind standards which are well 
coordinated with one another.
Page 2


5 8  XII –  Business Studies 
AK 
UNIT   8 
CONTROLLING 
Meaning & Definition 
Controlling means ensuring that activities in an organisation are performed 
as per the plans. Controlling also ensures that an organisation s resources are 
being used effectively and efficiently for the achievement of predetermined 
goals. 
It can be defined as  comparison of actual performance with the planned 
performance 
The controlling functions find out how far actual performance deviates from 
standards, analyses the causes of such deviations and attempts to take 
corrective actions based on the same. 
Importance of Controlling :- 
1. Controlling helps in achieving organisational goals :- The controlling 
function measures progress towards the organisational goals and brings to 
light/indicates corrective action. 
2. Judging accuracy of standards : A good control system enables 
management to verify whether the standards set are accurate or not. 
3. Making efficient use to resources - By the process of control, a manager 
seeks to reduce wastage of resources. 
4. Improves employees motivations : A good control system ensures that 
employees know well in advance what they are expected to do & also the 
standard of performance. It thus motivates & help them to give better 
performance. 
5. Facilitating Coordination in action : In controlling each department and 
employee is governed by predetermind standards which are well 
coordinated with one another.
5 9  XII –  Business Studies 
AK 
6. Ensuring order and discipline :- Controlling creates an atmosphere of 
order and discipline in the organisation by keeping a close check on the 
activities of its employees. 
Limitations of Controlling 
1. Little Control on external factors : Generally no exterprise can control 
external factors such as government policies, technological changes, 
competitions etc. 
2. Resistance from employee - Control is often resisted by employees. They 
see it as a restriction on their freedom. 
3. Costly affair : Control is a costly affair as it involves a lot of expenditure 
time and efforts. 
4. Difficulty in setting quantitative standards :- Control system loses some 
of its effectiveness, when standards cannot be defined in quantitative 
terms. In the absence of quantitative standards, comparison with 
standards becomes difficult. 
Relationship between Planning and Controlling : 
Planning and controlling are interrelated and infact reinforce each other in the 
sense that :- 
1. Planning is pre-requisite for controlling. Plans provide the standard for 
controlling. Thus, with out planning, controlling is blind. 
2. Planning is meaningless without controlling. It is fruitful when control is 
exercised. 
3. Effectiveness of planning can be measured with the help of controlling. 
4. Planning is looking ahead & controlling is looking back. 
Thus planning & controlling cannot be separated. The two are 
supplementary functions which support each other for successful execution 
of both the functions. 
Planning makes controlling effective where as controlling improves future 
planning. 
Controlling Process : 
1. Setting performance Standards :- Standards are the criteria against which 
actual performance would be measured. Thus standards serve as 
bencemarks.
Page 3


5 8  XII –  Business Studies 
AK 
UNIT   8 
CONTROLLING 
Meaning & Definition 
Controlling means ensuring that activities in an organisation are performed 
as per the plans. Controlling also ensures that an organisation s resources are 
being used effectively and efficiently for the achievement of predetermined 
goals. 
It can be defined as  comparison of actual performance with the planned 
performance 
The controlling functions find out how far actual performance deviates from 
standards, analyses the causes of such deviations and attempts to take 
corrective actions based on the same. 
Importance of Controlling :- 
1. Controlling helps in achieving organisational goals :- The controlling 
function measures progress towards the organisational goals and brings to 
light/indicates corrective action. 
2. Judging accuracy of standards : A good control system enables 
management to verify whether the standards set are accurate or not. 
3. Making efficient use to resources - By the process of control, a manager 
seeks to reduce wastage of resources. 
4. Improves employees motivations : A good control system ensures that 
employees know well in advance what they are expected to do & also the 
standard of performance. It thus motivates & help them to give better 
performance. 
5. Facilitating Coordination in action : In controlling each department and 
employee is governed by predetermind standards which are well 
coordinated with one another.
5 9  XII –  Business Studies 
AK 
6. Ensuring order and discipline :- Controlling creates an atmosphere of 
order and discipline in the organisation by keeping a close check on the 
activities of its employees. 
Limitations of Controlling 
1. Little Control on external factors : Generally no exterprise can control 
external factors such as government policies, technological changes, 
competitions etc. 
2. Resistance from employee - Control is often resisted by employees. They 
see it as a restriction on their freedom. 
3. Costly affair : Control is a costly affair as it involves a lot of expenditure 
time and efforts. 
4. Difficulty in setting quantitative standards :- Control system loses some 
of its effectiveness, when standards cannot be defined in quantitative 
terms. In the absence of quantitative standards, comparison with 
standards becomes difficult. 
Relationship between Planning and Controlling : 
Planning and controlling are interrelated and infact reinforce each other in the 
sense that :- 
1. Planning is pre-requisite for controlling. Plans provide the standard for 
controlling. Thus, with out planning, controlling is blind. 
2. Planning is meaningless without controlling. It is fruitful when control is 
exercised. 
3. Effectiveness of planning can be measured with the help of controlling. 
4. Planning is looking ahead & controlling is looking back. 
Thus planning & controlling cannot be separated. The two are 
supplementary functions which support each other for successful execution 
of both the functions. 
Planning makes controlling effective where as controlling improves future 
planning. 
Controlling Process : 
1. Setting performance Standards :- Standards are the criteria against which 
actual performance would be measured. Thus standards serve as 
bencemarks.
6 0  XII –  Business Studies 
AK 
2. Measurement of Actual performance : Performance should be measured 
in an objective and reliable manner. Which include personal observation, 
sample checking. 
3. Comparing Actual performance with standard : This steps involves 
comparison of actual performance with the standard. Such comparison will 
reveal the deviation between actual and desired performance. 
4. Analysing Deviations - The deviations from the standards are assessed 
and analysed to identify the causes of deviations. 
5. Taking Corrective Action :- The final step in the controlling process is 
taking corrective action. No corrective action is required when the 
deviations are within the acceptable limits. 
Techniques of Managerial Control 
Traditional Control Techniques Modern Control Techniques 
  Personal Observation   Return On investment 
  Statistical Reports   Ratio Analysis 
  Break even analysis   Responsibility Accounting 
  Budgetary Control   Management Audit 
  PERT and CPM 
  Management information 
T raditional T echniques :- 
Traditional techniques are those which have been used by the companies for 
a long time and are still being used. 
Modern T echniques :- 
Modern techniques of controlling are those which are of recent origin. These 
techniques provide refreshingly new thinking on the way in which various 
aspects of an organisation can be controlled. 
Budgetary Control : It is a technique of management control in which all 
operation are planned in advance in the form of budget & actual result are 
compared with budgetary standard.
Page 4


5 8  XII –  Business Studies 
AK 
UNIT   8 
CONTROLLING 
Meaning & Definition 
Controlling means ensuring that activities in an organisation are performed 
as per the plans. Controlling also ensures that an organisation s resources are 
being used effectively and efficiently for the achievement of predetermined 
goals. 
It can be defined as  comparison of actual performance with the planned 
performance 
The controlling functions find out how far actual performance deviates from 
standards, analyses the causes of such deviations and attempts to take 
corrective actions based on the same. 
Importance of Controlling :- 
1. Controlling helps in achieving organisational goals :- The controlling 
function measures progress towards the organisational goals and brings to 
light/indicates corrective action. 
2. Judging accuracy of standards : A good control system enables 
management to verify whether the standards set are accurate or not. 
3. Making efficient use to resources - By the process of control, a manager 
seeks to reduce wastage of resources. 
4. Improves employees motivations : A good control system ensures that 
employees know well in advance what they are expected to do & also the 
standard of performance. It thus motivates & help them to give better 
performance. 
5. Facilitating Coordination in action : In controlling each department and 
employee is governed by predetermind standards which are well 
coordinated with one another.
5 9  XII –  Business Studies 
AK 
6. Ensuring order and discipline :- Controlling creates an atmosphere of 
order and discipline in the organisation by keeping a close check on the 
activities of its employees. 
Limitations of Controlling 
1. Little Control on external factors : Generally no exterprise can control 
external factors such as government policies, technological changes, 
competitions etc. 
2. Resistance from employee - Control is often resisted by employees. They 
see it as a restriction on their freedom. 
3. Costly affair : Control is a costly affair as it involves a lot of expenditure 
time and efforts. 
4. Difficulty in setting quantitative standards :- Control system loses some 
of its effectiveness, when standards cannot be defined in quantitative 
terms. In the absence of quantitative standards, comparison with 
standards becomes difficult. 
Relationship between Planning and Controlling : 
Planning and controlling are interrelated and infact reinforce each other in the 
sense that :- 
1. Planning is pre-requisite for controlling. Plans provide the standard for 
controlling. Thus, with out planning, controlling is blind. 
2. Planning is meaningless without controlling. It is fruitful when control is 
exercised. 
3. Effectiveness of planning can be measured with the help of controlling. 
4. Planning is looking ahead & controlling is looking back. 
Thus planning & controlling cannot be separated. The two are 
supplementary functions which support each other for successful execution 
of both the functions. 
Planning makes controlling effective where as controlling improves future 
planning. 
Controlling Process : 
1. Setting performance Standards :- Standards are the criteria against which 
actual performance would be measured. Thus standards serve as 
bencemarks.
6 0  XII –  Business Studies 
AK 
2. Measurement of Actual performance : Performance should be measured 
in an objective and reliable manner. Which include personal observation, 
sample checking. 
3. Comparing Actual performance with standard : This steps involves 
comparison of actual performance with the standard. Such comparison will 
reveal the deviation between actual and desired performance. 
4. Analysing Deviations - The deviations from the standards are assessed 
and analysed to identify the causes of deviations. 
5. Taking Corrective Action :- The final step in the controlling process is 
taking corrective action. No corrective action is required when the 
deviations are within the acceptable limits. 
Techniques of Managerial Control 
Traditional Control Techniques Modern Control Techniques 
  Personal Observation   Return On investment 
  Statistical Reports   Ratio Analysis 
  Break even analysis   Responsibility Accounting 
  Budgetary Control   Management Audit 
  PERT and CPM 
  Management information 
T raditional T echniques :- 
Traditional techniques are those which have been used by the companies for 
a long time and are still being used. 
Modern T echniques :- 
Modern techniques of controlling are those which are of recent origin. These 
techniques provide refreshingly new thinking on the way in which various 
aspects of an organisation can be controlled. 
Budgetary Control : It is a technique of management control in which all 
operation are planned in advance in the form of budget & actual result are 
compared with budgetary standard.
6 1  XII –  Business Studies 
AK 
Types of Budget (i) Sales Budget, Production Budget etc. 
Budgetary Control : 
A budget reflects the policy for the specified period. The most common types 
of budgets used by an organisation are sales budget, production budget, cash 
budget etc. 
Budgetary control is a technique of managerial control in which all operation 
are planned in advance in the form of budgets and actual results are compared 
with budgetary standards. This comparison reveals the necessary action to be 
taken so that organisational objectivies are accomplished. 
Modern Techniques of Managerial Control : 
(i) ROI Return an investment 
ROI = 
s s 
Net Income Sales 
Sale Total Investments 
×  
(ii) Ratio Analysis : Liquidity ratios; Solvency ratios; 
Profitability ratios; Turnover ratios. 
PERT : Programme evaluation & review techniques. 
CPM : Critical path method 
MIS : Management Information System 
(i) It is computer based information system that provides support & 
information for effective managerial decesion making. 
(ii) It servis as an important control technique by providing data & 
information to the managers at the right time so that appropriate 
corrective action may be taken in case of deviation from standards. 
One Mark Question :- 
1. Explain the meaning of controlling. 
2. Write the first step of controlling process. 
3. Mention any one features of good controlling system. 
4. What are the two types of deviations. 
5. Which principle of management control is based on the belief that an 
attempt to control everything results in controlling nothing.
Page 5


5 8  XII –  Business Studies 
AK 
UNIT   8 
CONTROLLING 
Meaning & Definition 
Controlling means ensuring that activities in an organisation are performed 
as per the plans. Controlling also ensures that an organisation s resources are 
being used effectively and efficiently for the achievement of predetermined 
goals. 
It can be defined as  comparison of actual performance with the planned 
performance 
The controlling functions find out how far actual performance deviates from 
standards, analyses the causes of such deviations and attempts to take 
corrective actions based on the same. 
Importance of Controlling :- 
1. Controlling helps in achieving organisational goals :- The controlling 
function measures progress towards the organisational goals and brings to 
light/indicates corrective action. 
2. Judging accuracy of standards : A good control system enables 
management to verify whether the standards set are accurate or not. 
3. Making efficient use to resources - By the process of control, a manager 
seeks to reduce wastage of resources. 
4. Improves employees motivations : A good control system ensures that 
employees know well in advance what they are expected to do & also the 
standard of performance. It thus motivates & help them to give better 
performance. 
5. Facilitating Coordination in action : In controlling each department and 
employee is governed by predetermind standards which are well 
coordinated with one another.
5 9  XII –  Business Studies 
AK 
6. Ensuring order and discipline :- Controlling creates an atmosphere of 
order and discipline in the organisation by keeping a close check on the 
activities of its employees. 
Limitations of Controlling 
1. Little Control on external factors : Generally no exterprise can control 
external factors such as government policies, technological changes, 
competitions etc. 
2. Resistance from employee - Control is often resisted by employees. They 
see it as a restriction on their freedom. 
3. Costly affair : Control is a costly affair as it involves a lot of expenditure 
time and efforts. 
4. Difficulty in setting quantitative standards :- Control system loses some 
of its effectiveness, when standards cannot be defined in quantitative 
terms. In the absence of quantitative standards, comparison with 
standards becomes difficult. 
Relationship between Planning and Controlling : 
Planning and controlling are interrelated and infact reinforce each other in the 
sense that :- 
1. Planning is pre-requisite for controlling. Plans provide the standard for 
controlling. Thus, with out planning, controlling is blind. 
2. Planning is meaningless without controlling. It is fruitful when control is 
exercised. 
3. Effectiveness of planning can be measured with the help of controlling. 
4. Planning is looking ahead & controlling is looking back. 
Thus planning & controlling cannot be separated. The two are 
supplementary functions which support each other for successful execution 
of both the functions. 
Planning makes controlling effective where as controlling improves future 
planning. 
Controlling Process : 
1. Setting performance Standards :- Standards are the criteria against which 
actual performance would be measured. Thus standards serve as 
bencemarks.
6 0  XII –  Business Studies 
AK 
2. Measurement of Actual performance : Performance should be measured 
in an objective and reliable manner. Which include personal observation, 
sample checking. 
3. Comparing Actual performance with standard : This steps involves 
comparison of actual performance with the standard. Such comparison will 
reveal the deviation between actual and desired performance. 
4. Analysing Deviations - The deviations from the standards are assessed 
and analysed to identify the causes of deviations. 
5. Taking Corrective Action :- The final step in the controlling process is 
taking corrective action. No corrective action is required when the 
deviations are within the acceptable limits. 
Techniques of Managerial Control 
Traditional Control Techniques Modern Control Techniques 
  Personal Observation   Return On investment 
  Statistical Reports   Ratio Analysis 
  Break even analysis   Responsibility Accounting 
  Budgetary Control   Management Audit 
  PERT and CPM 
  Management information 
T raditional T echniques :- 
Traditional techniques are those which have been used by the companies for 
a long time and are still being used. 
Modern T echniques :- 
Modern techniques of controlling are those which are of recent origin. These 
techniques provide refreshingly new thinking on the way in which various 
aspects of an organisation can be controlled. 
Budgetary Control : It is a technique of management control in which all 
operation are planned in advance in the form of budget & actual result are 
compared with budgetary standard.
6 1  XII –  Business Studies 
AK 
Types of Budget (i) Sales Budget, Production Budget etc. 
Budgetary Control : 
A budget reflects the policy for the specified period. The most common types 
of budgets used by an organisation are sales budget, production budget, cash 
budget etc. 
Budgetary control is a technique of managerial control in which all operation 
are planned in advance in the form of budgets and actual results are compared 
with budgetary standards. This comparison reveals the necessary action to be 
taken so that organisational objectivies are accomplished. 
Modern Techniques of Managerial Control : 
(i) ROI Return an investment 
ROI = 
s s 
Net Income Sales 
Sale Total Investments 
×  
(ii) Ratio Analysis : Liquidity ratios; Solvency ratios; 
Profitability ratios; Turnover ratios. 
PERT : Programme evaluation & review techniques. 
CPM : Critical path method 
MIS : Management Information System 
(i) It is computer based information system that provides support & 
information for effective managerial decesion making. 
(ii) It servis as an important control technique by providing data & 
information to the managers at the right time so that appropriate 
corrective action may be taken in case of deviation from standards. 
One Mark Question :- 
1. Explain the meaning of controlling. 
2. Write the first step of controlling process. 
3. Mention any one features of good controlling system. 
4. What are the two types of deviations. 
5. Which principle of management control is based on the belief that an 
attempt to control everything results in controlling nothing.
6 2  XII –  Business Studies 
AK 
3-4 Marks Questions 
6.  Planning is looking ahead and controlling is looking back.  Explain. 
7.  Controlling function of management is a pervasive function . Explain. 
8. What is meant by Budgetary control? 
9.  Corrective action is essence of control . Explain. 
5-6 Mark Questions : 
10. Explain the various steps involved in the process of control. 
11. Explain the importance of controlling is an organisation. 
12. What is break-even-analysis? How it is an effective technique of control. 
13.  Planning and controlling are mutually interrelated and inter-dependent 
activities. Explain. 
14. What are the advantages of Budgetary Control? 
15. Explain the limitations of controlling? 
16. Explain any two Traditional techniques of controlling. 
17. Explain any two Modern techniques of controlling.
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