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Working of Budgetary Control System - Budgetary Control, Cost Accounting Video Lecture | Cost Accounting - B Com
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FAQs on Working of Budgetary Control System - Budgetary Control, Cost Accounting Video Lecture - Cost Accounting - B Com
| 1. What is budgetary control and how does it work? |  |
Ans. Budgetary control is a system that helps organizations monitor and control their financial performance by comparing actual results with the predetermined budget. It involves setting budgets, monitoring actual performance, and taking corrective actions to achieve financial goals. The system works by creating a budget that outlines expected income and expenses, regularly comparing actual results with the budget, identifying variances, investigating the reasons for those variances, and implementing corrective measures if necessary.
| 2. How does budgetary control relate to cost accounting? | |
Ans. Budgetary control and cost accounting are closely related as both play a significant role in managing and controlling an organization's finances. Cost accounting involves the collection, analysis, and interpretation of cost data, which is essential for effective budgeting. Budgetary control relies on cost accounting information to compare actual costs with budgeted costs and identify any variances. Cost accounting also helps in analyzing the reasons for cost variances and determining the impact on overall financial performance.
| 3. What are the benefits of implementing a budgetary control system? | |
Ans. Implementing a budgetary control system offers several benefits to organizations. Firstly, it helps in setting clear financial goals and targets, providing a roadmap for financial planning and decision-making. Secondly, it enables effective monitoring of financial performance, allowing timely identification of any deviations from the budget. Thirdly, it helps in controlling costs, improving cost efficiency, and maximizing profitability. Additionally, it facilitates resource allocation, aids in performance evaluation, and promotes accountability within the organization.
| 4. What are the steps involved in the budgetary control process? | |
Ans. The budgetary control process consists of several steps. Firstly, the organization sets its financial goals and objectives, which serve as the basis for budget formulation. Secondly, budgets are prepared for different departments or cost centers based on the organization's overall goals. Thirdly, the actual performance is measured and compared with the budgeted targets, identifying any variances. Fourthly, the reasons for variances are analyzed, considering both internal and external factors. Finally, corrective actions are implemented to address the variances and bring the financial performance back on track.
| 5. How can organizations ensure the effectiveness of their budgetary control system? | |
Ans. To ensure the effectiveness of a budgetary control system, organizations can follow certain practices. Firstly, it is important to involve all relevant stakeholders in the budgeting process to gain their commitment and support. Secondly, regular monitoring and reporting of financial performance is crucial to identify any deviations and take timely corrective actions. Thirdly, conducting variance analysis and investigating the reasons for variances help in understanding the causes and making informed decisions. Additionally, organizations should review and revise their budgets periodically to adapt to changing circumstances and ensure they remain realistic and achievable.
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Nov 16, 2024 Last updated |
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