Budgetary Control Question Answer
1. What do you understand by budget?
Answer: Budget is a financial and/ or quantitative statement prepared prior to a defined period of time for the policy to be pursued during that period for attaining the object.
2. Explain the meaning of budgeting?
Answer: It is the preparation of comprehensive operating and financial plans for specific intervals of time or to say the whole process of preparing a budget is budgeting.
3. What is budgetary control?
Answer: Budgetary control is a control procedure adopted for attaining targets determined in the budget.
4. What is meant by forecasting?
Answer: Evaluation of probable future events is termed as forecasting which may be of financial and nonfinancial nature.
5. Give the name of activity/ function budgets?
Answer: Sales budget, production budget, material budget, purchase budget, labour budget, production overhead budget, plant utilization budget, selling and distribution overhead budget are known as activity budget.
6. State any two objects of budgetary control?
Answer: It is a tool in the hand of management which helps in planning and control.
7. What is the function of the budget committee?
Answer: Budget committee enables the head of the department in forecasting and includes these in preparation for the master budget, analyzing variances and undertake remedial action.
8. Which budget is prepared at first production budget or sales budget?
Answer: If production is a key factor then at first production budget is prepared but if sales are the key factor then the sales budget is prepared at first.
9. What is principle budget factor the extent of those in budgetary control?
Answer: It is that factor the extent of whose influence should be assessed first to ensure the implementation of the functional budget in business sales, labor, materials etc. Are the key factors.
10. What is Budget Manual?
Answer: The budget manual describes the responsibility of officers entrusted with budgetary control and use of relevant form and record for the purpose.
11. What is the Master Budget?
Answer: Master budget termed as a summary budget to incorporates all functional budget and is prepared by budget officer.
12. What is Flexible budget?
Answer: It is a budget which recognizes the difference between fixed, semi-fixed and variable costs designed to changes in relation to the level of activity attained.
13. What is the basic difference between the production budget and production cost budget?
Answer: production budget means a budget of production cost budget is as a budget which shows the cost of production of budgeted quantity.
14. What is meant by Fixed budget?
Answer: Fixed budget means a budget means a budget which is designed to remain unchanged irrespective of the level of activity attained.
15. What is zero base Budgeting Technique?
Answer: zero-based budgeting as-as method of budgeting when by all activities are evaluated each time a budget is set discrete levels of activity are valued and a combination chosen to match the funds available – CIMA HAD DEFINED
16. What are the salient characteristics of budgetary control?
- Planning: targets are fixed in quantitative or monetary terms responsibility of officer is determined to enable appraisal.
- Co-ordination: the master budget is prepared to ensure coordination.
- Recording and reporting: actual performance is reported to the officer it is compared with standards and variances are analyzed to fix responsibility.
- Corrective action: remedial action are being taken to overcome adverse variances standard are revised if uncontrollable factors exist.
- Follow-up: it is observed whether measures adopted to overcome adverse variances are effective or not.
17. Explain the essence of effective budgeting system?
- It should be fully supported by top management.
- All officials concerning with budget should be aware of its object elements and techniques etc.
- The proper information system should prevail.
- Policies target and budget period should be clearly declined.
- Proper co-ordination and co-operation should lie in different departments.
- Programme implements officer should be entrusted with its preparation to get better results.
18. What are differences in budget, budgeting, and budgetary control?
Answer: Budget is a financial and quantitative statement prepared prior to a defined period of time of the policy to be pursued during that period that period for attaining object while budgetary control is a control process adopted for attaining targets detailed in the budget.
Budgeting is a process of preparing a budget so all the three terms are different.
19. What is the main limitation of budgetary control?
- Its accuracy is affected by changes in circumstances.
- Due consideration is not given to indirect and concealed facts affecting activity.
- It evolves dictatorial tendency and internal conflicts.
- A budget is only a tool manager it cannot become the substitute for the manager.
- It may increase paperwork if not properly implemented.
- Manager & employees may blame.
- each of their efficiency will be evaluated.
Budgetary Control Question Answer (Cost Accounting)