What is Budgetary Control, Meaning of Budget

One of the primary functions of the management is to plan for the future and to ensure that Plans are put into effect. One way of planning is through budgets. A budget is merely a plan relating to a period of time, expressed in quantitative terms. In the business world, a budget is the formal expression of the expected incomes and expenditure for a definite future period. Comprehensive budgeting control procedures provide invaluable aid for scientific management.


Meaning of Budget

The Chartered Institute of the Management Accountants UK has described a budget as a plan quantified in monetary phrases prepared and accepted prior to a defined time period, usually exhibiting planned income being generated and/or, expenditure to be incurred throughout the period and the capital to be employed to achieve a given objective. Based on Howard and Brown, A budget is actually a pre-determined statement of management policy throughout a given period which offers a standard for comparison with all the results actually achieved.

Characteristics of Budget

Budgets have the following characterics:

1. A budget is primarily a planning and control device
2. A budget is prepared in monetary terms and/or quantitative terms.
3. A budget is prepared for a definite future period.
4. It shows planned income and expenditure and also the capital to be employed.
5. Purpose of a budget is to implement the policies formulated by the management for attaining the given objectives.

Characteristics of Budget


The work of preparing budgets is known as budgeting. In the terms of Batty, the whole process of planning the budgets is called budgeting.

Budgetary Control Definition

Budgetary control is actually a system of managing costs via preparation of budgets. Budgeting is actually thus just a part of the budgetary control. Based on CIMA.

Budgetary control will be the establishment of budgets associated with the responsibilities of executives of any policy and the continuous evaluation of the actual with the budgeted outcomes, either to secure through individual action the objective with the policy or to give a basis for its revision.

Characteristics of Budgetary Control

The main characteristics of budgetary control are:

1. Establishment of budgets for each function/department of the organization.
2. Comparison of actual performance with the budgets on a continuous basis.
3. Analysis of variations of actual performance from that of the budgeted performance to know the reasons thereof.
4. Taking suitable, remedial action, where necessary.
5. Revision of budgets in view of changes on conditions. The technique of budgetary control is now widely used in the business world. Many businesses fail because of the lack of efficient planning which could have revealed that the business should not have been started or that one should have been prepared to face serious dangers ahead.

Forecast vs Budget

It is important to note carefully the distinction between a forecast and a budget. A forecast is a prediction of what may happen as a result of a given set of circumstances. It is an assessment of probable future events. A budget, on the other hand, is a planned exercise to achieve a target. It is based on the pros and cons of a forecast. Forecasting thus precedes the preparation of a budget.

Thus the principal point of variation between the forecast vs budget is that forecast is actually concerned with probable occasions while budget relates to prepared events moreover, forecast could be made by anyone, whereas a budget, as an enterprise objective, can be arranged only by the authorized management.