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Question
Write a short note on budgetary control as a technique of managerial control.
Solution
Budgetary control is a technique of controlling that involves preparing plans in the form of budgets. Budget refers to a financial or a quantitative statement that defines the targets to be achieved and the policies to be followed in a specific period of time. The actual performance is then compared with the budgetary standards. This comparison helps in identifying the deviations and thereby, guides in taking appropriate corrective measures. Budget can be prepared for different divisions of the organisation such as sales budget, production budget, purchase budget, etc. However, for the budgeting to be effective, future estimates must be made carefully. Budgeting also acts as a source of motivation for the employees by setting the standards against which their performance will be assessed. Thus, it encourages them to achieve the set objectives. In addition, it is also used to facilitate coordination among different divisions/departments of the organisation. Moreover, proper budgeting ensures that resources are allocated to different divisions as per their requirements. Thereby, it helps in optimum utilisation of the resources.
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