A STUDY ON BUDGETARY CONTROL IN CARMEL SENSOR PRIVATE LIMITED AT CHENNAI

Transcription

1 A STUDY ON BUDGETARY CONTROL IN CARMEL SENSOR PRIVATE LIMITED AT CHENNAI M.KUMAR Research Scholar (PT), Periyar University, Department of BBA, Government Arts college Dharmapuri ABSTRACT The project entitled A Study on Budgetary control in Carmel Sensors Private Limited at Chennai. Measurement of company position by budgetary and budgetary control helps identify organizational strength and weakness by detecting financial anomalies and focusing attention on issues of organizational importance. The researcher viewed a budget as a plan expressed in quantitative, usually monetary term, covering a specific period of time, usually one year. While a budgetary control is a methodical control of an organization's operations through establishment of standards and targets regarding income and expenditure, and a continuous monitoring and adjustment of performance against them. In this research work, the researcher will be considering. An indication and explanation of the importance of budget and budgetary control in an organisation as a key marketing control technique. An overview of the advantages and disadvantages of budgeting. An introduction to the methods for preparing budgets. An appreciation of the uses of budgets. The role budget and budgetary control in an organization. It using the simple percentage, correlation, and trend analysis. INTRODUCTION A budget is the pre-determined the future events. The word budget is derived from a French term Baguette which denoted a Leather pouch in which finds are appropriates for meeting anticipates expenses. The Institute of Costs and Management of England and Wales Budget is a financial and/or quantitative statement prepared and approved prior to a defined period of the policy to be pursued during that period for the purpose of attaining a given objectives. DEFINITION Budget us an estimate of future needs arranged according to an orderly basis, covering, some or all of the activities of an enterprise for definite period of time George R.Terry. A Budget is a comprehensive and Co-ordinate plan, Expressed in financial terms, for the Operations and resources of an enterprise for some specific period in the future A Budget is a predetermined statement of management policy during a given period of which provides a standard for comparison with the results actually archived. Brown and Howard PURPOSE OF BUDGET It directs the attention of all concerned to the affainment of a common goal It leads to the disclosure of organizational weakness. The budgets are Compare with actual performance, and variances. This investigations Step helps in taking corrective and remedial measures. It aims at careful control over the performance and cost of every function. It co ordinates efforts of all department in order to achieve an integrated order to achieve an integrated goal. Budget grows from bottom and are controlled from Top level icmrrjournal@gmail.com

2 Budgetary control It has pointed out that budget is the predetermined plan for the future of activities in order to attain a set objectives. The achievement of the objective, as set will depend on the execution of the planned course of activities. Whether the said activities are carried out or not, according to the plan, is to be verified in terms of the budget. The budgetary control may be defined as is a system of coordinating costs, which includes the preparation of budgets, coordinating the work of departments and establishing responsibilities, comparing actual performance with the budgeted and acting upon results to achieve maximum profitability. The Institute of Cost and Management Accountant, England has offered the following definition of the budgeting control which is almost close to the aforesaid definition, The establishment of the budget relating the responsibilities of executives to the requirements of a policy and continuous comparison of executives to the requirements of a policy and continuous comparison of actual with budgeted results. The following fundamental principles Establishment of a budget or a target, as a standard of per performance for each function or section of an organization. Obtaining the records of all performance. Continuous comparison of the actual performance with the standard, as planned in the budget. Calculation of the differences or variance and analyzing the reasons for them. Objectives of Budgetary Control Planning & Control Coordination & Deviations Efficiency and Economy Increase in Profitability Anticipation of future capital expenditure Essential of Budgetary Control : The budgetary control system should have full support of top management There should be well planned organizational set up, with responsibility and authority clearly demarked. The accounting system should provide accurate and timely information. Budgets have no meaning unless they lead to control action as a consequence of feedback provided. Staff should be strongly and properly motivated towards the system. The budget should lay down the target, which are realistic and attainable. Budget should actually aim as a co-coordinating device rather than control device icmrrjournal@gmail.com

3 CLASSIFICATION OF BUDGETS BUDGET On the Basis of time On the basis of flexibility On the basis of function *Long term * Fixed * Sales *Short term * Flexible * Production *Current * Material * Labor * plant utilization * Cash * Capital * Expenditure Limitation of Budgetary Control : Prediction of uncertain future Change of conditions Difficulty in coordination Conflict among different departments INDUSTRY PROFILE CARMEL was set up in America in 1996, have been entirely engaged in the Field of manufacturing microprocessor and conventional fire alarm product sales and service. The Co. has a tie up with TELEFIRE FIRE & GAS DETECTORS LTD., Israel and they support us with technical and equipment for unique and specialized fire detection products and Gas extinguishing products. It has a full-fledged office at kanada with highly experienced professionals for designing fire alarm products. CARMEL have all infrastructure i.e. R&D, Electronic assembly production shop, Machine shop, painting shop and Quality Testing Laboratory for manufacturing fire alarm control panels, Electronic Hooters, Manual call points, Response Indicators, Exit lamps and smoke and heat detectors, duly approved by CBRI / TAC, Motor control centre, etc. CARMEL make conventional and micro processor based fire alarm panels which are duly approved by M/s. Bharat Sanchar Nigam Ltd., on all India Basis, ETDC, SAMEER and etc. Products: Manufacturing of- Microprocessor and conventional fire alarm product sales and service. Fire Alarm Control Panels Conventional Fire Alarm Panel (SAB) Microprocessor Based Fire Alarm Panel - MCF 10 Microprocessor Based Fire Alarm Panel - MCF1 ADR ( Analog Addressable Control Panel ) Euro Series Detectors Ionization Smoke Detectors Heat Detectors (Rate of Rise cum Fixed Temperature) Accessories Hooter / Sounder MCP Manual Call Point Response Indicator (RI) Remote Indication Panel icmrrjournal@gmail.com

4 OBJECTIVES OF THE COMPANY To Carry on the Business as processors dealers, importers, exporters Merchants agents and Distributors of all kinds of alarm products. To carry on the business of processing alteration, modernization, and innovative type of the product to be manufacture. CAPITAL STRUCTURE OF THE COMPANY The Authorized share capital of the company in Rs.100,00,000/- (Rupees 0ne corer only) divided into 100,000 (one lacks equity shares of Rs.100/- each with power to increase or reduce the capital, whenever circumstances warrant. The Company borrowing Rs.400,00,000/- from ICICI Bank Chennai. PRIMARY OBJECTIVES To Analysis the effectiveness of budgetary control in Carmel Sensors Pvt. Ltd. At Chennai. SECONDARY OBJECTIVES To Analysis the income & expenditure Budgets To Identify the budgeting methods for new projects & investment To Know the Ratio of Sales and Expenditure. To Analysis the difference between budgeting estimates and actual budget in Carmel Sensors Pvt. Ltd. SCOPE OF THE STUDY This study is mainly concerned on the Budgetary control in Carmel Sensors Pvt. Ltd. And it focused on the budget of the company. This study deals with the Budget valuation Methods. This research work crafts a clear picture of the budgetary activities and control measures in the organization. This study will enable the company to plan for its future. This study on Budget and budgetary control assists Carmel Sensors (P) Ltd. As it has a wider scope in terms of time period. i.e. for a period of five years between 2005 to LIMITATIONS OF THE STUDY : Some of the needed Secondary data is not provided by the company. Project duration is very short period. The information is secondary data. It is analysis the fewer areas of the budgeting and budgetary control of the company. The success of the budgetary control largely depends upon willing, co-operation or teamwork of all concerned. It there is no Co-operation, the whole systems collapses. RESEARCH METHODOLOGY The methodology used to analysis for past and existing data. The study is primarily is based on the secondary data collective from Carmel sensor private Ltd., The data are extracted from the annual reports for a five year. The data collected were tabulated separately and received by managing data analysis and interpretation for the five year from 2005 to icmrrjournal@gmail.com

5 SOURCE OF DATA : Primary Data : The data those are collected a fresh for the first time and happen to be original in character are called as primary data. Secondary Data : The existing facts and information are secondary in nature and are collected from annual reports provided by the company. Period of Study: The study is based upon the data available for five years starting from 2005 to Methods of data collection : The budget estimate and actual data for the study period was collected from the firmed up report. This data for the sales and production was collected from the Annual Report of the respective year. TOOLS OF ANALYSIS : The analysis and interpretation of statements is used to determine the position and result of operation as well. The tool of analysis followed in the study is yearly analytical and partly descriptive in nature. For the financial analysis the financial statements of the company have been used. The following techniques were adopted. Simple Percentage Correlation Trend Analysis REVIEW OF LITERATURE (Chandler, 1990) Budgetary control as proven management tool helps organization management, and enhances improved performance of any economy in different ways. Its primary function is to serve as a guide in financial planning operators; it also establishes limits for departmental excesses. It helps administrative officials to make careful analysis of all existing operations, thereby justifying expanding, eliminating or restricting present practice. Budgeting and control entails a distinct pattern of decisions in an organization which is capable of determining its objectives, purposes or goals, and how these goals are achieved by establishing principal policies and plans. David Frederick (2001) : Over the past to decades the one word that has become the common currency in all managers' vocabulary is 'budgets'. The budget is perhaps the most frequently cited explanation for some chosen course of action or inaction by management and staff across all sectors. Management at all levels within the public, private and the third sector have used the budget as their shield or excuse when confronted or challenged about any decision. It is not uncommon to hear variations of the phrases `the budget does not permit us to', or `it is not in our budget'. Furthermore, management in some sectors may be forgiven for believing their sole raison d être has become budget preparation, budget compliance and budget monitoring icmrrjournal@gmail.com

6 SHIMUL (October 2001) : Budgetary control of SHIMUL Literature of Review Finance is the Life blood of a business. Therefore, financial planning is off almost significance to a businessman. Financial planning is concerned with raising funds and their effective utilizations with a view to maximize the wealth of the company. In spite of good financial plan, the desired results may not be achieved if there is no effective control to ensure its implementation. A budget is an important tool for financial planning and control. The budget represents a set of yardsticks or guidelines for use in controlling internal operations of an organization. The management, through budget, can evaluate the performance of every level of the organization. The discrepancy between planned performance & actual performance is highlighted through budgets. Budgeting: Definition A budget is a statement, which shows forecasts of the financial activities of a business to achieve a specific purpose. A budget is basically an estimate of receipts and payments of revenue and capital items in future. Correlation between Budgeted Total Net profit and Actual Total Net profit. Period Budget(X) Actual(Y) XY X 2 Y TOTAL R = XY X 2 x Y 2 R = x R = Interpretation : From this we can conclude that there is positive correlation between Budgeted Net Profit and Actual Net Profit. TREND ANALYSIS The Trend Analysis allows us to plot aggregated response data over time. This is especially valuable, if we are conducting a long running survey and would like to measure differences in perception and responses over time icmrrjournal@gmail.com

7 The following data points can be measured (Y-Axis) 1. Mean and Mean Percentile 2. Standard Deviation and Variance The "Time Factor" (X-Axis) can have the following granularity 1. Daily 2. Weekly 3. Monthly 4. Quarterly (Jan-Mar, Apr-Jun, Jul-Sept, Oct-Dec) 5. Yearly Trend Analysis can be extremely valuable as an early warning indicator of potential problems and issues with product line and service level changes that impact customers. We can immediately start investigating the dip and explore causes of the decrease in satisfaction levels. It can also be used to gauge response rates over time. Trend Analysis for Total Sales From Period Budget Actual Interpretation : Sources : Secondary Data (Rupees in Crore) The Actual Income towards Total Sales was low during the year and also actual Income towards Total Sales was high during the year FINDINGS SIMPLE PERCENTAGE The above study find a difference of the Percentage % in the total sales year of But the difference of percentage 8.81% in the year of The difference of the Percentage % in the total Raw materials year of But the difference of percentage 2.22% in the year of This year budget over the actual amount percentage % in the total stores and spares year of But the difference of percentage 2.5 % in the year of This year budget over the actual amount percentage 2.59 % in the total power and fuel year of But the difference of percentage 8.45 % in the year of The difference of the Percentage 52 % in the total Repair and Maintenance year of But the difference of percentage 4.21 % in the year of icmrrjournal@gmail.com

8 The above study find a difference of the Percentage % in the total salary/benefits year of But the difference of percentage 3.65% in the year of The difference of the Percentage % in the total Gross Margin Budget year of But the difference of percentage 7.75% in the year of The difference of the Percentage % in the total Net Profit and Loss Budget year of But the difference of percentage 5.56% in the year of CORRELATION We found that is a positive correlation between budgeted sales and actual sales. From the correlation it has been studied there is a positive correlation between budgeted income and expenditure and actual income and expenditure. We found that is a positive correlation between budgeted gross and net margin and actual gross and net margin. TREND ANALYSIS From this Trend Analysis show the budgeted sales and actual sales was yearly increase as well as total expenditure also. Low sales in the year of and high sales in the year of The actual expenditure was low in the year of and high in the years of SUGGESTIONS From the study Budgetary control helps to estimate the company income and expenditure. We can Know future position of the Company. The expenditure towards the raw materials may be reduced using various latest Technology like Just in Time and LIFO, FIFO. The allocation of adequate funds towards repairs and maintenance may reduce the future expenditure of the Stores. The experience candidate only preparing the company budget. They are asking suggestion from various department superiors, and subordinates. Because they are very effective in the budgetary control processors. CONCLUSION This report presents data obtained from a representative sample survey on the budgetary control used in the Carmel Sensors Private Limited Chennai. It is fully based on the past and existing data used to find the levels of the income and expenditure of the company. It is very essential to prepare the budget every year in every organization in order to realize the actual profit or loss. It ensure the success or failure of a business. The budgetary control the processes and tools applicable to track the expenses and budget variation must be beginning of the project plan elaboration, in order to avoid crucial financial unfore seen costs which may affect the project deliverable. References 1. Dr. MAHESHWARI.N : Principles of Management Accounting, 2 nd Edition, 2001, Sultan chand & sons, publication, New Delhi. Page No Dr. SRIVASTA.R.M : Financial Management, 1 st Edition, 1992, pragati prakasham publications, meerut. Page No KULKARANI.P.V : Financial Management, 1987, Himalaya Publishing house,. Page No icmrrjournal@gmail.com

9 4. Dr. GUPTA.S.P : Financial Management Sultan Chand & Sons Publication, New Delhi Page No Pillai.R.S.N. and Bhagavathi: Management Accounting, 2 nd Edition, 2008, Excel Publishing, Page No Reddy and Hari Prasad : Management Accounting, Himalaya Publishing house, Page No icmrrjournal@gmail.com