Inventory Management and Budgetary Control System

Transcription

1 Inventory Management and Budgetary Control System Inventory, as a current asset, differs from other current assets because only financial managers are not involved. Rather, all the functional areas finance, marketing, production, and purchasing, are involved. The views concerning the appropriate level of inventory would differ among the different functional areas. The Conflicting view points of the various functional areas regarding the appropriate inventory levels in order to fulfill the overall objective of maximizing the owner s wealth. Thus, inventory management, like the management of other current assets, should be related to the overall objective of the firm. It is basically concerned with inventory management techniques. Attention is given here to basic concepts relevant to the management and control of inventory. The aspects covered are: (i) determination of the type of control required, (ii) the basic economic order quantity, (iii) the recorder point, and (iv) safety stocks. As a matter of fact, the inventory management techniques are a part of production management. Thus it will help the financial managers in planning and budgeting inventory Planning is the basic managerial function. It helps in determining the course of action to be followed for achieving organizational goals. It is the decision in advance what to do, and when to do, and who will do the particular task? Plan is made to achieve best results. Control in the process of checking whether the plans are being adhered to or not, keeping the record of process, comparing it with the plans and then taking corrective measure for future if there is any devotion. Every business enterprise needs the use of control techniques for surviving in the highly competitive and managing economic world. There are various control devices in use.budget are the most important tool of profit planning and control. They also act as an instrument of coordination. A budget is a detailed plan of operations for some specific future period. It is an estimated prepared in advance of the future period to which it applies. It acts as a business parameter. It is a complete programme of activities of the business for the period covered. Objectives behind this Study Budget and Budgetary control system is a very vast subject. But at the same time it is basic need of every company to make the budget. So it requires the overall knowledge and skill for making budget and without planning nobody can achieve organizational goals. This topic is very essential to every company and it's have special importance in the current competitive world.

2 Taking into consideration the vast importance of Budget and Budgetary control. The objective behind this study work is as follows: To study in detail the budget procedure of Mahindra & Mahindra Co. Ltd. Nagpur. To list of various types of budgets generally Mahindra & Mahindra Co. Ltd. Nagpur prepares. To evaluate variance analysis of Mahindra & Mahindra Co. Ltd. for taking suitable action by comparing actual results with budgets so that the causes are not repeated and remedial action should be taken in future. a. Any modern business can t not function without planning which is related to production, sales, stocks, requirement of labour, etc. The advantage of planning is that we can anticipate the problems before hand. Planning through budgetary control is necessary at all levels of management in which there is the process of thinking which enables to provide new idea to the management. b. A detailed budgetary control system is one where the plans are written down and these plans are circulated to all the levels management this can be achieve only through proper communication. c. It encourages research and development as budgetary control schedules are usually based on past experience. From the study variances analysis is possible so that corrective action taken wherever necessary. Objectives of Budgetary Control Budgetary control is essential for policy planning and control. It also acts as an instrument of co-ordination. The main objectives of budgetary control are as follows. To ensure the planning for future by setting up various budgets. The requirement and expected performance of the enterprise are anticipated. To co-ordinate the activities of different departments. To operated the cost centers and department with the efficiency and expected. Elimination of waste and increasing profitability. To anticipate capital expenditures for future.

3 To centralize the cost system Correction of deviation from establish standard. Fixation of responsibility of various individuals in the organization. Reference : Analysis of Financial Statements of XYZ Companymes Agriculture constitutes backbone of Indian Economy & in spite of congested industrialization in the last four decades; Agriculture still occupies a place of significance. Being the largest sector of the economic activity, it is the source of livelihood for over 70 % of the population in the economy. Agricultures accelerate the economic development to a very large proportion of population, capital for its own development and surplus for investment in other productive sectors. It is well known that agricultural production is the combined effect of a variety of implements, fertilizers, irrigation, farm machinery, high yielding varieties of seeds, etc.all these inputs in one way or another contribute to increasing in productivity of agriculture & form under one. But these inputs become more effective and their potential is better utilized if appropriate energy and power sources are made available to the farmer. Objectives 1. To analyses the profitability of the business 2. To analyses the asset management of the firm. 3 To analyses the short term and long term financial position of the firm. 4. To make recommendation based on the analysis of financial statements. Working capital management is a significant aspect of financial Management. It is important that investment in current assets and the level of current liabilities will have to be geared quickly to change in sales. It is also important that apportion of working capital requirement is brought from Long term sources such as equity or

4 long term loans.in adequate working capital is a crisis and it may arise due to poor working capital and financial management. Every organization has adequate working capital for its efficient functioning. The growth can be ensured by a systematic and continuous analysis of fixed assets, current assets, fixed and current liabilities, sales liquidity etc. An analysis of financial statements will help to identify the weak points and convert it to strong points by taking some remedial measures. The present study is an attempt in this direction The analyses of financial statement have been made for a period of 5 years ranging from Methodology of the Study The performance evaluation of an enterprise may be conducted by making a comparative study of its own records and an attractive approach would here to analyses the firm's objectives and performance against absolute standard of efficiency. The study was conducted on the basis of financial data from published records and other books with both primary and secondary data. The data have been collected from partnership deed of SIMCO, published financial statements of last 6 years, personal interview with office staff and other relevant books and accounts of the firm. Tools Used For Analysis The study makes use of techniques like Comparative Balance Sheet & Income Statements Common Size Balance Sheet & Income Statements Profitability Ratio. Liquidity Ratio Activity Ratio etc Simple Mathematical Tools like Averages

5 Percentages Accounting Tools like Ratios Trend Analysis & Statistical Tools were made also used for this analysis. Limitatons Of The Study The Sample Size is very small. Only 5 data were analyzed. So there is a possibility of occurrence of some sampling errors. If the sample were large and representative, the observation would have become more credible. It considers only monetary factors, non monetary factors are not considered. The time allowed for the study is less. It has been conducted by using secondary data Reference : R.K Sharma and Sasi. K.Guptha MANAGEMENT ACCOUNTING Kallyani Publishers, New Delhi 1991