A STUDY ON THE EFFECTIVENESS OF BUDGET AND BUDGETARY CONTROL WITH SPECIAL REFERENCE TO LARSEN AND TOUBRO LIMITED, CHENNAI

A STUDY ON THE EFFECTIVENESS OF BUDGET AND BUDGETARY CONTROL WITH SPECIAL REFERENCE TO LARSEN AND TOUBRO LIMITED, CHENNAI Dr.A.KADHAR LAL Assistant Professor, P.G & Research Department of Commerce, The New College (Autonomous), Chennai- 600014. ABSTRACT INTERCONTINENTAL JOURNAL OF FINANCE RESEARCH REVIEW The present article explore A study on the effectiveness of Budget and Budgetary Control LARSEN AND TOUBRO LIMITED.. For any organization, a proper planning and deciding of its budget for confronting with its future course of action is very significant indispensable. It is given in depth knowledge on the subject and also paved way for knowing how its preparation are made and further, making suitable suggestions for its improvement through the analysis done. To sum up, an efficient and effective budget will obviously be an essential tool for the company for reducing cost and maximizing profit the anticipated budgeted revenue is not able make out from the actual working from this area. As a part of data analysis 6 years budgets are collected so as to make a over all study about the budget and budgetary control. With the collected information different budgets like sales budget, raw material budget, Purchase budget, and overhead budgets are analyzed so as to have a clear knowledge idea about the income and expenditure position of the company for the past 6 years and also to have to find the trend in which the federation s position is moving. Using percentage analysis the 6 years budgets are analyzed and the income and expenditure position of the federation can be found. After finding the reason for the unfavorable trend of the federation certain suggestions are provided so as to overcome the problem. 1.1 INTRODUCTION 1.1.1. BUDGETARY CONTROL The economic structure and development of a state depend upon its budget which reflects the formulation of policies, co-ordination of economic activities and control of operation required to achieve the targets assigned to a period of time. A system of budget is necessary to plan and control the activities pertaining to production and sales. Budgeting is one of the technique widely is used for planning and control. It has become an essential technique for cost control and profit maximization. Costs are reduced and controlled through reduction of wastage, creating a proper relationship between costs and income and combining various factors of production in a profitable way. This is the possible only when management undertakes the effective planning. Management wants that all operations should be forecasted and as far as possible planned ahead and the actual results compared with the planned ones. For these two functions of planning and control, two new techniques are applied, namely budgetary control. A Budget is prepared to have effective utilization of funds and for the realization of objectives as efficiently as possible. Budgeting is a powerful tool to the management for performing its function efficiently. Budgetary control is useful to the management to prepare detailed plans and exercise effective coordination and control. 1.2 INDUSTRY PROFILE Electronics is the science of how to control the electric energy, energy in which the electrons have a fundamental role. Electronics deals with electrical circuits that involve active electrical www.icmrr.org 27 icmrrjournal@gmail.com

components such as vacuum tubes,transistors, diodes and integrated circuits, and associated passive electrical components and interconnection technologies. Commonly, electronic devices contain circuitry consisting primarily or exclusively of active semiconductorssupplemented with passive elements; such a circuit is described as anelectronic circuit. The nonlinear behaviour of active components and their ability to control electron flows makes amplification of weak signals possible, and electronics is widely used in information processing, telecommunication, and signal processing. The ability of electronic devices to act as switches makes digital information processing possible. Interconnection technologies such as circuit boards, electronics packaging technology, and other varied forms of communication infrastructure complete circuit functionality and transform the mixed components into a regular workingsystem. 1.3 COMPANY PROFILE Larsen & Toubro is a major technology, engineering, construction, manufacturing and financial services conglomerate, with global operations. L&T addresses critical needs in key sectors - Hydrocarbon, Infrastructure, Power, Process Industries and Defense - for customers in over 30 countries around the world. L&T is engaged in core, high impact sectors of the economy and our integrated capabilities span the entire spectrum of design to deliver. With over 7 decades of a strong, customer focused approach and a continuous quest for world-class quality, we have unmatched expertise across Technology, Engineering, Construction, Infrastructure Projects and Manufacturing, and maintain a leadership in all our major lines of business. Every aspect of L&T's businesses is characterised by professionalism and high standards of corporate governance. Sustainability is embedded into our long-term strategy for growth. The Company s manufacturing footprint extends across eight countries in addition to India. L&T has several international offices and a supply chain that extends around the globe. Customer Delight - translating customer expectations into customer satisfaction is a result of unending efforts to deliver world-class products and services. Quality processes are derived from a gamut of improvement tools and techniques like Value Stream Mapping, Value Engineering, Kaizen etc., which lead to formulation of operational excellence that at times exceed customer requirements. We have a well-established customer feedback mechanism which enables us to have regular interactions with our clients. Individual interactions, customer meets and satisfaction surveys are channels to obtain stakeholder response. Prompt analysis is undertaken; corrective measures are implemented and institutionalized for any complaint / feedback received. 1.5 SPECIAL CONCEPTS AND REVIEW OF LITERATURE 1.5.1 SPECIAL CONCEPTS BUDGET: A Financial or quantitative statement prepared and approved prior to a definite period of time, of the policy to be pursued during that period for the purpose of attaining a given objective is known as budget. A budget is thus a standard with which to measure the actual achievement of an organization. BUDGETORY CONTROL: It is a system of management and accounting control by means of which operations, sales and output are forecast for a reasonable period ahead and the actual results are compared with the budget. www.icmrr.org 28 icmrrjournal@gmail.com

SALES BUDGET: Usually in a scheme of budgetary control, the starting point is the preparation of sales budget. This should record both quantity and value since a forecast of future sales in absolute terms has not value. It has to be related to price. Three methods are usually used in determining the probable sales or future sales: (i) Analysis of past sales, (ii) Estimate by field staff and (iii) Analysis of the potential market by market research etc PRODUCTION BUDGET: After careful calculation of sales and matching the price with the sales volume, efforts are made to fix up the targets of production. The quantity to be produced will depend on three factors: (i) Capacity of the factory. (ii) Possibilities of making up supplies by buying certain parts or obtaining semi-finished components. (iii) Opening and closing stock of materials and finished goods. CAPITAL EXPENDITURE BUDGET: This sets out capital expenditure on fixed assets which may be incurred during the period. It is based on the following information: 1. Reports of the production manager requesting new production machinery. 2. Reports of the purchases and the sales manager requesting new transport vans, cars and other vehicles etc. 3. Reports of the office manager requesting new office machines and equipments. 4. Building requirements. VARIANCE: A Variance is the divergence between any planned result measure in money e.g.if the planned cost is 60 and the actual cost 70,then the variance is 10.The overall variance between the planned cost and the unplanned cost is due to a number of factors. 1.5.2 REVIEW OF LITERATURE Jawaharlal suggested that there are many factors which are duly considered while preparing long term budgets such as market trends, economic factors, growth of population, consumption pattern, industrial productions, national income, government economic and industrial policy. Long rage budget covers specific areas such as future sales, future production, long term capital expenditures, extensive research and development programs financial requirements, profit forecast. They evaluate the future implications associated with present decisions and help management in making present decisions and sellers the most profitable alternative. Jain S.P and Narang H.L points out that The size of the organization increases the need for budgeting is corresponding more because a budget is correspondingly more because a budget is an effective tool of planning and control. Budgetary control is applied to a system of management and accounting control by which all operations and output are forecasted as for as possible and actual results when known are compared with budget estimates. He also points out that a proper system of accounting is essential for developing a satisfactory budget. The formation of the budget depends upon information largely collected form the cost www.icmrr.org 29 icmrrjournal@gmail.com

accounting system. Hence, a significant characteristic of the budgetary control is comparing actual performance with prior estimates laid down in the budget to make sure that actual performance is steering in the right direction. As per the views of Charles T. Horgnren and its associates, budgeting is the common accounting tool company s use for planning and controlling what they must do to satisfy their customers and succeed in the market place. They also added that budgeting is most useful when it is an integral part of a company s strategy analysis. It shows how resources will be deployed to implement strategy. Gany L. Sundaram and Straton in their study on the budget has revealed that budget tell employees what is expected of them. A good budget process communicates both from the top down and from the bottom up. All the planned activities of all submits of an organization sales, production, distribution and finance are clearly summarized in the master budget. Such budget even quantities targets for sales, cost driver activities, purchases, production, net income, and cash position. Hence, the budgetary process compels manager to think and to prepare for changing conditions. And also the success of a budget depends heavily on employee reaction to it. M.M.Arora has pointed that, many business fail because of lack of efficient planning which could have revealed that business should not be started or proper preparation should have be done in advance. If the budget system in the business is to be successful it must be fully supported by every member of management and the impetus and direction must come from the very top, management. Hence, in order to derive maximum benefits from the budget system, well defined responsibility centers should be built up with in the organization. 2.1. Scope of study This Study has been undertaken on behalf of the company in Order to identify the possible benefits and disadvantages of implementation of various tools with special references to the finance function. It aims also at identifying the benefits for forecasting the Sales and Production budget for the Current Year. The main scope of this Study is to provide Budgeted information to management for decisionmaking. Objectives of the Study: 1. To familiarize with the method of preparing budget and its control in general. 2. Specifically, to identify those variance which influence the budget 3. when comparison of standard budget is made with actual. 4. Finally, find out the effectiveness of the budget and its control by doing an proper analysis and giving suitable suggestions for improvement. Problem of study: Larsen And Toubro Limited has incurred a lot of problems with regard to the cost of its products and distributing to different parts of Tamil Nadu. So the researcher has opted, one of the cost control measures viz, budgetary control, in order to study in depth the underlying factors in the cost incurred and suggesting ways to highlight improving its cost function. Limitations of study: (1) The study is limited to the extent of data provided by the unit. (2) With in the short duration, data could be analyzed only in certain perspectives. www.icmrr.org 30 icmrrjournal@gmail.com

(3) The estimate will suitable only for the current period. (4) The estimates are based only on the current situation. 1.10 Research Methodology and Design 1.10.1 SOURCES AND METHOD OF DATA COLLECTION: The source for collection of data are through primary and secondary helped in knowing more about the organization, the function and working of finance department, and about budget preparation from direct and personal talks with financial experts in the department. The secondary data obtained from company brouchers, annual reports, company files and reports. 1.10.2 DATA PROCESSING, ANALYSIS AND INTERPRETATION: The collected data were checked thoroughly and edited to make it complete for further processing. For proper assignment of data, a mast table has been prepared contains all information..the analysis and interpretation were made on the basis of objectives of study. 1.10.3 PERIOD OF COVERAGE: The study covers the period of 5 years from 2013-2018 The study covers both revenue budget and expenditure budget. 1.10.4 STATISTICAL TOOLS USED FOR ANALYSIS: Different statistical tools like tabulations and bar charts. 1.10.5 BUDGET PREPARATION: 3 stages in the budget Preparation: I st Stage Preparation of revised Estimate for the current year. II nd Stage: Preparation of budget estimate for the next year. They are prepared in the month of September. It is approved by the Larsen And Toubro Limited and approved budget is intimated to the units in the month of December. The preparation of Budget is based on the 5 year plan of government. IIIrd Stage: Larsen And Toubro Limited prepares the following types of Budget: Sales Budget. Raw Material Budget. Purchase Budget. Expenditure Budget Overhead Budget. Sales Budget: Usually in a scheme of budgetary control, the starting point is the preparation of sales budget. This should record both quantity and value since a forecast of future sales in absolute terms has not value. It has to be related to price. Three methods are usually used in determining the probable sales or future sales: (iv) Analysis of past sales, (v) Estimate by field staff and (vi) Analysis of the potential market by market research etc www.icmrr.org 31 icmrrjournal@gmail.com

Raw material Budget: Preparation of Material budget is useful and helpful in achieving continuous, uninterrupted production as the non-availability of materials at the right time can affect the production. Material of budget consists of two parts, one is the consumption budget and another is materials purchase budget. Material budget is prepared on the basis of material consumption budget. Purchase Budget: Purchase budget is prepared on the basis of material consumption budget. It also takes into account the opening stock of material and desirable closing stocks. Overhead Budget: Overhead budget is of two types: (a).production Overhead budget: It is a budget of indirect costs in the form of indirect wages, indirect material and indirect expenses to be incurred in the factory. It is prepared with the help of production, labour budget. It is prepared on the basis of past year s figures and future changes expected. (b).administration Overhead budget: This budget is prepared to estimate the expenditure to be incurred for planning, organizing, and direction and control functions of the management. The budget is based on the past year s expenditure incurred with expected future changes. Budget and Budgetary Control can be calculated using the formula: ARR=Increase in expected average annual operating income Net initial income 2.1 Data Analysis and Interpretation 2.1.1 Income Budget analysis & Interpretation: Sales Budged Analysis 1. Table showing the variance of sale of Products Table: 4.1 (Amount in lakhs) Year B.E Actual Variance % 2012-13 32589.42 31073.94 1515.48 4.7% 2013-14 40034.67 40065.35 30.68-0.08% 2014-15 33081.63 33109.81 28.18-0.09% 2015-16 36810.86 35998.69 812.17 2.2% 2016-17 4213.71 40807.14 133.57 3.21% 2017-18 46002.18 44464.70 1537.48 3.3% From the above table it can be inferred that there is a little variation between the budgeted and actual value. Here in most of the years actual stands less that the budgeted value showing unfavorable condition. The variance of the past 6 years are 4.7%,-0.08%,-0.09%, 2.2%, 3.2%, 3.3% shows that the difference in actual and budgeted value is continuously increasing leading the federation to unfavorable condition 2. Table showing the variance of sale of products production in union www.icmrr.org 32 icmrrjournal@gmail.com

Table: 4.2 (Amount in lakhs) B.E Actual Variance % Year 2012-13 3112.09 3139.04-26.95-0.9% 2013-14 4057.39 3786.13 271.26 6.7% 2014-15 3680.35 3971.61-291.26-7.9% 2015-16 4055.46 4269.50-214.05-5.3% 2016-17 4323.14 3902.06 421.08 9.7% 2017-18 4589.23 4398.64 190.59 4.2% From the above table it can be inferred that every year the budgeted value is varying from the actual showing a favorable condition and unfavorable condition. When the budget of the years 2016-17 & 2017-18 are compared the variance has been considerably reduced showing an comparatively favorable condition. 3. Table showing the variance of sale of products Table: 4.3 (Amount in lakhs) Year B.E Actual Variance % 2012-13 611.34 7.6.92-95.58-15.6% 2013-14 888.65 864.71 23.94 2.7% 2014-15 905.68 895.46 10.22 1.1% 2015-16 1060.99 1.35.86 25.13 2.4% 2016-17 1257.75 1224.09 33.16 2.6% 2017-18 1520.27 1452.79 67.48 4.4% From the table it can be inferred that there is a little variation between the actual & budgeted value. Here in most of the years the actual is less that the budgeted value showing an unfavorable condition. The variance of the past 6 years are (-15.6%, 2.7%, 1.1%, 2.4%2.6%, 4.4%) shows that the sale of products in the federation is negatively increasing showing unfavorable condition. 4. Table showing the variance of sale of frozen semen straw Table: 4.4 (Amount in lakhs) Year B.E Actual Variance % 2012-13 113.04 106.86 6.18 5.5% 2013-14 130.40 138.29-7.89-6.1% 2014-15 151.75 128.82 22.93 15.1% 2015-16 144.50 136.27 8.23 5.7% 2016-17 167.00 159.73 7.27 4.4% 2017-18 202.10 186.08 16.02 7.9% From the above table it can be inferred that there is a variation between the actual & budgeted value. In the above table we can find that in most of the years actual value is less that the budgeted value www.icmrr.org 33 icmrrjournal@gmail.com

showing an unfavorable condition. The past 5 years variance (5.5%,-6.1%, 15.1%, 5.7%, 4.4%, and 7.9%) shows that the sale has been improving due to the efforts of the federation. 5. Table showing the variance of sale of liquid nitrogen Table:4.5 (Amount in lakhs) Year B.E Actual Variance % 2012-13 6.00 2.19 3.81 63.5% 2013-14 5.52 3.92 1.6 28.9% 2014-15 3.37 3.53-0.16-4.7% 2015-16 5.61 4.78 0.83 14.8% 2016-17 4.67 4.61 0.06 1.3% 2017-18 5.19 4.95 0.24 4.6% From the above table it is inferred that there in a variation between the budgeted and actual value. As the actual is less than the budgeted value it shows unfavorable condition. The variance of the past 6 years (63.5%, 28.9%,-4.7%, 14.8%, 1.3%, 4.6%) show that the variance is considerably decreasing thus taking the federation to favorable condition. 6. Table showing the variance of sale of other receipts: Table: 4.6 (Amount in lakhs) Year B.E Actual Variance % 2012-13 343.46 401.64-58.18-16.9% 2013-14 434.11 494.31-90.2-22.3% 2014-15 607.36 595.62 11.74 1.9% 2015-16 607.36 595.62 11.74 1.9% 2016-17 572.60 401.34 171.26 29.9% 2017-18 412.50 349.52 62.98 15.3% From the above table it is inferred that there in a variation between the budgeted actual value. The 6 years variance (-16.9%,-22.3%,-99.2%, 1.9%, 79.9%, 15.3%) of other receipts shows both favorable & Unfavorable conditions. But the analysis of overall performance shows that the variance is increasing taking the federation to unfavorable condition. 7. Table showing the variance in income: Table: 4.7 (Amount inlakhs) 2012-13 3677.35 35430.59 1344.76 3.7% 2013-14 45520.74 45352.71 168.03 0.4% 2014-15 38126.28 38713.75-587.47-1.5% 2015-16 42684.77 42040.73 644.04 1.5% 2016-17 48468.37 46498.97 1969.4 4.1% 2017-18 52731.47 50856.68 1874.99 39.1% www.icmrr.org 34 icmrrjournal@gmail.com

From the table we can infer that there is a slight difference between the actual & budgeted value. The variance (3.7%, 0.4%,-1.5%, 1.5%, 4.1%, 39.1%) show that in most of the years the actual value is less than the budgeted value showing unfavorable condition. 2.1.2 Expenditure Budget analysis & Interpretation:Raw Material Budget analysis: 8. Table showing the variance of expenditure in raw material-products: Table: 4.8 (Amount in lakhs) Year B.E Actual Variance % 2012-13 24592.95 22181.07 2411.88 9.8% 2013-14 26081.72 25943.93 137.79 0.5% 2014-15 21894.62 21788.81 105.81 0.48% 2015-16 25163.58 25036.81 126.77 0.55 2016-17 30662.25 29477.30 1184.95 3.86% 2017-18 32839.26 31962.50 876.76 2.7% From the above table if in inferred that there is a variation between budgeted & actual value. Here the table clearly shows that the actual value is less than the budgeted value & thus showing a favorable condition. The variance (9.8%, 0.5%, 0.48%, 0.5%, 3.86%, and 2.7%) shows that expenditure is continuously reducing thus taking the federation to a favorable condition. Table: 4.9 (Amount in lakhs) Year B.E Actual Variance % 2012-13 2334.87 1918.09 416.78 17.9% 2013-14 3544.00 3189.12 354.88 10.% 2014-15 2158.61 2110.50 48.11 2.2% 2015-16 1816.53 1775.35 41.18 2.3% 2016-17 2795.77 3064.60-268.83-9.6% 2017-18 3832.05 3982.05-150 -3.9% From the table it is inferred that there is a variation between the budgeted & actual amount. The actual values of 2009-2010 to 2012-2013 are normally less that the budgeted value showing favorable condition. But the variance of 4 years (17.9%, 10%, 2.2%, and 2.3%) clearly shows that the expenditure is increasing as a result of the internal & external conditions. As a continuation of this process in 2013-2014 & 2014-2015 the actual amount has become greater that budgeted amount showing unfavorable condition. But the variance of last 2 years (-9.8%&-3.9%) shows that in three years. www.icmrr.org 35 icmrrjournal@gmail.com

10. Table showing the variance of expenditure of raw material priducts for products Table: 4.10 (Amount in lakhs) 2012-13 160.00 107.94 52.06 32.5% 2013-14 145.32 137.10 8.22 5.7% 2014-15 135.16 146.23-11.07-8.2% 2015-16 177.37 182.32-4.95-2.8% 2016-17 316.03 322.56-6.53-2.1% 2017-18 381.80 396.18-15.18-3.9% From the above table it is inferred that there is a variation between the actual value estimated budget values. The variance of the 6 years (32.8%, 5.7%,-8.2%,-2.8%,-2.1%,-3.9%) Shows to the favorable & unfavorable conditions. Due to internal & external factors the expenditure has increased showing unfavorable condition, but the variance clearly shows that the expenditure in the priducts for products shows some positive sign as the variance is decreasing. 11. Table showing the variance of expenditure of variance of raw material Ingredients for products. Table: 4.11 (Amount in lakhs) 2012-13 78.63 45.36 33.27 42.3% 2013-14 42.52 35.79 6.73 15.8% 2014-15 89.86 61.95 27.91 31.1% 2015-16 72.59 69.55 3.04 4.2% 2016-17 93.96 95.15-1.19-1.3% 2017-18 107.36 108.97-1.61-1.5% From the above table it in inferred that there is a variation between the actual value & estimated budget value. The variance (42.3%, 15.8%, 31.1%, 4.2%.-1.3%,-1.5%) shows both favorable & unfavorable condition. But when 6 years variance is compared it shows that the expenditure is increasing & thus showing unfavorable condition. 2.1.3 Purchase Budget analysis: 12. Table showing variance of expenditure for purchase of raw material-products: Table: 4.12 (Amount in lakhs) 2012-13 2477.77 2590.09-112.32-4.5% 2013-14 3385.66 3847.53-461.87-13.6% 2014-15 3025.82 3374.25-348.43-11.5% 2015-16 3728.27 3876.62-148.35-3.9% 2016-17 3976.06 3604.35 371.71 9.3% 2017-18 4184.39 4097.91 86.48 2.1% www.icmrr.org 36 icmrrjournal@gmail.com

From the above table it is inferred that there is a variation between the actual & estimated amount. The variance between (-4.5%, 13.6%,-11.5%,-3.9%, 2.1%) Shows both favorable & unfavorable condition. But when 6 years variance are compared it clearly shows that even though expenditure in increasing showing unfavorable condition the federation is taking steps to reduce the expenditure. 13. Table showing the variance of staff compensation Table: 4.13 (Amount in lakhs) 2012-13 3934.06 3234.91 699.15 17.8% 2013-14 3768.91 3657.19 111.72 2.9% 2014-15 3565.23 3428.49 136.74 3.8% 2015-16 3762.06 3648.40 113.66 3.0% 2016-17 4072.45 4076.11-3.66-0.09% 2017-18 4679.12 4683.21-4.09-0.08% From the above table we can infer that there in a variation between estimated & actual amount the variance (17.8%, 2.9%, 3.8%, 3.0%,-0.09%,-0.08%) It shows both favorable & unfavorable condition. But if 6 yrs budgets are compared it shows that the condition is unfavorable due to increase in expenditure staff compensation 2.1.4 Over head budget analysis: 14. Table showing the variance of production O/H: Table: 4.14 (Amount in lakhs) 2012-13 3541.20 2995.22 545.98 15.4% 2013-14 3555.65 3498.25 57.4 1.6% 2014-15 3277.04 3242.07 34.97 1.1% 2015-16 3905.08 3895.78 9.3 0.2% 2016-17 4924.03 4793.99 130.04 2.6% 2017-18 5483.90 5168.10 315.8 5.8% From the above table it is inferred that there is a difference between the actual & the estimated budget. The variance (15.4%, 1.6%, 1.17%, 0.2%, 2.5%, and 5.8%) shows that the actual value is less than estimated value showing favorable condition. But when 6 years budgets are compared it shows that the expenditure is increasing showing as slight unfavorable condition. www.icmrr.org 37 icmrrjournal@gmail.com

15. Table showing the variance of administration O/H: Table: 4.15 (Amount in lakhs) 2012-13 251.86 99.41 152.45 60.5% 2013-14 498.75 107.51 391.24 78.4% 2014-15 125.09 113.38 11.71 9.4% 2015-16 170.63 165.89 4.74 2.8% 2016-17 165.31 162.93 2.38 1.4% 2017-18 211.54 214.45-2.91-1.4% From the above table is inferred that there is a difference between the actual & the estimated budget value. The variances (60.5%, 78.4%, 2.8%, 1.4%,-1.4%) shows that the most of the actual value is less than the estimated budget value showing favorable condition. But when 6 years budget are compared it shows that the expenditure is continuously increasing leading itself to unfavorable condition in the year 2014-15. 16. Table showing the variance of development O/H: Table: 4.16 (Amount in lakhs) 2012-13 88.07 81.61 3.46 4.1% 2013-14 88.74 81.99 6.75 7.6% 2014-15 111.94 82.40 29.54 26.4% 2015-16 100.53 92.84 7.69 7.6% 2016-17 138.60 115.92 22.68 16.4% 2017-18 183.88 158.38 25.5 13.9% Source: SecondaryData. From the above table it is inferred that there in a slight difference between the actual & estimated value. The variance (4.1%, 7.6%, 26.4%, 7.6%, 16.4%, and 13.9%) shows that the actual is less than the budgeted value showing favorable condition. When the 6 yrs budget is compared we are able to find that the expenditure is slightly increasing towards the last years (2014-2015). 17. Table showing the variance of interest: Table: 4.17 (Amount in lakhs) 2012-13 388.23 398.19-9.96-2.6% 2013-14 406.75 409.91-3.16-0.8% 2014-15 173.77 144.82 28.95 16.7% 2015-16 112.05 98.59 13.46 12.0% 2016-17 90.59 137.91-47.32-52.2% 2017-18 121.87 144.73-22.86-18.8% www.icmrr.org 38 icmrrjournal@gmail.com

From the above table it is inferred that there is a different between the actual & the estimated budget value the variances (-2.6%,-0.8%, 16.7%, 12.0%,-52.2%, 18.8%) shows that actual is higher than the estimated amount showing unfavorable condition. 18. Table showing the variance of Depreciation Table: 4.18 (Amount in lakhs) 2012-13 400 400 0 0% 2013-14 400 400 0 0% 2014-15 250 253.23-3.23-1.3% 2015-16 240.57 240.57 0 0% 2016-17 228.55 228.55 0 0% 2017-18 2173.13 217313 0 0% From the table we can infer that there no considerable change between the budgeted & actual amount. As result the variance in mostly zero. When the 6 years budget is compared we can find that there exists slight unfavorable situation. 19. Table showing the variance of Expenditure: Table: 4.19 (Amount in lakhs) 2012-13 38798.06 34616.94 4181.12 10.8% 2013-14 43109.88 42582.05 527.83 1.2% 2014-15 36496.60 36594.24-97.64-0.3% 2015-16 40829.48 40708.28 121.2 0.3% 2016-17 49427.29 47462.51 1964.78 3.9% 2017-18 54271.47 52510.6 1760.87 3.3% From the table it is inferred that there is a slight variation between the actual & estimated value. The variance (10.8%, 1.2%,-0.3%, 0.3%, 3.9%, 3.3%) shows that the actual value in loss the budgeted estimate showing a favorable condition. But 6 years budget is compared we can find out that the expenditure is slightly increasing which may bad to an unfavorable condition. Findings It has been found that in most of the years actual value in sale of products stands less that the budgeted value showing unfavorable condition. The variance of the past 6 years 4.7%, - 0.08%,-0.09%, 2.2%, 3.2%, 3.3% shows that the difference in actual and budgeted value is continuously increasing leading the federation to unfavorable condition. When the budget of the years 2012-2013 & 2013-2014 we compared the variance (9.7%, 4.2%) in sale of products products in union has been considerably reduced showing an comparatively favorable condition. www.icmrr.org 39 icmrrjournal@gmail.com

In most of the years the actual value for sale of products is less that the budgeted value showing an unfavorable condition. The variance of the past 6 years are (-15.6%, 2.7%, 1.1%, 2.4%2.6%, 4.4%) shows that the sale of products products in the federation is negatively increasing showing unfavorable condition. It is found that in most of the years actual value for sale of semen straws is less that the budgeted value showing an unfavorable condition. The past 5 years variance (5.5%,-6.1%, 15.1%, 5.7%, 4.4%, and 7.9%) shows that the sale has been improving due to the efforts of the federation. In the sale of liquid nitrogen actual value is less than the budgeted value showing unfavorable condition. The variance of the past 6 years (63.5%, 28.9%,-4.7%, 14.8%, 1.3%, 4.6%) show that the variance is considerably decreasing thus taking the federation to favorable condition. The 6 years variance (-16.9%,-22.3%,-99.2%, 1.9%, 79.9%, 15.3%) of other receipts shows both favorable & Unfavorable conditions. But the analysis of overall performance shows that the variance is increasing taking the federation to unfavorable condition. The variance in income (3.7%,0.4%,-1.5%,1.5%,4.1%,39.1%) show that in most of the years the actual value is less than the budgeted value showing unfavorable condition. It has been found that the in the expenditure for raw material for products the actual value is less than the budgeted value & thus showing a favorable condition. The variance (9.8%, 0.5%, 0.48%, 0.5%, 3.86%, and 2.7%) shows that expenditure is continuously reducing thus taking the federation to a favorable condition. The actual values of expenditure of raw material-ingredients from 2009-10 to 2014-2015 are normally less that the budgeted value showing favorable condition. But the variance of 4 years (17.9%, 10%, 2.2%, and 2.3%) clearly shows that the expenditure is increasing as a result of the internal & external conditions. As a continuation of this process in 2010-11 & 2011-2012. the actual amount has become greater that budgeted amount showing unfavorable condition. But the variance of last 2 years (-9.8%&-3.9%) shows that in three years The variance of the expenditure of raw material-products for products for 6 years (32.8%, 5.7%,-8.2%,-2.8%,-2.1%,-3.9%) of Shows to the favorable & unfavorable conditions. Due to internal & external factors the expenditure has increased showing unfavorable condition, but the variance clearly shows that the expenditure in the products for products shows some positive sign as the variance is decreasing. The variance (42.3%, 15.8%, 31.1%, 4.2%.-1.3%,-1.5%) in the expenditure of raw materialingredients for products shows both favorable & unfavorable condition. But when 6 years variance is compared it shows that the expenditure is increasing & thus showing unfavorable condition. The variance in the expenditure for purchase of raw materials (-4.5%, 13.6%,-11.5%,-3.9%, 2.1%) Shows both favorable & unfavorable condition. But when 6 years variance are compared it clearly shows that even though expenditure is increasing showing unfavorable condition the federation is taking steps to reduce the expenditure. The variance in the expenditure for providing staff compensation (17.8%, 2.9%, 3.8%, 3.0%,- 0.09%,-0.08%) Shows both favorable & unfavorable condition. But if 6 yrs budgets are compared it shows that the condition is unfavorable due to increase in expenditure. The variance in the expenditure due to production overhead (15.4%, 1.6%, 1.17%, 0.2%, 2.5%, and 5.8%) shows that the actual value is less than estimated value showing favorable condition. But when 6 years budgets are compared it shows that the expenditure is increasing taking the federation to unfavorable condition. www.icmrr.org 40 icmrrjournal@gmail.com

The variances in the expenditure due to administration overhead (60.5%, 78.4%, 2.8%, 1.4%,- 1.4%) shows that the most of the actual value is less than the estimated budget value showing favorable condition. But when 6 years budget are compared it shows that the expenditure is continuously increasing leading itself to unfavorable condition in the year 2014-2015. The variance in the expenditure due to development overhead (4.1%, 7.6%, 26.4%, 7.6%, 16.4%, 13.9%) shows that the actual is less than estimated budget showing favorable condition. When the 6 yrs budget is compared we are able to find that the expenditure is slightly increasing towards the last years (2014-2015). The difference in the actual & the estimated budget value of the interest of 6 years (-2.6%,- 0.8%, 16.7%, 12.0%,-52.2%, -18.8%) shows that actual is higher than the estimated amount showing favorable condition. The variance in the expenditure (10.8%, 1.2%,-0.3%, 0.3%, 3.9%, 3.3%) shows that the actual value in less than the budgeted estimate showing a favorable condition. But 6 years budget is compared we can find out that the expenditure is slightly increasing which may bad to an unfavorable condition. 2.3 Suggestion There is a decrease in the sale of different types of products. The government must increase the awareness among the people about the different types of products available through advertisements. Good quality of products with good taste has to be produced so as to increase the sale of the products. The federation has to take steps to produce products that can be consumed even by diabetes affected by people so as to increase the sale of products. The frozen semen straw should be made available at different centers so as to supply the same as and when needed. The federation should maintain constant contact and good relation with those who buy semen straws from the federation. The sale of liquid nitrogen can be increased by forming distribution centers through out Tamil Nadu. The expenditure in the purchase of raw materials for products can be reduced by buying the raw materials in bulk so as to get the advantage of economies of scale. The expenditure can also be reduced by owning goods carrying vehicles so as to reduce the excess expenditure caused due to hiring of those vehicles. The federation can get loans from private financial institutions which provide loans in low interest so as to reduce excess expenditure due to paying of interest. The federation has to take steps to reduce the wastage of products and other raw materials so as reduce the expenditure. 2.4 Conclusion For any organization, a proper planning and deciding of its budget for confronting with its future course of action is very significant indispensable. The study on the efficiency of the tool used for Budget and Budgetary Control at Larsen And Toubro Limited, has given in depth knowledge on the subject and also paved way for knowing how its preparation are made and further, making suitable suggestions for its improvement through the analysis done. To sum up, an efficient and effective budget will obviously be an essential tool for the company for reducing cost and maximizing profit the anticipated budgeted revenue is not able make out from the actual working from this area. BIBLIOGRAPHY: Websites: 1. www.larsen and toubro limited.com 2. www.googlesearch.com 3. www.valueresearch.com www.icmrr.org 41 icmrrjournal@gmail.com

Reference Books: 1. Financial Accounting and Analysis - S.P.JAIN K.L NARANG 2. Management Accounting - T.S.REDDY, Y.HARI PRASAD REDDY www.icmrr.org 42 icmrrjournal@gmail.com