What is Budgetary Control

Budgetary control is a process by which financial control is exercised within an organisation. It involves the following steps:

1. Establishing Budgets: The first step in budgetary control is to establish budgets for every department of the organisation. These budgets are usually prepared for a fixed period of time, typically for a year.

2. Comparing Actual Performance with Budgeted Performance: Once the budgets are established, the actual performance of each department is compared with the budgeted performance. This is done to identify any deviations or variances.

3. Analysing Variances: If there are any variances between the actual and budgeted performance, these variances are analysed to identify the reasons behind them. This helps in understanding whether the variance is due to changes in the business environment or due to inefficiencies in the organisation.

4. Taking Corrective Action: Based on the analysis of variances, corrective actions are taken. If the variance is due to inefficiencies, steps are taken to improve efficiency. If the variance is due to changes in the business environment, the budgets may need to be revised.

5. Reviewing the Process: The budgetary control process is continuously reviewed and updated based on the changing needs of the organisation.

In summary, budgetary control is a proactive approach for managing the financial