BUDGET AND BUDGETARY CONTROL

SUBMITTED By S.SANDEEP (HT. No 2129-09-672-016 ) A Project submitted in partial fulfillment for the award of the degree of MASTER OF BUSINESS ADMINISTRATION

DEPARTMENT OF BUSINESS ADMINISTRATION

INFORMATION AND RESEARCH INSTITUTION OF AURORA,MOOSARAMBAGH
(AFFILIATED TO OSMANIA UNIVERSITY)

(2009-2011)

INFORMATION AND RESEARCH INSTITUTE OF AURORA MOOSARAMBAGH

CERTIFICATE

This is to certify that the project entitled BUDGET AND RUDGETARY

CONTROL TA BEVCON PVT LTD submitted to the Osmania University in

partial fulfillment for the award of degree of Master of Business Administration has been carried out by S.SANDEEP Hall-Ticket Number 2129-09-672-016, who is a bonafide student of Information and Research Institute of Aurora ,Moosarambagh, Hyderabad for the academic year 2009-11.

HEAD OF THE DEPARTMENT

INTERNAL GUIDE PRINCIPAL

DECLARATION

I hereby declare that this Project Report entitled BUDGET AND BUDGETARY CONTROL done at BEVCON WAYORS submitted by me in partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION at

INFORMATION AND RESEARCH INSTITUTE OF AURORA

I further declare that this work is not been copied or lent and it is not submitted to any other university or institution for the award of any degree/diploma/certificate or published any time before.

Name & Address of the student

Signature of the Student

ABSTRACT
Operational management needs to know the causes of off-standard performance in order to improve operations. The knowledge of variances (real result versus budget) will aid control, at least if and when these variances are understood well enough. The only criterion for the calculation of a variance is it usefulness.Ofcurce variances must be calculated immediately After the event and one ahould act upon them adequately. Budget processes in many cases actually exemplify what is harming companies instead of helping them Jensen,2001,describeswhat is happening in practice. Measuring performance, by whether or not achieving set targets for the period or missing them, is ridiculous. Budgets and targets mean nothing without thorough detailed budgetary control; how should it be conducted Variance analysis, the way it is taught at many schools and universities, in accordance with a wide variety of textbooks, is put to the test. This paper presents a few examples, with quotes from various textbooks and examinations. Problem definitions are quoted literally. Workingouts as explained by famous writers/lecturers/consultants are given where necessary and otherwise they are available at the quoted places in literature. The author's opinion is that these working-outs cannot stand the test. Anyway my opinion is not important, the reader decides. I give my elaboration in full detail, in reaction to the corresponding working-out published in well-known textbooks/examination papers, and may the best one prevail. Of course the elaborations of others and myself have a lot in common, but the discrepancies are at stake. Wrong, incomplete, unclear analyses will lead to mismanagement. In literature a socalled Dutch method is advocated versus what is supposed to be the American way to handle variance analysis i.e. solving the problem of budgeting and budgetary control. The author's opinion is that only one calculating method can be the right one. Only the best integral working-out is the essential base to better (operational) management. Ofcourse variance analysis is but a means to an end. A deeper understanding of the state of the company is the ultimate goal of all representations in budgeting and budgetary control. Management's task is to find the reasons for the variances and to take proper action to bring operations into line with the budget. Maybe the variances and trends indicate that the standards need amendment.

ACKNOWLEDGEMENT

I would like to express my gratitude for all the people, who extended unending support at all stages of my project. I wish to express my sincere thanks to Head of the Department Mr.G.N.SATISH and my internal guide Mrs.Srinivas and also the management and staff of my college for providing the guidance and support. I express my sincere gratitude to my guide Mr.M.RAMESH of BEVCON WAYORS PVT LTD,Hyderabad for sparing his valuable time in the valuable information and suggestions all through, for the successful completion of the project. Last but not least, I express my sincere gratitude to all the employees at BEVCON WAYORS PVT LTD,. who has directly or indirectly contributed to the successful completion of the project.

(S.SANDEEP)

LIST OF CONTENTS Chapters 1 Description Introduction Need for the study Scope of the study Objectives of the study Research Methodology 2 3 Review of Literature Company profile 1. Company profile 2.Industry profile 4 5 Data Analysis & Interpretations Summary and conclusion Findings Suggestions Conclusions Limitations 6 Bibliography 01 02 03 04 6-35 36-64 36-40 41-53 54-78 79-82 79 80 81 82 83 Pg.No.

CHAPTER 1

INTRODUCTION

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INTRODUCTION
Budget is essential in every walk of our life national, domestic and business. A budget is prepared to have effective utilization of funds and for the realization of objectives as efficiently, as possible. Budget is a widely practiced technique and most of us use budgets in some way or the other. Budget is one of the emphasized terms used in efficient methods of planning and control. It is employed, no doubt, in large business houses, but even the small businesses are using it, in some informal manner. Budget in common parlance is understood as planning for expenditure. A budget is defined as a comprehensive and Co-ordinate plan expressed in financial terms, for the operations and resources of an enterprise for some specified period in the future. In the views of E. H. Graham of the Chrysler Corporation, Of the management tools used by Chrysler Corporation, including computers, PERT, Operations Research (OR) and system analysis and so on, budgets are un doubly the most important tool. Budget is always expressed in terms of money and quantity. The techniques of budgeting are important applications of Management accounting. Budgets are set in large business houses as well as in families. It is basically a statement of expected income & expense under certain anticipated operating conditions.

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NEED AND IMPORTANCE OF THE STUDY

Budget schedule is so essential and must because during this period for which a budget is prepared and employed. In terms of time, budget can be short and Long-terms Budget. Shortterm Budget is prepared on the basis of day-to-day administrations. They are generally prepared in physical as well as in monitory. Long-term Budget is designed for a long period. This is prepared in the case of major projects schemes to know in advances the probable capital commitments

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SCOPE OF THE STUDY

The scope of the study is very wide as it ranges from the various specific budgets of each department to the Master Budget and Performance Budget of the organization. Master Budget is a Summary of the budget schedules in capsule form made for the purpose of presenting in one report the highlights of the budget forecast. Performance Budget involves evaluation of the performance of the organization in the context of both specific as well as overall objectives of the organization. According to the National Institute of bank Management Performance Budgeting technique is, The process of analyzing, identifying, simplifying and crystallizing specific performance objectives of a job to be achieved over a period in the frame work of the organization objectives, the purpose and objectives of the job. The technique is characteristic by its specific directions towards the business objectives of the organization.

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OBJECTIVES OF THE STUDY

1. To study the various aspects of budget and budgetary control. 2. To study the performance of the organization in terms of profitability. 3. To study revenue receipt and revenue expenditure of the organization 4. To study the actual performance with budget performance. 5. To facilitate centralized control with delegated authority and responsibility.

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RESEARCH METHODOLOGY
Case study method has been adopted to carry out the study. Both primary and secondary data have been used to complete the study.

Primary data: Primary data was collected through interaction with personnel who are
working in finance and Accounts Departments of the organization.

Secondary data: Secondary data was collected from the company annual reports & other
relevant records. Afterwards, the data collected is processed and analyzed by using appropriate analytical tools and techniques so as to examine the efficiency. The present study was carried out for a period of thirty days in a prestigious organization i.e. Bevcon Wayors Pvt. Ltd.

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2.1

Budgetary control and performance evolution system in

corporaration in barain by
- Author: Tamilmani. Article from: The journal of accounting and
Finance. Article date: year: Oct 2006-march 07.

Abstract:
This study examines some aspects of budgetary control and performance valuation systems by utilizing data based on a questionnaire survey of 42 medium and large size companies located in the state of Bahrin. The study finds that the conventional from of budget controllability principle is practiced to a great extent managers end to greate slack to meet future uncertainty the focus is on short-term performance evolution style is followed budget variances are used to evauate managers ability, and for cost control purpose. Bonus is affected by budget performance along with new assignments, but not salary.

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2.2

Corporate budget planning, control and performance evaluation in

Bahrain by Author: P. L. Joshi, Jawahar Al-Mudhaki Article from: MCB UP Ltd Article date:year:2008. volume:23 Abstract: Budget planning:
Implementation and performance evaluation practices by utilizing a questionnaire survey of 54 medium and large sized companies located in Bahrain. Most of the companies prepare long-range plans and operating budgets, and they follow a definite budget procedure and implementation methodology. Uses budget variances to measure a managers ability, for timely recognition of problems, and to improve the next periods budget. While both the listed and non-listed companies have reported many similar budget practices, the main differences were specific purposes served by budgets, degree of budget participation, periodicity of variance reporting, and purposes and authority to evaluate budget variance reports. In certain cases, firm size influences budgeting practices. Contributes toward filling a gap in the literature on the use of budgets as a planning and control tool in developing countries. Most prior studies were mainly confined to advanced countries. The study findings suggest the need for research on attitudes held by the budgeters towards the use of budget variances in the context of advanced management accounting techniques.

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CHAPTER 2

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REVIEW OF LITERATURE

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2.3 Budgetary fairness and governmental program heads' turnover intention -Author: A. Blair Staley, Article from: Emerald Group
Publishing Limited

Article date: 2009 september Purpose Empirical evidence from governmental budgeting and related organizational
decision-making contexts suggests that program heads will be less likely to leave their governmental unit when they feel that governmental budgeting is fair. The purpose of this study is to examine relationships between three forms of fairness in governmental budgeting distributive fairness, procedural fairness, and interactional fairness and program heads' intention to leave the governmental unit.

Design/methodology/approach Questionnaire data were gathered from 87 US federal

government program heads with budget responsibility and analyzed with multiple regression.

Findings Interactional budgetary fairness had a significant and positive unique

relationship with intent to leave after controlling for the other two forms of budgetary fairness and three demographic variables. Neither distributive budgetary fairness nor procedural budgetary fairness had a significant unique relationship with intent to leave.

Practical implications Budgetary decision makers and budget staff in governmental

units can reduce program heads' intention to leave the governmental unit by promoting interactional budgetary fairness through steps such as treating the program heads with kindness and respect during budgeting and providing clear and adequate explanations for budgetary decisions.

Originality/value This study is the first to examine relationships between the three forms
of organizational decision-making fairness and turnover intention in a governmental budgeting context.

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2.4 Budgetary control of Australian police services and the new governance of security
Author: Benoit DuPont Article from: University de Montral,
Canada. Article date: Oct 2009.

Abstract
Through the example of the Australian police services, this article examines the impact of the New Public Management tools on strengthening administrative accountability. Governments, faced with increasing social demand for security, have launched into political auctions on the themes of police activity and social control. Relationships between the authorities and the police administrators have been redefined, mainly through more rigorous budgetary control. After a rapid examination of the administrative context that led to the implementation of programme budgeting -the main government tool in this area -the article examines the tensions that resulted from its introduction. Particular emphasis is placed upon the limitations of such a tool in the field of security, which is undergoing profound reconfiguration as a result of increasingly frequent cooperation between public, private and hybrid actors.

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2.5 Union budget 2008-09 By

P.Chidambaram. article from ;: finance India. Article date : 2008. volume: 22. Page: 1-30. Abstract:
India economy, in the past three years, has shown sustained growth in GDP with an increase from 7.5% to 9.4% and 9.6%, resulting in an unprecedented average growth rate of 8.8%. Agriculture is at a disappointing note with a growth rate at only 2.65. A cause of concern for economy has been raising prices of crude oil, commodities and food grains. These are inflationary and put a pressure on domestic price. Keeping check on inflation remains one of the corner stones for governments policy. Economics has witnessed capital inflows that are far in excess of the current account deficit. The budget has provided a much needed support to agriculture by waiving the loans of farmers and doubling the agriculture credit. The labor class has been provided insurance support along with support to mid-day meal and providing health centers in rural areas. The salaries class has been conforted with raise rise the minimum exemption limit and upward shift of slab rates.

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2.6 Examine the importance of budgetary control. By Author: Mayor, Article date: 2004 September.
Budgetary control in management is a critical component of the success of any business. Mayorss 7s, of project management (staff, skills, style, and stakeholder) all play a role in the ability of a budget officer to maintain budgetary control. This paper shows that a clearly defined budget, both during the early management planning stages and day-to-day working budgets, is important. Further, a series of mile stones and out comes can help the budget officer to maintain budgetary control. The paper explains that the responsibility for overspreading can alternatively lie with customers, the budget management team, or unforeseen outside influences, depending on the reason for the over spending. However, a good budget officer always has some degree of responsibility for overspending and can help control this process by effectively using milestones to help control the budgetary control process

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DEFINITION OF BUDGET
The term Budget appears to have been derived from the French word Baguette which means Little Bag or a container of documents and accounts. A budget can be seen as an Economic plan for a given period of time.

CONCEPT OF BUDGET
Budget is as quantified plan for future activities quantitative blueprint for action. It is referred as a plan relating to period of time expressed in monetary and in quantitative terms. The Charted institute of Management Accountants, (CIMA) defined budget follows: A plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure of the capital to be employed, may be drawn up showing incremental effects a former budgeted or actual figures. According to Gordon shilling law, A business budget is pre-determined detailed plan of action, developed and distributed as a guide to current operations and as a partial basis for subsequent evaluation of performance. as

The Essentials of a Budget are: Financial and quantitative statement of the action plan. It is planning device and also serves as a bases for performance evaluation and control. It is laid down prior to the budget period during which it is followed and based on rights policy.

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BUDGET MANUAL
A budget Manual lays down the details of the organizational set up, the routine procedures and programmers to be followed for developing budgets for various items and the duties and responsibilities of the executives regarding the operation of the budgetary control system. A budget manual is defined as a document schedule or booklet which sets out, inter alia, the responsibilities or the persons engaged in the routine of and the forms and records required for budgetary control. Budgets are to be drawn keeping in view the objectives of the organization given in the budget manual. The following are some of the most important matters covered in a Budget Manual: Introduction and brief explanation of the objectives, benefits and principles of budgetary control. Organization chart giving the titles of different personnels with full explanation of the duties and each to operating systems and preparation of departmental and functional budgets. The entire process of budgeting programmer including the timetable for periodical reporting. Length of budget periods and control periods should be clearly states. Procedures to be followed throughout the system should be explained in clear terms. Outline of main budgets and their accounting relationships.

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 Explanation of Key budgets.

The advantages to be derived from the use of budget manual are: Every one knows in writing that what is his role, what is to be done and how it is to be done in the system of budgetary control. As every thing is in writing. Ambiguity is avoided and reliance on memory is eliminated. As one of the objectives of budgeting is communication, it is important to have budget manual so that everyone in the organization can refer to it for guidance and information about the budgetary process.

ADMINISTRATION OF BUDGETS Budgeting takes up a lot of management time. Top managers want lower level managers to participate in the budget process, because lower-level managers have valuable knowledge about the day-to-day aspects of running the business. They also Creates greater commitment and responsibility towards the budget among lower level managers. The prevalence of budgets indicates that the advantages of budgeting systems outweigh their cost. To gain the benefits of budgeting. Management at all levels of the company should understand and support the budget and all aspects of the management control system. Budgets should not be administered rigidly. Changing conditions usually call for changes in plans. A manager may commit to the budget, but a situation might develop in which some unplanned repairs or an unplanned advertising program would better serve them in interest of the company.

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BUDGETING It is concerned with the implementation of the approved programmed within the long-range plan. It is the act of preparing budgets. Budgeting is a way of managing Business and Industry

CLASSIFICATION OF BUDGETS
The budgets are usually classified to their nature. The following are the types of budgets, which are commonly used. 1. Classification according to Time Long term Budgets Short term Budgets Current Budgets 2. Classification on the basis of Functions Operating Budgets Financial Budgets Master Budgets 3. Classifications on the basis of Flexibility Fixed Budgets Flexible Budgets

1) CLASSIFICATION ACCORDING TO TIME

Long Term Budgets: The budgets are prepared to depict long-term planning of the business. The period of long-term budgets varies from five to ten years. The long-term planning is done by top level

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management. Long time budgets are prepared for some sectors of the concern such as capital expenditure, research and development, long-term finances etc. These budgets are useful for those industries where gestation period is ling i.e. machinery, electricity, engineering etc.

Short-term Budgets: These budgets are generally for one or two years and are in the form of

monetary terms. The consumers goods industries like sugar, cotton, etc., Use short-term budgets. Current Budgets: The period of current budget is generally of months and weeks. These budgets relate to the current activities of the business. According to Institute of Cost and Works Accounts., London Current Budget is a budget which is established for use over a short period of time and is related to current conditions.

2) CLASSIFICATION ON THE BASIS OF FUNCTIONS

Operating Budget: These budgets relate to different activities or operations of a firm. The number of such budget depends upon the size and nature of the business. The commonly used operating budgets are: Sales Budget Production Budget Production cost Budget Purchase Budget Raw Material Budget Labour Budget Plan Utilization Budget Manufacturing Expense or Works Overhead Budget Administration and Selling Expenses Budget etc.

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The Operating Budget for a firm may be constructed in terms of programme or responsibility areas, and hence consists of: Programme Budget Responsibility Budget.

Programme Budget:
It consists of expected revenues and costs of various products or projects that are termed as the major programmes of the firm such as budget can prepared for each product line or project showing revenues, costs and the relative profitability of the various programmes. Programme Budgets are useful in locating areas where efforts may be required to reduce costs and increase revenues. They are also useful in determining imbalances and inadequacies in programme so that corrective action may be taken in future.

Responsibility Budget: When the budget of a firm is constructed in terms of responsibility areas it is

called the responsibility budget. Such shows the plan in terms of persons responsible for achieving them. It is used by the management as a control device to evaluate the performance of executives who are in-charge of various cost centers. Their performance is compared to the targets (Budgets), set for them and proper action is taken for adverse result, if any. The kinds of responsibility areas depend upon the size and nature of business activities and the organizational structure. However, responsibility area may be classified under three broad categories: Cost / Expense Centre Profit Centre Investment Centre

Financial Budget:

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Financial Budgets are concerned with case receipt and disbursements, working capital expenditure, financial position and results of business operations. The commonly used financial budgets are: Cash Budget Working Capital Budget Capital Expenditure Budget Income statement Budget Statement or Retained Earnings budget Budgeted Balance Sheet or position statement Budget

Master Budget:
Various functional budgets are integrated into Master Budget. The Budget is

prepared by the ultimate integration of separate functional Budget. According to Institute of Cost and Works Accounts, London, The Master Budget is the summary Budget incorporating its functional Budget. The Budget Officer prepares Master Budget and it remains with the top-level management. This budget is used to co-ordinate the activities of various functional department and also to help as a control device.

3) CLASSIFICATION ON THE BASIS OF FLEXIBILITY

Fixed Budget: The fixed budgets are prepared for a given level of activity the budget is prepared before beginning of the financial year. If the financial year starts in January then budget will be prepare a month or two months earlier(November or December). The changes in expenditure arising out of the anticipate changes will not be adjusted in the Budget. These is a difference of about twelve months in the budgeted an actual figures. According Institute of Cost and works Accounts, London, Fixed Budget is a budget which is designed to remain unchanged irrespective of the level of the activity actually attained. Fixed budget are suitable under static conditions. If sales expenses and costs can be forecasted with greater accuracy then this budget can be advantageously used.

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 Flexible Budget:
A flexible budget consists of series of Budgets for different level of activity. It therefore, varies with the level of activity attained. A flexible Budget is prepared after taking into consideration unforeseen changes in the conditions of the business. A flexible Budget is defined as Budget which by recognizing the difference between fixed, semi-fixed and variable cost is designed to change in relation to the level of activity. The flexible budgets will be useful where level of activity changes from time to time. When the forecasting of demand is uncertain and the undertaking operate under shortage of materials, labour etc. this Budget will be more suited.

OPERATING BUDGETS 1) Sales Budget:

A Sales Budget is an estimate of expected sales during a Budget period. A sales Budget is known as a nerve center or backbone of the enterprise. The degree of accuracy with which sales are estimated will determine the practicability of operating Budgets. A sales Budget is the starting points on which other budgets are also bases. A sales Budget lay down potential sales figures in value as in quantity. It lays down a comprehensive plan and programme for sales department. The sales manger is made responsible for preparing Sale Budget. He uses all possible factors to be taken into account while preparing a sales Budget.

2) Production Budget:
Production Budget is built up in terms of quantities and money. The quantities are entered at the beginnings and when the remainder of the Budget has been built up and the cost

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of production calculated the costs are entered to compile a production cost Budget. In preparing the production Budget the following factors should be considered.

Principal Budget factor, e.g. if the sales be the key factor then sales Budget, otherwise other Budget. Production planning and determination of optimum capacity. The opening and closing stocks. Management policy regarding make or buy of components.

3) Production Cost Budget:

A purchase Budget gives the details of the purchases which must be made to meet the needs of the business. It includes all items of purchase, such as raw materials, indirect materials and other equipment. However, purchase Budget for raw materials is the most important and the following are required to be considering in preparing this Budget.

4) Purchase Budget:
A Purchase budget gives the details of the purchases which must be made to meet the needs of the business. It includes all items of purchase, such as raw materials, indirect materials and other equipments. However, purchase Budget for raw materials is the most important and the following factors are required to be considering in preparing this Budget. Opening and closing stocks Unfulfilled orders at the beginning of the budget period. Storage space, economic buying quantity and financial resources.

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The prices to be paid.

Material Budget:
A Materials Budget shows the estimated quantities as well costs of raw materials and components required for producing goods as per production Budget. At the stage of preparation of materials Budget is used to obtain the cost of each material consumed. It serves the following purposes. It assists purchasing department in planning the purchases. It helps in the preparation of purchase Budget It provides data for raw materials control.

6)

Labour Budget:
This Budget gives and estimates the requirements of directs labour essential to

meet the production target. This Budget may be classified into Labour requirement budget and Labour Requirement Budget. The purpose of Labour Budget is to assist in the provision of the correct number and type of Employee for the projected output. Once the preliminary classification of labour into its principal grades has been carried out, the labour requirements for each product are then set with the help of time and motion studies. From the total meanhour required for production labour requirements are ascertained and from the estimated rate per hour, labour cost per hour, labour cost per unit is determined.

7) Plant Utilization Budget:

This budget indicates that the plan and machinery requirement to meet the budgeted production during the period. Such a budget will detail the machine load in every department and indicate the extent of under or over loading. Thus management may get useful information regarding the effective utilization of plants and machinery in an organization.

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8) Manufacturing Overheads Budget:

This Budget gives an estimate of the works overhead expenses to be incurred in a budget period to achieve the production target. The budget includes the cost of indirect materials, indirect labour and indirect works expenses. The budget may be classified into fixed cost, variable cost and semi-variable cost. It can be broken into departmental overhead can be estimated on the basis of past information after taking into consideration the expected changes which may occur during the Budget period. Variable expenses are estimated on the basis of the budgeted output because these expenses are bound to change with the changes in output.

9) Administration Cost Budget:

All the administration costs relating to each Budget center should be separately and then incorporated in the administration cost Budget. A very important aspect of predetermining administration costs is to make sure that all administrative functions are carried out as effectively as possible. Thus, this budget represents forecast of the cost of selling and Distribution for Budget represents forecast of the cost of selling and distribution of budget period and is clearly related to the sales Budget. All expenses relating to selling and distribution of the various products as indicated in the sales budget are included in it. These expenses are based on the volume of sales distribution overhead. Long-term expenses advertisement are divided into fixed and variable categories with reference to volume of sale, separate Budgets are of selling and distribution costs as cost of transport department are included in the departmental production cost Budget form control point view rather than including in selling and distribution costs Budget.

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FINANCIAL BUDGET
1) Cash Budget:
This Budget gives and estimate of the anticipated receipts and payment of each during the Budget period. So, this Budget is divided into two parts, one showing the estimated cash receipt on account of cash sales, credit collections and miscellaneous receipt and the other showing the estimate disbursement on account of cash purchases, amount payable to creditors, wages payable to workers, indirect expenses payable, Budgeted, wages payable to workers, indirect expenses payable, budgeted capital expenditure etc. In short, every factor which affects the receipts and payments of cash are taken into accounts in the preparation of this Budget.

2) Capital Expenditure Budget:

The Capital Expenditure Budget gives an estimate of the amount of capital that may be needed for acquiring the fixed assets required for fulfilling production requirements as specified in the production budget. The Budget is prepared after taking into consideration the available productive capacities, probable reallocation of the existing assets and possible improvement in production techniques. Separates Budget may be prepared for different items of assets such as plant and equipment Budget, building budget, etc. The capital expenditure Budget is an important Budget providing for acquisition of assets, necessitated by the following factors: Replacement of existing assets. Purchase of additional assets because of starting up of new lines of production.

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Purchase of additional assets to meet a proposed increases in production due to increase in demand. Installation of an improved type of machinery so as to reduce cost of production. Thus, Capital Expenditure Budget enables one to know what new fixed assets are needed and what will their costs rate of return.

Purposes:
The objectives of Capital Expenditure Budget are stated below:
To enable the company to establish system of priorities in expenditure To correct capacity imbalances. To provide a tool for controlling capital expenditure. To make proper financial provision to meet planned expenditure. To provide Budget of depreciation and maintenance costs for inclusion in the

department expense Budgets.

PERFORMANCE BUDGETING
Performance Budgeting had its origin in the U.S.A after Second World War. It tries to rectify some of the shortcomings in the traditional Budget. In the traditional Budgets amounts are earmarked for the objects of expenditures such as salaries, travel, office expenses, grant-in-aid etc. In such system of Budgeting the money concept was given more prominence i.e. estimating or projecting rupee value for the various accounting heads or classification of revenue and cost. Such system of budgeting was more popularly used in government department and many business enterprises. But such system Budgeting control of performance in terms of physical units or the related costs cannot be achieved. These days Budgets are established in such a way so that item of expenditure is related to specific responsibility center and is closely linked with performance of that standard. 36

Developing work programs and performance expectations by assigned responsibility is the achievement and objects of the enterprise. Thus, in performance Budgeting classification of expenditure follows a three-tier pattern viz. Function-Programme - Activity.

Advantages of Performance Budgeting:

The following are the main advantages of performance Budgeting. It presents clearly the purpose and objectives for which funds are required. It gives better appreciation of Budgeting by legislature. It improves Budget formulation process. It enhances accountability of the executives.

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A Systematic Approach to develop the performance budget

Objective Structure

Execution & Record Keeping Review & Control

Organizational Structure Develop Physical Targets Develop Function Programs

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ZERO BASE BUDGETING

Under Zero Base Budgeting methods, before preparing a Budget a base determined form which the Budget process begins. Quite often current years Budget is taken as the base or the starting point for preparing the next years Budget. The figures in the base are charged as per the plan for the next year. This approach of preparing Budget is called Incremental Budgeting since the Budget process is concerned mainly with the increases or changes in operations that are likely to occur during the Budget period. For example, sales of the current years Budget for sales will be current years sales plus and allowance for price increases and expected changes in sales volumes. The main drawback of this approach is that it perpetuates the past inefficiencies. Zero Base Budgeting is an alternative to Incremental Budgeting. It was introduced at Texas Instruments in USA in 1969 by peter pyre, who is known as the father of Zero Base Budgeting. It is managerial tool and is steadily gaining acceptance in the business community. Zero Base Budgeting is not based on Incremental approach and precious figures are not taken as the base for preparing next years budget. Instead, the Budget figures are developed with zero as the base, which means that a budget will be prepared as if it is being prepare for a new company for the first time. In Zero Base budgeting, budget requests for appropriation are accepted on the basis of cost / benefit approach, which ensures vale for money. If question long-standing assumptions and systematically examines and perhaps abandons any unproductive projects. This means that those activities which are of no value find no value in the forthcoming Budget even though these might have been an integral part of the past budget prepared under the traditional approach. Zero Base budgeting in way are tries to locate those activities not essential.

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The important steps in Zero Base Budgeting are: Identification of decision units in order to justify expenditure in their proposed Budget. Preparation of Decision Packages. Each package is a separate and Identifiable activity. These packages are linked with corporate objectives. Ranking of decision packages based on cost benefit analysis. Allotment of funds based on the above resulting by following pyramid-ranking system to ensure optimum results.

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ZERO BASED BUDGETING

This is my previous level of expenditure

MANAGER

This is what I want for forthcoming period, for reasons enumerated.

These are the Additions requires to meet the inflationary effects and expansion programs.

TOP MANAGEMENT T

O P

TRADITIONAL BUDGETING
M A N A G E R

A Certain amount to Sanction for a decision Unit. 41 This Expenditure will lead to If the Proposal is discarded, the result these Advertisements

M A N A G E M E N T

CONCEPT OF BUDGETARY CONTROL

Budgetary Control and Budgeting are often used inter changeably to refer to a system of management control. Budgetary Control implies the use of a comprehensive system of budgeting to aid management in carrying out its functions like planning, co-ordination and control. According to C.I.M.A, London Budgetary Control is the establishment of budget relating to the responsibilities of executive of a policy and to continuous comparison of the 42

actual with the budgeted results, either to secure by individual action the objection of policy or to provide a basis for its revision. According to Brown and Howard Budgetary Control is a system of controlling costs which includes the preparation of budgets, co-ordinating the debts and establishing responsibilities, comparing actual performance with the Budget and acting upon results to achieve maximum profitability.

Characteristics of Budgetary Control:

The Main Characteristics are as follows: Establishment of Budgets for each function or department f the organization. Comparison of actual performance with the Budgets on continuous basis. Analysis of variations of actual performance form that of the budgeted performance to know the reasons there of.

Co-Ordinal Features:
The three Co-Ordinal features of a Budgetary Control are as follows: Planning Co-ordination Control Therefore, Budgetary control embraces all and in addition includes sciences of planning the Budgets to effects an overall management tool for the business planning and control, quotes Rowland and William.

Objective of Budgeting Control

Budgetary control improves planning and in co-ordination and helps in control. The reasons for producing budgets are as follows: 1) To aid planning of annual operation.

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2) To co-ordinate the activities of various parts and to ensure harmonious conditions prevails in the organization with each other. 3) To communicates plans to the various responsibility center managers. 4) To motivate managers to strive to achieve the organizational goals. 5) To control activities. 6) To evaluate the performance of managers. 7)

Characteristics of a good budgeting

1) Budgeting process should be backed and supported by the chief executive of an organization. 2) The Organization goal should be qualified and clearly stated. These goals should be within the frame work of organization in plans. 3) There should be proper fixation and delegation of authority and responsibility. 4) The persons for execution of budget should participate in budget preparation. 5) The Budget should be realistic. It should present goals that are reasonably attainable. 6) A good system of accounting is also essential to make the budgeting successful. 7) The budget should cover all the phases of the organization and be continuous exercise. 8) Periodic report should be prepared. Comparing budget and actual results i.e.., there should be effective follow up. 9) Clear-cut organizational lines should be established and the employees should be impaired budgeting education. 10) The budgeting system should be bases on information, communication and participation.

Requisites for a Successful Budgetary Control System

44

1) The budgets are used to realize objectives of the business. In the absence of clear goals, the budgets will also be unrealistic. 2) Budget preparation and control is done at every level of management. Every though budgets are finalized at top level but the involvement of person form lower levels of management is essential for their success. This necessitates proper delegations of authority and responsibility. 3) An effective system of communication is required for a successful budgetary control. 4) Budgetary control may not be taken only as control device by the employees but it should be used as a tool improves their efficiency. 5) Budgeting is done4 for every segment of the business. It will also require the active participation and involvement of all employees. The success of budgetary control systems depends upon the participation of all employees of the organizations. 6) Flexibility in budgets is required to make them suitable under changed circumstances. Budgets are prepared for the future, which is always uncertain. Flexibility will make the budgets more appropriate and realistic. 7) All persons should be motivated to improve their working so that budgeting is successful. A proper system of motivation should be introduced for making this system a success.

Advantages of Budgetary Control

The Budget programme forces the managers into plan ahead. 45

In forces early consideration of basic policies. All members of top management participate in budget committee. For this reason even planning a departmental level gets benefits of experience of seasoned executives. Management is forces to put down in cold figures, what is means by satisfactory results. It demands the most economical use of labour, materials, facilities and capital. In inculcates a habit of timely, careful, adequate considerations of all factors before reaching important decisions. The use of budget promotes understanding of the problems of co-workers. It facilitates period self-analysis of the organization. The use of budgets removes clouds of uncertainties for lower levels of management regarding basic policies and objectives. Management is forced to give timely and adequate attention to the effect of changing business conditions. Budgeting co-ordinates the activities of various department and functions of the business. Budgeting control aims at maximization of profits through careful planning and control. It directs capital expenditure in maximization of profits through careful planning and control It directs capital expenditure in the most profitable direction. Budgetary control system creates necessary conditions for the introduction of standard casting techniques. A budgetary control system assists in delegation of authority and assignment of responsibility.

Limitations of Budgeting
Budgeting cannot take place of management but is only a tool of management the budget should be regarded not as a master, but as a servant. 46

 A budget programme must be dynamic and continuously deal with the chaining business conditions. Budgets will lose much of their usefulness if they acquire rigidity and are not revised with the changing circumstances Budgeting is an expensive technique. The installation and operation of the budgetary control system is costly affair as it requires the employment of specialized staff and involves other expenditure which small concern may find difficult to incur. Estimates are used as basis for budget plan and estimates are based mostly on available facts and beset managerial judgments. Since a lot of human element is involved in exercising managerial judgment. It is but natural to give some allowance interpretation and utilization of estimated results. Budgeting based on inaccurate forecasts is use less as a yardstick for the measuring of the actual performance. The circumstances are constantly changing and therefore budgets and budgetary techniques will not be useful, till they are continually adapted. Budgetary control cannot reduce the managerial function to a formals. It is only a managerial tool, which increase effectiveness of managerial control. The use of budgets may lead to restricted use of resources. Budgets are often taken as limits. Efforts may, therefore, not be made to exceed the performance beyond the budgeted targets, even though it may be physically possible.

47

CHAPTER 3

48

INDUSTRY PROFILE COMPANY PROFILE

About Thermo Engineers

49

Thermo Engineers Company, A Veteran in the E. P. S. Plant Industry with the

inception in 1998, launched manufacturing of E.P.S. Molding Plant, equipments at I-95 SiteC, Surajpur Industrial Area, Greater Noida, Distt. Gautam Budh Nagar (U.P.)-201306. The unit is situated at a distance of approx. 25 km from Delhi, one of the largest and fully equipped engineering unit suitable for Design, Manufacturing and Molding of E. P. S. Plant (Machine, Mould, Filling Gun, Ejector, Water cooling System, Power Pack, Boiler Cyclone & ID Fan etc.) Heat Exchangers, Pressure Vessels, Structures and various E.P.S. Molding related equipment according to Clients requirements. These molds are manufacture for various types of packing and insulation. Our design team consists of project managers and AUTOCAD operators. This department engineers, designs, draws plan and writes specifications for the total project, including equipment, piping, insulation, ductwork and controls. We utilize AutoCAD in all our jobs. Systems are designed to meet or exceed current indoor air quality and energy standards. We also offer Professional Engineering Consulting Services. The equipments are being fabricated in the workshop shed located on the existing plot area of 600 Sq Metre. Due to phenomenal increases in domestic and international demand of these equipments, we propose to increase our manufacturing capacity as well as our clients also.

50

Established in 1951, Elecon Engineering Company Ltd of Vallabh Vidyanagar, Gujarat, India, pioneered the manufacture of material handling equipment in India. In more than five decades, Elecon has designed and implemented several landmark projects in India as well as abroad. From a modest start of design and manufacture of Elevators and Conveyors from which incidently, the company derives its corporate identity. viz. "Elecon". It has grown over the years to be known as a pioneer of the concept of mechanised way of Bulk Material Handling Equipment in India. During the span of more than 4 decades, Elecon has encompassed all the major core sectors through its supplies of highly sophisticated equipment bearing ample testimony of the symbolic mark of Elecon's unbeatable technology. Elecon has thus, made its presence felt through consistent and satisfactory performance of its equipment in such core sectors as fertilizer, cement, coal/power generation, chemical, steel plant and port mechanisation etc., across the country. Elecon is the first company in India to have manufactured sophisticated equipment for Bulk Material Handling. Its product range includes design, engineering, manufacture, supply, erection and commission of: Wagon tipplers Bucket wheel stacker/reclaimers Barrel-type blender reclaimers Fertilizer reclaiming scrapers Limestone pre-homegenizing and blending plants Single and twin bucket wheel bridge-type reclaimers Crawler-mounted trippers Stationary and shiftable conveying systems for open cast lignite mines Integrated coal handling plants for power stations Underground mining conveyors

51

Light Lift India Pvt. Ltd. is a sister concern of the Haryana Mechanical Industries, established in the year 1966 for the manufacturing of Tiger Brand Chain Pulley blocks and Travelling Trolleys. In 1985, Haryana Mechanical Industries expanded their unit for the manufacturing of Overhead Cranes, Hoists, Hydraulic Hand Pallet Trucks, Hyd. Jib Cranes, Stackers, Drum Trolley, Delivery Tables etc. Under the Brand name of Light Lift Since then it has been one of the leaders in the field. Light Lift is an ISO 9001: 2000 certified company accredited by ICL Certifications Ltd, New Zealand for Design, Manufacturing, Supply & Export of Material Handling Equipments. Another giant step was the establishment of the marketing unit in the name of Nagpal Marketing to market these products across India. In 1996 Light Lift and Haryana Mechanical Industries diversified into manufacturing of Hand Tools for Electrical and Electronics Industries under the Brand Name of Nagpal. Nagpal Marketing is looking for Domestic Sales and Light Lift India Pvt. Ltd. is looking for International Sales of these Products. Quality is of prime importance to us and our efforts to maintain the highest quality standards has helped us stay ahead of competition. Backed by strict quality control at each stage of production, with the latest in technology employed for maximum customer satisfaction.

Backed by a rich industry experience, we are able to comprehend precise requirements and cater to our clients in a most effective manner. We are engaged in offering a quality range of Industry Ovens, Conveyors, Painting Booths and Other Associated Equipment. Our range includes Material Handling Conveyor, Material Handling Conveyor & Oven, Industrial

52

Fired Oven, Diesel Fired Oven, LPG Fired Oven, Anodizing Plants and Electrical / Diesel/ LPG Fired Oven. These are fabricated using quality material & components and appreciated for their high performance, low maintenance and easy operations. Our range of Industry Ovens, Conveyors, Painting Booths and Other Associated Equipment is extensively used in various industries such as powder coating, food, rubber and chemical. Our range of Industry Ovens, Conveyors, Painting Booths and Other Associated Equipment is of optimum quality and tested at each and every level of production in order to ensure its compliance with international quality standards. Apart from the quality products, we also serve our clients with valuable services like Powder Coating Booths, Hot Air Generators & Ventilation Blowers, Imported Burners (Sales, Service & Spare Parts), and CED Coating Plants. In addition to this, we also hold expertise in offering other valuable services like Automatic Phosphating Plants, M.S. & S.S. Fabrication Works. Further, we ensure to carry out fabrication work and valuable services as per their requirements. Moreover, we have also developed a streamlined supply chain and a wide distribution network for the prompt processing of our domestic as well as international orders. All these attributes have enabled us to build a huge client base all across the globe.

Business Specifics:

Company Profile: Manufacturer, Supplier and Exporter Based at: Faridabad, Haryana (India)

Smaco Engineering Pvt. Ltd. is a preeminent Manufacturer, Supplier and Exporter of a vast range of Material Handling Equipment. Promoted by a group of engineers, the company is actively engaged in the production of Material handling Equipments such as EOT Cranes, Jib Cranes, Electric Wire Rope Hoists, Battery Operated Stacker, Cage Lifts, Hydraulic Lifting Platform and so forth. We are strategically located in Maharashtra, India and reaching out to client based in Indonesia, Saudi

53

Arabia, Mauritius, the Gulf Region and other developing Asian Countries. Capitalizing on our rich experience in this industry, we have a complete understanding of what clients require even before they place their demands with us. With the power of modern technology, we are able to provide highly advanced Material Handling Equipment that aid the clients business in many ways. Our motto has always been to maintain long-term relations with the clients for a win-win situation with the clients, where we remain their dependable suppliers and they help us in improving our process continuously. Along with an assurance of the finest quality from our end, clients are also benefited with the timely delivery and the best deals in the industry for the Equipment that we provide. Infrastructure Our state-of-the-art facilities are located near Navi Mumbai, equipped with the latest machinery and tools to carry out the manufacturing, finishing and packaging of the equipments. We are located near to the major ports, where our spacious warehousing and transportation facilities enable us to cater to the clients in the best way. Team The team at Smaco believes in pursuing excellence with the utmost perfection. We encourage a healthy culture of innovating on a constant basis and have a group of expert engineers and experienced technicians, which is trained regularly to keep them updates on the latest technologies and practices in the industry.

COMPANY PROFILE

Bevcon Wayors Pvt Ltd., Hyderabad is a major Player / Manufacturer of Material Handling Equipments in the India. Bevcon is also one of the fastest growing SME.

54

Established in 1991, Bevcon had a steady growth and now have established as one of the leading Material Handling, Crushing and Screening Systems Company in India. Equipments Manufactured Bevcon Wayors is into the Business of Bulk Material Handling, Crushing, and Screening Equipment for all sectors of industries. Bevcon Wayors Designs, Manufactures, Supplies and undertakes Erection & commissioning at customers site. All Equipments and products undergo rigorous quality control checks and are manufactured to the highest Engineering Standards. VISION & MISSION OF THE ORGANIZATION We envisage being a market leader by 2010 in Bulk Material Processing & Handling Solutions through satisfying customers, stakeholders and employee needs. Our Outlook for the Vision: As a part of our vision we are bringing in the business & manufacturing expertise from Global Players and forge new business alliances to bring in Futuristic Technologies to Indian Markets. We have Technology tie-ups with companies such as Burwell Technologies of Australia, Sanland - China, Friedrich & Noma - Germany, Statec Austria, Nergeco France-Australia, Thermostop - Canada.

Bevcon has the Professional and Competent staff with skills on par with International Standards to gear up for the above. Our Mission is to create smarter engineering solutions evolved by a technology driven team. The mission is achieved by the following edicts.

Strong Engineering and Design base.

55

Strict conformance and compliance to quality of equipment and work procedures. Excellence in service to customers. Honesty, integrity and transparency in all relationships. Respect for the individual.

We provide Turnkey Solutions for Your Bulk Material Handling needs for Pharma Crushing | Screening | Conveying Our expertise is based on nearly decade and half experience in designing custom material handling solutions for various sectors of Industry. The Turnkey Material Handling Solutions can be a combination of Crushing - Screening - Conveying Systems coupled with Pneumatic Handling and cartridge dust extraction system are Engineered and Executed to your needs.

PROMOTORS:

P. SUNEEL LAKSHMAN Managing Director

56

He is the driving force behind the company and has a clear vision of making our organization as the best Project Engineering Company in Bulk Material Handling, Dust Extraction and Pneumatic Handling. Y. SRINIVAS REDDY Technical Director A Mechanical Engineer with 20 years of experience in material handling equipments technology. He is the founder director of the company and heads our manufacturing facility. His forte is Design and Engineering for complex Material Handling requirements. He is also the key force in new product development at our company.

Top of Form BEVCON WAYORS ORGANISATION STRUCTURE

57

DEPARTMENTS OF MC

MC MANAGEMENT

BEVCON WAYORS BEVCON WAYORS Cherlapalli Regulatory Board

Complete Aided institute

Research & Development Sector

Industrial Sector

Services support Sector

Budget Department of Bevcon

A concern must have an organization chart. This is necessary in order to have clear idea of authority and responsibility of Chief Executive so that they may be no conflicts among Function Executive for shrinking responsibility and making others responsibilities for poor performances. In preparing, Maintaining and administrating the Budget section at SSE consists of an Accounts Officer and two assistants guided by one Deputy Controller of Accounts who will be supervised by joint controller (F&A) who is the responsible person 58

from Finance Wing to present the Budget to the Executive Committee and the Head of Unit Viz, Chief Executive. After the approval of the Chief Executive, the Budget proposals will be placed before Bevcon Wayors Board. The Budget proposals will be submitted to the Department of Atomic Energy, Mumbai for approval. The Department after receipt of proposals scrutinizes the requirements of each unit and after a detailed discussion, compiled proposal of the department as a whole will be places before Atomic Energy Commission. In respect of the capital projects the approval of the planning Commission has to be obtained before execution of any ongoing for new project.

Function of Budget Wing at SSE

Issue of Budget Circular. Collection of data relating to actual Receipts and Expenditure of previous year. Compilation of estimates of Receipts and Expenditure received from various authorities Preparation of various supporting break-up statement of Receipts and Expenditure Compilation of budget Estimates in respect of Receipts, Revenue Expenditure, Capital Expenditure, Loans and advances, Provident Fund (Receipts and Payments) etc. Monthly / Quarterly phasing of receipts and expenditure for periodical review and financial control. Preparation of monthly report of Receipts and Expenditure with supportive breakup statements. Preparation of Annual plan proposals in respect of Capital Projects (both ongoing and new) for approval of Department as well as planning Commission. Intimation of progress of expenditure in respect of Capital Projects to the concerned project Co-ordinates.

59

Review of receipts Expenditure for final grant of expenditure and surrender of funds. If any. Preparation of Appropriation Account (budget Estimate and Actual Expenditure and Variations and the reasons there of) Correspondence with concerned authorities in respect of all the above.

Preparation of budget at Bevcon

In SSE, the Budget of the organization is being prepared for the following. A detailed estimate of the following is taken into consideration. Receipts Expenditure on Revenue Account The Expenditure on Capital Account The Budget estimates shall give the anticipated receipts and expenditure for the ensuring financial year under each major, minor, sub and detailed heads of accounts.

Budget Period in Bevcon

Budget period is the period for which a budget is prepared and employed. In terms of time, budget can be short and Long-terms Budget. Short-term Budget is prepared on the basis of day-to-day administrations. They are generally prepared in physical as well as in monitory. Long-term Budget is designed for a long period. This is prepared in the case of major projects schemes to know in advances the probable capital commitments.

60

In SSE, Budget is prepared for both Long-term (Five years plan), short-term (One year Plan) and is reviewed periodically. The Long - Terms Budget is made generally for the capital projects both for ongoing and new projects and action plans will be drawn up for setting up of new projects with a view to attain the predetermined objects to meet the future requirements. The plan project, have to be first approved for the projects, will be as need based and revised as per the availability of funds. While preparing the Budget estimates for the ensuring year, a review of Budget proposals made for the current year will be taken up during mid July and August or each year. Any revision in the estimates will be proposed based on the anticipated expenditure till end of financial year, this is known as Revised Estimates for the current year.

Pre-requisites Met By Bevcon Wayors for Effective budgetary Control System

In order to ensure effective and successful implementation of budgetary control system in organization, Bevcon Wayors Management has fulfilled the following prerequisites. The objectives, plans and polices of the organization are spelt out in clear cut terms without ambiguity.

61

The organization chart in SSE, clearly defines the duties and responsibilities for each level of executives. In Bevcon Wayors the output level for which Budgets are fixed are spelled out clearly. A Budget committee is constituted for effective functioning of Budgeting and budgetary control system. There is a well defined system of communication and reporting between various levels of managements Management has nominated Head of Finance as Budget Controller who is capable to share his ideas with various authorities and. Co-ordinates the activities. There is a Budget manual in Bevcon, clearly defining the plans, procedures etc., for operation of Budget and control. The Budget will be prepared for all related activates tasks in the firm, that they represent completeness. Budgets are prepared for all related activities / tasks in the firm, tat they represent completeness. Support of top management for effective implementation of budgetary system and controls also exists at Bevcon.

Types of Budgets Prepared in Bevcon

Types of Budgets prepared in Bevcon, Hyderabad are: 1) Capital budget

62

2) Revenue budget and Receipt Budget. 3) Public Accounts Budget. 1. Capital Budget: This consists of expenditure in capital projects proposals by Bevcon. The Capital Budget is prepared based on the sanctioned cost of the project approved in the five year plan quality. Capital payments consist of capital expenditure on acquisition of assets like land, building, machinery, equipment and other establishment charges. For Capital Projects the approval of the planning Commission has to be obtained before execution of any Ongoing/New Project. The Budget Estimates under the Capital Head will have to be made separately for each project according to the aims and objects of the project and necessary requirements for the same. The allocation of funds will depending upon the progress of the

2. Revenue and Receipt Budget: Revenue Budget consists of the expenditure in

connection with operating the plants. It consists of the expenditure relating to the following items: Purchase of raw materials. Purchase of Consumables Purchase of Spares and tools. Establishment Charges. Cost of fuel and maintenance of Vehicles. Depreciation. Interest.Revenue budget is proposed on a yearly basis. It is prepared based on the production schedule for a particular year.

In Bevcon, the Revenue Expenditure is made for various operational facilities, they are: Fuel fabrication Facilities: This deals with manufacture of Fuel components. Tube plants: - Which deals with manufacture of Zircalloy and Structural Tubes for the fuel requirements.

63

Estate Management: - This deals with the expenditure to wares maintenance of Housing Colony of the employees. Department Canteen: - the expenditure to wares manpower and other related expenditure Budget in maintaining canteen for the employees will be classified under this head. In addition to the above, expenditure towards security and transportation of the

employees etc., will fall under Revenue Head of the Organization.

Revenue Receipts: Revenue Receipts Budget is prepared based on the production

schedule and anticipated scale of products for the year. The receipts are projected based on the requirement of the fuel boundless (PHWR & BEVCONR) by the operating reactors of Nuclear Power Corporation and likely job works from private parties and sale of effluents, special material etc.

3. Public Account budget: Besides the normal Receipts and Expenditure, Government
of India acts as custodian in respect of funds collected form its employees and also from public. For example, transaction relating to provident funds, small savings collections and other security deposits etc., the money thus received is kept in the public account till their final settlement as the money, generally speaking, does not belong to the government and has to be paid back sometime or the other to the person and authorities who deposited on fulfillments of the rules and regulation laid down by the government.

Action at Bevcon Wayors at Unit Level

Since the time of submission of the Budget proposals is standard, the unit has to initiate action well in advance by calling for the requirements for the various agencies during 64

June of each year and collect the data by the end of the month. Various performs are designed for the collection data. The important ones are: 1) Man Power Budget 2) Machinery and Equipment 3) Supplies and materials 4) Motor Vehicles 5) Minor/Maintenance Works 6) Major Civil / Electrical Works for construction of capital projects. 7) Office and other administrative expenditure. 8) Interest and Depreciation Reserves etc. The requirement of data in respect of machinery items, supplies and materials, major works are being obtained form plants through online in various formats, which will be compiled to assess the total expenditure under these heads for the unit as while. All the information on plan projects is distinctive and will be scrutinized for utilization. The Revenue Expenditure is granted for utilizations within the year ending 31 st March of every year and any unspent amount will lapse and not available for the next unless provided afresh while submission of revised proposals. Whereas in respect of capital project the project cost is sanctioned for completion of the project and the unspent could be spilled over to next year by making provision in Revised Estimates. The revenue Expenditure depends upon the requirement during the year towards the operational cost of the complete projects and there are no lower or upper limits whereas the Capital Expenditure is limited to the sanctioned cost of the project as well as the approved outlay during the Five year period. Compilation of all the information object-wise and the draft proposals of provisions required by each plant with reference to the draft proposals of provision required by each plant with reference to the proposed production and overall requirement for the unit will be submitted for approval of Chief Executive.

65

The major requirements for the unit are: Raw materials for production. Toward power and Water expenditure payable to the local municipal. Towards Transportation of staff, payment of APSRTC / PVT transporters. Towards Diesel Oil required for both plants, power unit and also for vehicles. Magnesium, zircon Sand, Zirconium Sponge etc. Provision for these items will be cross matched with the production targets, previous year, stock available, prevailing rates and likely time taken for delivery of items etc. All general expenditure like office and administrative expenditure, taxed etc., Will be assessed based on the actual requirement for the financial year and comparison will also be made with the actual expenditure during the previous financial year. Requirement of overtime will be provided as per the production targets and manpower availability and will be restricted based on the direction of the Ministry of Finance etc. The requirement of each plant will be reviewed and discussed with the concerned authorities, possibility of incurring expenditure, postponement of requirement of next year etc., and finally the entire requirement the unit will be formulated. Manufacture seamless stainless steel an special alloy tubes for atomic Energy, Defense, space and other private industries, Zirconium Alloy Components for Non-Nuclear application such as fertilizer and heavy chemical industries and also high purity and advanced materials for various hi-tech applications

Nearly decades of experience in the manufacture of products meeting stringent quality requirement and continuous in house technology up-gradation has developed expertise in design, has build a number of sophisticated equipment such as special chemical process reactor high temperature sintering finances and pilger mills, made rapid strides furnaces in the 66

field of mechanical material handling and process automation. A few of this equipment have been supplied to interested customers. Bevcon Wayors has a continuous HRD programmes for upgrading the skills and knowledge of manpower. It has evolved and implemented sound occupational health, safety and environment management systems. The green environs of the premises evolved and implemented sound occupational health, safety and environment management systems. As an employer, provides housing assistance, medical care and educational facilities It has drawn up plans for strengthening corporate R&D and is passed to meet the future requirement of the Power Progamme. As regards capital projects, review of the expenditure up to date will be taken as base for revision in the requirement and progress of work and arrival of major equipment shipment will be discussed and the provision will be formulated project - wise. Revenue receipts of the unit from the sale of products produced will be assessed based on requirement of various units, and other private parties. The requirement of the unit as a whole under both Revenue and Capital heads would be submitted to the Board and on approval of the same proposal will be sent to department for consideration.

67

CHAPTER-4

68

DATA ANALYSIS AND INTERPRETATION

69

STUDY ON BUDGET PREPARATION AT BEVCON WAYORS PVT. LTD.

The study involves various aspects of budgetary done at SSE, which consists of Revenue Expenditure for the past seven years and to identify the process involved in control of expenditure to maximize the efficiency of Revenue Expenditure. The Revenue Expenditure on SSE for the past five years with break-up under expenditure are tabulated below form Table No.1 to Table No.7

TABLE NO. 1 SHOWING REVENUE EXPENDITURE BUDGET 2009 - 2010 (Rupees in Lakhs)
S.No. Item Budget Actual Variation Variation

70

Estimates 1. Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works Interest and Depreciation Motor Vehicle 6. Office Expenses 7. 8. Administrative Expenses Rent, Rates And Taxes Others Totals 35 36.53 150 35 36.53 66.17 7150 7032.21

(Amount) 117.79

(Percentage) 1.64

2.

70

74.40

-4.4

-6.28

3.

26872

37477.15

-10605.15

-39.46

4. 5.

2600 2000

2191.55 2000

408.45 0

15.70 0

83.83 -1.53 -1.53

55.88 -4.37 -4.37

9.

35

28.60

6.4

18.28

10.

39 39,489

33.31 49,495.88

5.69 -10,006.88

14.58 -25.34

REVENUE EXPENDITURE BUDGET FOR YEAR 2009-2010

71

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Budget Estimates 100
80 60 40 20 0 1s Qtr 2ndQtr 3rdQtr 4thQtr t

Salaries and Other Establishm ent Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Office Expenses Adm inistrative Expenses Rent, Rates And Taxes Others Totals

Actual

Es at W t es N orth

Reasons for Variation between Budget Estimate & Actual Expenditure (2009-2010) Saving under the Head Salaries due to shifting of premises to new cities head. Increase under supplies and materials due to upwards revision of manuals. Saving under the head of motor vehicles due to postponement of replacement of same vehicles for the next year.

TABLE NO. 2
72

SHOWING REVENUE EXPENDITURE BUDGET 2008 - 2009

(Rupees in Lakhs)
S.No. Item Budget Estimates 6650 Actual Variation (Amount) -93.42 Variation (Percentage) -1.40

1.

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works Interest and Depreciation Motor Vehicle Office Expenses Administrative Expenses Rent, Rates And Taxes Others Totals

6743.42

2.

78

75.83

2.17

2.78

3.

27052

30947

-3895

-14.39

4. 5.

2102 7300

2373.98 5500

-271.98 1800

-12.93 24.65

6. 7. 8.

103 475 35

52.47 503.69 36.53

50.53 -28.69 -1.53

49.05 -6.04 -4.37

9.

35

38.5

-3.5

-4.37

10.

1507 45,337

1544..82 47,816.24

-37.82 -2,479.24

-2.50 -5.46

73

REVENUE EXPENDITURE BUDGET FOR YEAR 2008 -2009

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 Budget Estimates Actual

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Office Expenses Administrative Expenses Rent, Rates And Taxes Others Totals

Reasons for Variations between Budget Estimate & Actual Expenditure (2008 - 2009) Increase in salaries on Account of liberated LTC provision Increase in Office Expenses on Account of increases Transport and issue of Uniform for Ministerial Staff Increase in Rent, Rates & Taxes as per demand for property Tax.

TABLE NO. 3

74

SHOWING REVENUE EXPENDITURE BUDGET 2007 - 2008 (Rupees in Lakhs)

S.No. Item Budget Estimates 6100 Actual Variation (Amount) -116.18 Variation (Percentage) -1.90

1.

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works Interest and Depreciation Motor Vehicle Office Expenses Administrative Expenses Rent, Rates And Taxes Others

6216.18

2.

83

34.1

48.90

58.91

3.

28349

25497.79

2851.21

10.05

4. 5. 6. 7. 8.

2040 9850 125 506 35

2102.44 8896 53.92 445.90 35.31

-62.44 954 71.08 60.1 -0.31

-3.06 9.68 58.86 11.87 -0.88

9.

26 1286

26.20 1335.27

-0.2 -49.27

-0.76

10. Totals 48,400 44,643.11 3,756.89

-3.83 7.76

REVENUE EXPENDITURE BUDGET FOR YEAR 2007 -2008

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50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Salaries and Other Establishm ent Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Office Expenses Administrative Expenses Rent, Rates And Taxes Others

Budget Estimates

Actual

Totals

Reasons for Variations between Budget Estimate & Actual Expenditure (20072008)
Increase in Salaries due to merger of 50% of Dearness allowance on 01-04-2007. Saving under the head traveling Expenses, Office expenses due to Economy measure. Decrease is mainly due to MDU supply and other materials based on production schedule. Savings under Motor vehicles due to non-receipt of sanctions.

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TABLE NO. 4 SHOWING REVENUE EXPENDITURE BUDGET 2006-2007 (Rupees in Lakhs)

S.No. Item Budget Estimates 6231 Actual Variation (Amount) 548.87 Variation (Percentage) 8.8

1.

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works Interest and Depreciation Motor Vehicle Expenses Administrative Expenses Rent, Rates And Taxes Others Totals

5682.13

2.

116

73.53

42.47

36.61

3.

22078

25452.56

-3374.56

-15.28

4. 5.

2288 7500

1560.31 9850

727.69 -2350

31.80 -31.33

6. 7. 8.

125 506 35

46.76 424.35 33.58

78.24 81.65 1.42

62.59 16.13 4.05

9. 10.

18 1289 40,186

26.80 1303.07 44,453.09

-8.8 -14.07 -4267.09

-48.88 -1.09 -10.61

77

REVENUE EXPENDITURE BUDGET FOR YEAR 2006 -2007

45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Expenses Adm inistrative Expenses Rent, Rates And Taxes Others Totals

Budget Actual Estimates Reasons for Variations between Budget Estimate & Actual Expenditure (2006 2007)
Saving under the head Salaries due to shifting due to shifting of provision to new cities head. Saving under the Head Traveling Expenses, Office Expenses, foreign Expenses, due to economy. Increase under supplies and materials due to upward revision of manuals Savings under the head of motor vehicles due to postponement of replacement of same vehicles for the next year.

78

TABLE NO. 5 SHOWING REVENUE EXPENDITURE BUDGET 2005-2006

(Rupees in Lakhs)
S.No. Item Budget Estimates 6241 Actual Variation (Amount) -445.2 Variation (Percentage) -7.13

1.

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works

6686.20

2.

120

72.88

47.12

39.26

3.

21162 2234

20844.36 1889.79

317.64

1.50

4. 5. 6. 7. 8. Interest and Depreciation Motor Vehicle Expenses Administrative Expenses Rent, Rates And Taxes Others Totals 28200 135 500 30 28200 51.96 470.98 29.69

344.21 -

15.40 -

83.04 29.02 0.31

61.50 5.80 1.03

9.

17

25.57

-8.57

-50.4

10.

732 59,371

652.34 58,923.77

79.66 447.23

10.88 0.75

79

REVENUE EXPENDITURE BUDGET FOR YEAR 2005 -2006

60000 50000 40000 30000 20000 10000 0

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Expenses Adm inistrative Expenses Rent, Rates And Taxes Others Totals

Budget Actual Reasons for VariationsEstimates Estimate & Actual Expenditure (2005 2006) between Budget
Excess under salaries due to payment of updating allowance. Saving under the head minor works due to less rates claimed by M/s. APGPCL. Saving under supplies and materials for postponement of procurement of certain materials.

80

TABLE NO. 6 SHOWING REVENUE EXPENDITURE BUDGET 2004-2005

(Rupees in Lakhs)
S.No. Item Budget Estimates Actual Variation (Amount) Variation (Percentage)

1.

Salaries and Other Establishment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works Interest and Depreciation Motor Vehicle Expenses Administrative Expenses Rent, Rates And Taxes Others Totals

6274

6087.90

186.10

2.96

2.

100

61.26

38.74

38.74

3.

19515

16744.60

2770.4

14.19

4. 5.

2481 16000

2057.72 16000

423.28 -

17.06 -

6. 7. 8. 9.

90 427

109.20

-19.2

-21.33

441.34 45 23.17 30 12.57 1148 46,110 956.86 42,494.62

-14.34 21.83

-3.35 48.51

17.43 191.14 3615.38

58.10 16.64 7.84

10.

REVENUE EXPENDITURE BUDGET FOR YEAR 2004 -2005

81

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Salaries and Other Establishm ent Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Expenses Administrative Expenses Rent, Rates And Taxes Others

Budget Actual Totals Estimates Reasons for Variations between Budget Estimate & Actual Expenditure(2004-2005)
Non-revisions of the rate of prime raw materials which was anticipated and also short supply of the same by the supplier. Partial withdrawal of increased power tariff by the State Government Non-filling of vacant and new posts as per policy of the Government

TABLE NO.7 SHOWING REVENUE EXPENDITURE BUDGET 2003-2004 (Rupees in Lakhs)

82

S.No.

Item

Budget Estimates

Actual

Variation (Amount)

Variation (Percentage)

1.

Salaries and Other Establish ment Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor works Interest and Depreciation Motor Vehicle Expenses Administrative Expenses Rent, Rates And Taxes Others Totals

6231

5918.98

312.02

2.

100.1

48.45

41.65

41.55

3.

19421

18558.61

862.39

4.44

4. 5.

1984.1 16

1922.61 16

61.49 -

3.09 -

6. 7. 8. 9.

120 415 45.8 25

76.64 403.04 22.15 28.03 854.55

43.36 11.96 23.65 -3.03 156.45

36.13 2.88 51.64 -12.12 15.47

10.

1011 45,353 43,843.06 1509.94 3.32

REVENUE EXPENDITURE BUDGET FOR YEAR 2003 -2004

83

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Salaries and Other Establishm ent Charges Travel Expenses(Foreign Trips) Supplies and Materials Minor w orks Interest and Depreciation Motor Vehicle Expenses Administrative Expenses Rent, Rates And Taxes Others Totals

Budget Actual Estimates Reasons for Variations between Budget estimate & Actual Expenditure (2003 2004)
Increase in the cost of raw materials/prime consumables. Download revision in the power-tariff by state. Saving on account of deferment of Leave Concession for employees by the Government.

Salaries
200910

Year

2003-04

2004-05

2005-06 84

2006-07

2007-08

2008-09

Variation amount Variation Percentage

312.02
5

186.1
2.96

-445.2 -7.13

548.87
8.8

116.18 -1.9

-93.42 -1.4

111.79 1.64

Interpretation:
The variations that need to be commented are those falling in a range above +5% or below -5%The years in which such variations occurred are 2003-04 where the variation is +5% on account of liberated LTC provisions and it has increased to 8.8% in 2006-07

Travel expenses

85

Year Variation amount Variation Percentage

2003-04 41.65 41.6

2004-05 38.74 38.74

2005-06 47.12 39.26

2006-07 42.47 36.61

2007-08 48.9 58.91

2008-09 2.17 2.78

2009-10 -4.4 -6.28

Interpretation:
The travel expenses had over short the budget consistently five out of seven years under study. The range was 36 percent to 59 percent which indicated lack of control and absence of economy measures. The company realized these facts in 2007-2008 and put in place a package of economy measures which raised the bar for out of budget expenditure. The measures have worked well and as a result the variance of travel expenses over and above budget was controlled almost in 2008-2008 and more than expected 2009-10. The control was so effective that a negative variance have set in year 2009-10 of the order of -6.28.

Supplies and materials

86

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation amount 82.39 2770.4 317.64 -3374.6 2851.21 1853 605.2 Variation Percentage 4.44 14.19 1.5 -15.28 10.05 2863 4439.46

Interpretation:
It signifies that the trend of increase in the negative variation in last 2 years is on account of postponement of procurement of materials in the year 2006-2007, 2008- 2009, 2009- 2010 which is not a healthy sign. Under procurements of materials points out to delay in implementation of projects and impartial negative effects on profitability which needs to be probed into in detail.

Minor works

Year

2003-04

2004-05

2005-06 87

2006-07

2007-08

2008-09

2009-10

Variation amount Variation Percentage

61.49 3.09

423.28 17.06

344.21 15.4

727.69 31.8

-62.44 -3.06

-271.98 -12.93

408.45 15.7

Interpretation:
The acceptable range is + (or) - 5%. In general the variation was with in the rage only in 2 out of 7 years. In 4 out of 7 years it was positive variation of 15% to 31% which is indicative of the fact that the budgetary process was not being diligently adhered to in the case of budgets for minor works.

Interest and Depreciation

88

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation amount -2350 954 1800 0 0 0 0 Variation Percentage -31.33 9.68 24.65 0 0 0 0

Interpretation:
Acceptable range is + (or) - 10%. The variation beyond the above range is observed in case of 2006-2007 and 2008-2009. The reason was on account of general and rapid reduction in rates of interest charged by banks.

Motor vehicle

89

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation amount 43.36 -19.2 83.04 78.24 71.08 50.53 83.83 Variation Percentage 36.13 -21.33 61.5 62.59 56.86 49.05 55.88

Interpretation:
The acceptable range is + (or) 25%., As the age of vehicles stock is more, allowing for increased expenditure in repairs and maintenance on account of age of vehicle stock it was found that the expenditure under the head was uncontrollable. With the range of over expenditure being from 36% to 63%.

Office Expenses

90

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation amount 11.96 -14.34 29.02 81.65 60.1 -28.69 -1.53 Variation Percentage 2.88 -3.35 5.8 16.13 11.87 -6.04 -4.37

Interpretation:
The acceptable range is + (or)-5%. The variation above the range was found to be sizable in the case of 2006-2007 and 2007-2008 due to issue of uniform to ministerial staff and increase transport

Administrative Expenses

91

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation amount 23.65 21.83 0.31 1.42 -0.31 -1.53 -1.53 Variation Percentage 51.64 48.51 1.03 4.05 -0.88 -4.37 -4.3

Interpretation:
The acceptable range is + (or)-5%. It was observed that the budget for administrative expenses was periodically increased to accommodate the positive variation in previous year during period 2004-2007. Thus the budget peaked in year 2004-2005, while the variation is high in 2003-2004 and 2004-2005.

Rent, Rates and Taxes

92

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation amount -3.03 17.43 -8.57 -8.8 -0.2 -3.5 6.4 Variation Percentage -12.12 58.1 -50.41 -48.88 -0.76 -10 18.28

Interpretation:
The acceptable range is + (or) - 20%. The abnormal years were observed to be 20042007 which a positive variation of 58% in 2004-2005 to negative variation of around 50% in 2005-2006 and 2006-2007. This is and account of changes in government / taxes / municipal polices and changes in valuations during the relevant years.

Others

93

Year 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Variation 156.45 191.14 79.66 -14.07 -49.27 -37.82 5.69 amount Variation 15.47 16.64 10.88 -1.09 -3.83 -2.5 14.58 Percentage

Interpretation:
The acceptable range is + (or) - 20% as the item indicates miscellaneous of expenditure the variance is found to be with in the acceptable range.

94

CHAPTER 5

95

FINDINGS, SUGGESTIONS and CONCLUSION

96

FINDINGS

There is an urgent need to formulate and implement cost reduction program. There is under procurement of materials with consequences for profitability, which needs to be proved into in detail. Budgetary process has been effective in case of travel expenses and in effective in case of motor vehicle repairs and maintenance and minor works. There is fluctuations in salaries occurred

97

SUGGESTIONS
The variances arising out of each factor should be correctly segregated, and reported to the management Controllable variances should be reported immediately, so that responsibility can be fixed and action taken against the individuals responsible.

Suggestions must be taken from all departments of the organization for proper planning and control of budgets. It is important to have budget manual so that every one in Bevon Wayors can refer to it for guidance and information about the budgetary process Control the salaries fluctuations

98

CONCLUSIONS
This can be concluded that the budget and budgetary control process and how each manager can draw out of the budgetary planning and control system concrete objective to improve the operating performance and profitability of the business. Bevcon Wayors Pvt. Ltd. has been achieving highest production year over the year by rescuing the corresponding expenditure and attained no only self sufficiency but also been supportive to the nuclear power Plants spread all over India. With the help of proper budgetary planning and control system, Bevcon Wayors has been able to improve operating performance and profitability of the Organization. The financial system in Bevcon Wayors has been very quick and well planned one, which could be implanted in other such government organization. The organization have followed effective budget system and control for maintaining the expenditure within the appeared Budget and it also kept the profile high and achieving the targeted production within the appeared Budget and it also kept the profile high and achieving the targeted production by minimum expenditure which expenditure which is evident form the last seven years Revenue Expenditure Budget. Form the variations between Budget Estimates and Actual Expenditure of last five years it may be seen that the percentage of variation is becoming marginal from year to year which reflects improved system of Budgeting as well as control of Expenditure.

99

LIMITATION
This comparative study limits its coverage to 7 years. Information presented is limited to the secondary data in the form of annual reports geographically the field research is limited to the city Hyderabad and Secunderabad. The proposed study may not be free from certain limitation. For instance the limitation of time and cost cannot be ignored. At the time, the findings of the study can be applied to comparable firms and not to incomparable ones. Besides this, budgeted amounts calculated at one point of time may not be informative as they suffer from short- fluctuations.

100

CHAPTER 6

101

BIBLIOGRAPHY

102

BIBLIOGRAPHY

1.

M.Y.Khanb(2006), Indian financial system (4th edition), Tata Mc Graw-Hill Publishing

Company Limited (New Delhi) 2. John.f.marshal(2006)and vipul K.Bansal (1st edition),prentice-hall of India.

Private limited 3. 4. 5. joh j. Hampton, Financial Decision Making, Eastern Economic Edition. S.N Maheshwari,S.K Mmaheswari, Financial accounting, Vikas publications. fundamentals of Statics, S.C.Gupta, Himalaya Publishing House.

Journals Referred: Tamilmani, The journal Of Accounting and Finance, Year:Oct 2006-March 07 Blair Staley, Nace R. Manger, Manaerial auditing journal, year 2008.

WEB SITES www.bevcon wayors.com www.iibf.org.in www.emeraldinsight.com

103

104