Introduction

Project on Budget & Budgetary Control

INTRODUCTION:

Budgetary control is the important aspect for industry development because budgets provide

yard stick against which the actual performance is measured. It always helps to the top

management to take the appropriate decision to motivate and directing their personnel towards

well set plans and policies of the company.By considering the advantage of the budgetary

control the Ranna Sugars also adapted this system. In Ranna Sugars they were maintaining the

monthly budget with the help of daily reports. The daily reports must contain the item like

production efficiency, sugar cane utilization, man power requirement, consumption of

electricity, wages etc. With this the budgetary control manager prepares a monthly profitability

statement of a particular month & submitted that one of the appropriate authority like

production manager. By this statement or submitted report, they will take correct decision about

the organizational activities.A study has been conducted on the “BUDGETARY CONTROL”

which is most probably adopted in the Ranna Sugars organization.Budgetary control i.e. a most

powerful tool to the management for performing its function i.e. formulating plans,

coordinating activities and controlling operations etc, effectively as well as effectively.Now a

day, the number of companies are compete with each other for the survival in the present

market. Whether it may be other sugars industries .but no one company can comete without

proper planning. So the Cost-Budgetary control may help them to make proper decision in the

number of various fields.Budgetary control is applied to a system of management & accounting

control by which all operations & output are forecasted as for ahead as possible. And actual

results are known that are compared without budget estimates.The budgetary system integrates

key managerial functions as it links top management’s planning function with the control

function performed at all the levels in the managerial hierarchy. A more accurate budget can be

developed for those activates where direct relationship exists between inputs & outputs. These

input, output are base for developing budgets & exercising control.

1


INDUSTRIAL PROFILE

Indian sugar industry

India is the largest consumer & second largest producer of sugar in the world.The Indian sugar

industry second large agro industry Located in the rural India. The Indian sugar has a turnover of

rs.500 billion per annum & it contributes almost rs.22.5 billion to the central & state exchequer as

tax, cess & excise duty every year. Indian sugar industry has been a focal point for a socio-

economic development in the rural areas. About 50 million sugarcane farmers & a large number of

agricultural labors are involved in sugarcane cultivation & ancillary activities, constituting 7.5 %

of the rural population. Besides, the industry provides employment to about 2 million skilled/semi-

skilled workers & others mostly from the rural areas. The industry not only generates power for its

own requirement but surplus power for export to the grid based on by-product-bagasse. It also

produces ethyl alcohol, which is used for industrial &portable uses,& can be used to manufacture

ethanol, an ecology friendly &renewable fuel for blending with petrol.

2

CANE MANAGER

OFFICE MANAGER CANE CANE PROCUREMENT MANAGER CANE DEV MANAGER

CANE OFFICERS CANE OFFICERS

FIELD ASSISTANT FIELD ASSISTANT


CANE DEVELOPMENT DEPARTME

3


IN CANE DEVELOPMENT

YEAR DATECANE DAYS

SUGAR DEVELOPMENT

RECOVERY PRODUCTION

1999 - 00 25/11/1999 TO 28/06/2000 217 407989 510015 12.50

2000 - 01 19/11/2000 TO 15/05/2001 178 352938 436300 11.91

2001 - 02 29/10/2001 TO 05/04/2002 159 354028 424670 11.41

2002 - 03 21/10/2002 TO 29/04/2003 191 503083 585700 11.47

2003 - 04 05/11/2003 TO 13/01/2004 69 115321 127000 10.68

2004 - 05 21/10/2004 TO 18/01/2005 90 105687 115850 10.88

2005 - 06 02/11/2005 TO 21/04/2006 170 351953 400151 11.39

2006 - 07 28/10/2006 TO 09/06/2007 225 520288 608549 11.60

2007 - 08 20/11/2007 TO 26/05/2008 189 379020 446699 11.65

2008 - 09 02/10/2008 TO 25/02/2009 145 238681 255400 10.60

4

PRODUCTION DEPARTMENT

LABORATORY INCHARGE

LABORATORY CHEMIST

LABORATORY BOYS

DEPUTY CHIEF CHEMIST

MANUFACTURING CHEMIST

STAFF AND WORKERS


6 )PRODUCTION DEPARTMENT:

To utilize the installed capacity of 3500 in proper manner the following personality the

duty to manage the Production department.

The production department is one of the core parts in every process based

industry. In addition, it plays a vital role in the organization for smooth going in every sugar

industries; Production department is divided in to two sections.

a)Engineering department

b)Manufacturing department

a) Engineering Department.

5


STRUCTURE:

6

CHIEF ENGINEER

MECHANICAL SECTION

ELECTRICAL SECTION

WORKSHOP STORE SECTION

CANE WEIGHMENT

CANE UNHOLDING URANGMENTS

CANE PREPARATION

MILLING

BOILER SECTION

POWER GENERATION


Mechanical section :

This includes all the mechanical process that is right from the cane weighment till milling

( obtaining of sugar juice ) for further processing. This section includes 4 main steps they are…..

a. Cane weighment arrangements

b. Cane unloading arrangement

c. Cane preparation

d. Milling

Cane Weighment Arrangements:

Cane weighment is totally computerized process. Hear the cane weightment is carried

through electronic platform called “weighs bridge”. This electronic platform is of two types. One

with the capacity of 40 tons for lorry and tractors and other with a capacity of 10 tones for only

cart.

Hear after weighing the cane a slip is provided so that particular farmer which has the

details of total weight of the cane, total trips, timing, vehicle number, variety of sugarcane and

other details. And after this when the vehicle comes back after unloading the sugar cane, empty

vehicle weight all their data stored in the computer and final copies are listed for further actions.

Cane unloading arrangements:

Hear the weighed sugar cane is unloaded and sent further for cane preparation. Further

unloading cane there are 2 unloaders with the help of sling attached instruments cane is loading on

the feeding table.

Cane preparation:

After feeding the sugar cane on feeding tables with the help of levelers which avoid

overloading of sugar cane is sent to primary cutter, which cut the sugar canes in to small pieces,

further fine fibers are obtained from there process by passing them in the fibrizer.

7


Milling:

After fibrizering the cane passing the prepared fiber cane through a set of mills carries on

milling weighted hot water is also added in the course of crushing for better extraction of juice.

After crushing the juice is sent for further process

Power generation

Process chart of Co-generation

Water treatment

Make up water

Feed water tank

Deareator tank

[Heating 1100 C]

Pumping

Stream drum

Turbine

Generator [electricity]

8


Functions of power generation department are given below.

To generate power at high quantity.

To distribute it to different areas, as KPTCL.

To provide better working conditions to their workers for safety.

4 MW, 11 KV turbo alternator using for home consumption.

Around 8.5 MW is exported to KPTCL.

Power production 12.5 MW per hour.

Stores Section

Various section spare parts are stored in stall system and all the units are computerized and

given a code number. Bin card and other system are followed hear. These stores materials are

normally required for preventive maintenance during seasons and off seasons for servicing and

overalling

Function

1) To make the material requisitions for the purpose of knowing the quantity material.

2) To make purchase order or in simple terms the tender.

3) To make approval memo for verification of materials.

4) The main function of store department is to prepare a bin card.

5) The store department issued material with reference with store requisition.

6) To make classification & codification of materials.

7) Receipt of material.

8) Inspect it with ordered quantity, quality & if any other specifications.

9) Some of the material like chemical is to be sent to laboratory for incepatation & testing.

10) Getting indents from departmental head & issuing it.

11) To make purchase return if the material are rejected.

12) To maintain minimum level of materials.

13) Infringing purchase department when material required

9


GENERAL OBJECTIVES OF BUDGETARY CONTROL ARE AS

FOLLOWS:

1) Planning:

A budget is a plan of the policy to be pursed during the defined period of timed to attain a

given objectives. The budgetary control will force management at all levels to plan in time all

the activities to be done during the future periods.

A budgeted as a plan of action achieves the following purposes.

Action is guided by well thought out plan because a budget is prepared after a careful study

and research.

The budget serves as a mechanism through which management’s objectives and polices are

affected.

It is bridge through which communication is established.

The most profitable course of plan is selected.

Budget is a complete formulation of the policy of the undertaking to be pursed for the

purpose of attaining a given objectives.

2). Co-Ordination:

The common objectives of the firm may be successfully achieved by the way of budgetary control

because it stimulates the co-operation of all concerns with the co-ordinates the various activities.

3) Communication:

It is necessary in an efficient organization that all people be informed about the objectives, polices,

programmers and performance. This is made possible through their Participant in the budgeting

process. Budgets inform each manager of what others have agreed to do. They also inform

managers of the resources available objects and targets.

Thus the budgeting system integrates key managerial functions as it links top management’s

planning function with the function performed at all the levels in the managerial hierarchy. But the

efficiency of the budget as a planning and control device depends upon the activity in which it is

being used. A more accurate budget can be develop for those activities where direct relationship

between inputs and outputs. The basis for developing budgets and exercising control.

10


CONCEPT OF BUDGETING:

One of the primary objects of cost accounting is to provide information to business management

for planning and control. Budgeting act as a toll of both planning and control. Budgeting is a

formal process of financial planning using estimated and accounting data.

DEFINITION OF THE BUDGET:

The Institute of Cost and Management. Accounts (UK) definesA budget as a “a financial and/or

quantities statement, prepaid and approved prior to a defined period of time, of the policy to be

pursed during that period for the purpose of attaining a given object. It may include income,

expenditure and the payment of capital”.

RELATION BETWEEN BUDGETING AND FORECASTING :

“Budgeting” and “forecasting” are used interchangeably According to the national association of

accountants (USA)”forecasting is a process of predicating or estimating a future happening”,

Forecasting is an essential part of the budgeting process. Forecasting is estimating future events

and their effects on the budget. Forecasting comes to an end after mere estimating. Budgeting is a

process of preparing budgets and further control aspects are involved in its procedure.

ESSENTIALS OF BUDGET:

It is prepared in advance based on a future plan of action.

It relates to a future period and based on objective to be attained.

It is a statement expressed in monetary and for physical units prepared for the

implementation of policy formulated by the management.

11


ADVANTAGES OF BUDGETING

Budgeting plays an important role in the effective use of resources and achieving overall

organizational goals.

Budgeting compels and motivates management to make an early and timely study of its

problem.

budgeting provides a valuable means of controlling income and expenditure of a business

as it is a “plan for spreading”

Budgeting provides a too through which managerial polices and goals are periodically

evaluated, tested and established as a guidelines for the entire organization.

Budgeting help in directing capital and others resources into the most profitable channels.

Budgeting coordinates and correlates all business activates.

The use of budgeting in an organization develops an attitude of “Cost Consciousness”,

stimulates the effective use of resources, and creates an environment of profit-mindedness

throughout the organization.

“The uppermost point is that budgets provide a discipline that brings planning to the

fore front as a key managerial responsibility”.

Budgeting encourage productive competition.

CLASSIFICATION OF BUDGETS:

A. According to time:

Long term budgets: A budget is designed for a period of 5 to 10yrs.

Short term budgets: A budget is a generally prepared for a period of Not exceeding 5

years

Current Budgets: The budgeted is prepared for a month or a quarter.

12


OPERATING AND FUNCTIONAL BUDGETS

1) Sales budget:

The most important budget, which all other budgets are contingent upon, is the sales budget. All

budgets, such as production budget, selling & distribution budget & other all affected by the sales

budgeted & are depended upon the revenue derived from sales.

Forecasting sales:

The three main factors that should be considered by management in forecasting sales.

1) Information concerning past performance.

2) Information about present condition with in the individual company & in each sales territory.

3) Data concerning the industry & generally business.

2) Production budget:

A production budget is stated in physical units. Essentially the production budget is the sales

budget adjusted for inventory changes as follows.

Units produced= Budgeted Sales+ (Desired Closing Inventory of Finished Goods-Beginning

Inventory of Finished Goods.)

3) Production cost budget:

A production cost budgeted summaries the materials budget, lab our budgeted, the factory budget,

and may be expressed and analyzed by departments and or products. It is also known as

manufacturing budget.

4) Direct material budget:

This budget specifies the cost if direct materials used and the Cost of the direct materials

purchased.

Use of direct material budget

1. It helps the purchasing departments to prepare a schedule to ensure

Delivery of material when needed.

2. It helps in fixing minimum and maximum levels of inventories in stores department.

13


5. Direct labor budget:

The labor budget estimates the labor, adequate in number and grades, to enable the production

budget to be achieved. It is generally preferable to prepare a separate direct labor budget and to

include indirect labor in the factory over head budget.

6. Factory overhead budget:

This budget is prepared on the basis of chart of accounts which reflects different expenses

accounts & which properly classified expenses accounts and details the cost centers or departments

factory overhead budgeted where in overhead costs have been classified in to fixed and variable

components.

i. Inventory budget:

An inventory budget can be prepared to find out the values of direct materials & finished goods

inventory.

a. Selling expenses budget:

It is also known as the marketing expenses budget. The selling cost budget is made up of a

number of cost items, some of which are fixed and some variable. Fixed expenses are salaries and

depreciation; the principal variable expenses are commission, travel advertising and bad debts.

b. Administrative expenses budget

The Administrative expenses budget covers the administrative costs for non-

manufacturing business activates. The administrative expenses budgets contains expenses like

director’s remunerations, legal charges, audit fees, salaries, rent office expenses, interest, property

tax, put etc.

14


BUDGETED INCOME STATEMENT

A budgeted income statement summaries all the individual Budgets i.e. sales budgeted, cost of the

goods sold budget, selling budget, and administrative expenses budget. This budget determines

income before taxes (If the tax rate is available, net income after taxes can also be computed).A

system of budgetary control installation in an organization is very much beneficial which may be

result in proper planning & control of activates. It ultimately results in minimizing costs and

maximizing profits. If the company wants to prepare the budgets for future period of time, it is

very much essential that company have to consider the past performance. Thus the past

performance is treated as vital basis for the future period. Suppose in case of past performance is

not available than the company has to follow the following process.

A. DETERMINATION OF THE OBJECTIVES:

The installation of budgetary control system needs to have proper objective i.e. for what

purposes it has been installed. The objective may be

Minimizing costs or maximizing profits.

Co-ordination of activities of different departments.

Controlling the management functions.

B. ORGANIZATION FOR BUDGETING:

Under this process the authorities and responsibilities of each executive are clearly stated.

i.e. delegation of work means dividing the work between departmental heads.

C. BUDGET MANUAL:

The budget manual is a written document, which specifies the objective of the budgeting

organization & procedures.

15


SOME IMPORTANT MATTERS COVERED IN A BUDGET MANUAL

A statement related to objectives of the organization & how they can be achieved

through budgetary control.

Reports, statements, forms & other records to be maintained.

Timetables for all stages of budgeting.

A statement related to functions and responsibilities of each executive.

There should be proper classification of accounts, which are lost, revenues and other

financial amounts are to be classified with their respective nature.

D. REPONSIBILITY FOR BUDGETING:

1. Budget controller: The chief executive is ultimately responsible for the budget program

and past of work designated as budget controller. The budget controller should have

knowledge of technical skill of the business and report to chief executive.

2. Budget committee: Budget committers are framed for true delegation of authority and

responsibilities. The work should be divided under different heads i.e. Sales, production,

and finance etc. The duty of budget committee to submit, discuss and finally approve of the

budgeted big figures.

E. FIXATION OF THE BUDGETED PERIOD:

Budgeted period:

“The period for which a budget is prepared & employed”.

The budget period depend upon:

The nature of the business.

The control techniques.

16


F. BUDGETED PROCEDURE:

The procedure followed while designing and operating a budgetary control system depends

upon the nature of the business.

THE PROCEDURE AS FOLLOWS:

1. Determination of key factor:

Key factor is that factor the extent of whose influence must first be assessed in order to

ensure that functioned budgets are reasonably capable of fulfillment.

Ex: Sales, production, purchases, cash etc.

Key factor must be identified & diagnosed. Budget are meaning & unless key factor

identified.

2. Making of forecasts:

Forecast is nothing but estimation of probabilities for a given period. Forecasts are made

regarding sales, production cost and financial requirements of the business.

3. Consideration of alternative combinations of forecasts:

Alternative combination of forecasts is considered for efficient of overall plan with the

motive to maximum profits.

4. Preparation of budgets:

After finalization of forecasts the budgets will be prepared.

17


5. Choice between Fixed & Flexible budgets:

A fixed budget is based on a fixed volume of activity. It is ineffective & meaningless

because of actual capacity utilization may vary from month to month or quarter to quarter.

A flexible budget is prepared for changing levels of activity. The flexible budget considers

the fixed and the variable costs separately.

1. Start with a canned budget worksheet.

2. Go through your check book or bills for the last two to three months and add and delete

categories from the worksheet to fit your expenditures.

3. Think about your hobbies and your habits and be sure to add categories for these expenses.

4. Go through your pay stubs and calculate your average monthly gross pay.

5. Do the same for any interest income, dividends, bonuses, or other miscellaneous income.

6. For each expense category, try to determine a budget amount that realistically reflects your

actual expenses while setting targeted spending levels that will enable you to save money.

7. Once you're comfortable with your expense categories and budgeted amounts, enter

expenditures from your checkbook from the last month.

8. Keep track of cash expenditures throughout the month and total and categorize these at the end

of each month.

9. Subtotal the income and expense categories.

10. Subtract the total expenses from the total income to arrive at your net income.

11. If the number is negative, your expenses are greater than your income. Your situation can

probably be greatly improved by changing your spending habits.

12. If you have a positive net income, transfer most of it to a savings or investment account at the

end of each month. Extra cash left in a regular checking account has a way of getting spent.

13. After you've tracked your actual spending for a month or two, analyze your spending to

identify where you can comfortably make cuts.

14. Once you've got the budgeting process in place, take an in-depth look at your largest spending

categories, brainstorm about ways to reduce spending in specific categories, and set realistic

goals

18


Tips:

1. Don't try to fit your expenses into somebody else's budget categories. Tailor the categories

to fit your own situation.

2. Make your categories detailed enough to provide useful information, but not so detailed

that you become bogged down in trivial details.

3. Think of your budget as a tool to help you get out of debt and save money, not as a

financial diet.

NEED FOR THE STUDY:

To make myself well known about organization structure at Ranna Sugars.

To get the knowledge about budgetary performance through trend analysis and over all

performance of Rona Sugars through primary and secondary data.

So studying the various practices carried out in finance will be helpful to me in my

MBA course.

LIMITATIONS:

Considering the scope mentioned above, some or few limitations are arising i.e. the Rona

Sugars is big organization. This finance & accounts is also big departments. But due to shortage of

training period, I am concentrating only on the budgetary control of costing departments.

Time constraints.

Only Three years data is used for the analysis of the study

19


CONCLUSION:

From the study it can be concluded that to know that budgetary control is treated as one of

the better techniques for minimizing cost and maximizing profit in Ranna Sugars. Budgetary

control technique Plays important role in the profit making or smooth running of the company

It co ordinates all the departments like Finance, Marketing, Production in the company. It

makes the decentralization of authority in the organization which helps organization goal with

in stipulated period of time. Budgetary control acts as safety for an organization because it helps

to identify business risk and necessary steps can be taken to avoid the risk.

Budgetary control techniques help to know how the available monetary resources can be

utilized effectively. This technique focus on efficiency in the allocation of resources in

particular time. As the finance department is the soul of any organization. Budgetary control

helps the organization by making finance department effectives

20


BIBOLOGRAPHY

www.infoindia.com

www.7506259405.com

www.sipnsurf.com

www.proindia.com

www.project.co.in

21

http://www.project.co.in/

http://www.proindia.com/

http://www.sipnsurf.com/

http://www.7506259405.com/

http://www.infoindia.com/

Introduction

Documents

budgetary control manager

costbudgetary control

control function

budgetary system

industry development

monthly budget

largest producer of

large agro industry