MANAGEMNT ACCOUNTING

TERM PAPER 2019-20

SUBMITTED BY:
DILEEP KUMAR K
20192MBA 0328
MBA SEC “F”
2nd SEM

SUBMITTED TO:
PROF LEENA GGEORGE
ASSISTANT PROFESSOR
SCHOOL OF MANAGEMENT
PRESIDENCY UNIVERSITY
BANGALORE
 BUDGETARY CONTROL- “A TOOL FOR COST CONTROL”
 BUDGETARY CONTROL DEFINITION:
Budgetary control refers to how well managers utilize budgets to monitor and control costs
and operations in a given accounting period. In other words, budgetary control is a process
for managers to set financial and performance goals with budgets, compare the actual results,
and adjust performance, as it is needed.
 IMPORTANCE OF BUDGETARY CONTROL:

1. Quick Reporting:
A good system of budgetary control in the organization requires the establishment of such
procedures, which will provide reports on the performance of various operations. The reports
should reach the persons concerned with the implementation of budgets without any delay so
that quick actions may be taken wherever necessary in the organization.

2. Detailed Organization Structure:

There should be a detailed organization structure with precisely designed authorities,
responsibilities and lines of communication so that everybody in the organization understands
the significance of objectives in detail.

3. Frequent Comparison:
There should be frequent comparison between budget estimates and operating results in the
organization. Alford and Beatty are of opinion that careful analysis of both operating results
and budget estimates is the essence of budgetary control in the organization.

4. Definite Plan:
There should be comprehensive planning in the enterprise. All the operations in the
organization should be planned in clear terms. The administration of the budgets should also
be properly planned in the organization. It must be pre-determined who is to be held
responsible for the implementation of budget in the organization.

5. Responsibility Matched by the Authority:

Those assigned with the responsibility to implement the budgets should also be given the
necessary authority to achieve the budgeted targets in the organization. Lack of sufficient
authority will make the implementation of budgets ineffective in the organization.

 STEPS IN BUDGETARY CONTROL:

1. Establish a plan or target of performance, which coordinates all the activities of the
business.
2. Record the actual performance.
3. Compare the actual performance with that planned.
4. Calculate the differences, or variances and the reasons for them.
5. Act immediately, if necessary, to remedy the situation.

 TYPES OF BUDGETS:
1) Cash flow budget

Predicting when and how the cash will flow in or out of the business is called a cash flow
budget. The cash flow budget is usually specified for a specific time, for example, a year.
Cash flow budget is useful for the organization to manage its cash and it also considers
factors such as accounts receivable accounts payable to determine whether a company has
sufficient cash flow in hands for continuing its operations.

2) Operating Budget

A forecast of projected income and expenses along with its analysis over the course of a
specific period of time is called the operating budget. Operating budget must include factors
such as production, labor cost, etc. to provide a clear picture for the company.

The specific time period for operating budget is weekly, monthly, quarterly, half yearly or
yearly depending on the convenience of the organization. A regular month on month or
quarter on quarter analysis of these reports helps in the determination of overspending of
budgets.

3) Financial budget

The company strategy for managing it assets income and expenses and other financial aspects
are present in the financial budget. The financial budget helps to paint the overall picture of
the financial health of the company and an overview of it spending in accordance with its
revenues from core operations.

4) Sales Budget

This type of budget gives some expected sales revenue and expenses and selling for the
organization for a specific period of time. It is the backbone of the organization or it is also
known as the nerve Centre since it is the initiation on which are deposits are also based.
Sales forecasting plays a very important role and determination of sales budget is both should
be proper for further things to fall in place.

5) Production budget

Sales budget forms the basis for the preparation of the production budget. Stock levels are
also taken into consideration along with the manufacturing program of the organization. The
production budget is very useful in determining the cost of production which in turn will
decide the price of the product. Every organization has a different type of production budget.
2. The increase or decrease in cost elements (From P & L Statement and
other financial statements) by doing comparative analysis for the last three
years.

PROFIT AND LOSS STATEMENT:

PROFIT & LOSS MAR '19 MAR '18 MAR '17 MAR '16 MAR '15
ACCOUNT OF
TATA STEEL
(in Rs. Cr.)
12 months 12 months 12 months 12 months 12 months
INCOME
Sales Turnover 70,610.92 60,519.37 53,260.96 42,686.29 46,577.26

Net Sales 70,610.71 59,616.82 47,993.02 38,210.34 41,785.00

Other Income 2,294.73 -2,447.24 -431.34 2,308.15 2,473.63

TOTAL 73,459.77 56,624.22 48,891.33 40,375.52 45,003.80

INCOME
EXPENDITURE

Raw Materials 25,688.42 20,831.29 16,129.77 13,116.66 14,701.62

Power & Fuel Cost 3,033.34 2,925.20 2,880.92 2,881.17 2,704.42

Employee Cost 5,131.06 4,828.85 4,605.13 4,324.90 4,601.92

Other 0 0 0 0 0
Manufacturing
Expenses
Miscellaneous 16,749.28 14,707.16 13,830.90 10,532.89 10,513.41
Expenses
TOTAL 50,602.10 43,292.50 37,446.72 30,855.62 32,521.37
EXPENSES
OPERATING 20,562.94 15,778.96 11,875.95 7,211.75 10,008.80
PROFIT
PBDIT 22,857.67 13,331.72 11,444.61 9,519.90 12,482.43

PBDT 20,034.09 10,521.10 8,756.06 8,059.63 10,506.48

 Depreciation 3,802.96 3,727.46 3,541.55 1,933.11 1,997.59

Profit Before Tax 16,231.13 6,793.64 5,214.51 6,126.52 8,508.89

PBT (Post Extra- 16,231.13 6,793.64 5,214.51 6,126.52 8,508.89

ord Items)
Tax 5,694.06 2,468.70 1,912.38 1,225.57 2,069.77

REPORTED NET 10,533.19 4,169.55 3,444.55 4,900.95 6,439.12

PROFIT
Total Value 24,913.68 22,461.21 21,316.95 17,738.96 17,819.75
Addition
Equity Dividend 1,145.92 1,237.35 1,043.07 776.97 776.97

Corporate 224.86 95.71 55.65 149.3 153.02

Dividend Tax
PER SHARE
DATA
(ANNUALISED)
Shares in issue 12,041.26 12,041.19 9,712.15 9,712.15 9,712.15
(lakhs)
EARNING PER 87.48 34.63 35.47 50.46 66.3
SHARE (RS)
Equity Dividend 130 100 100 80 80
(%)
Book Value (Rs) 585.11 510.87 511.31 725.65 686.4

ANALYSIS:
Over the last 5 years sales decrease in the beginning (2016) but in the remaining years kept
on increasing.
Over the last 5 years income kept on increasing except 2016.
Over the last 5 years expenses also kept on increasing except 2016.
Operating income also kept on increasing except 2016.
Net profit also kept on increasing over the last 5 years except 2016.
Tax also kept on increasing as per the profit ratio.
As per the increase in the profit Ratio Earning share also kept on increasing.
Tata Steel Long shares closed at 406.00 on January 28, 2020 (NSE)
X
BALANCESHEET STATEMEMT:
Standalone ----------------------------in Rs.Cr.---------------------------------
Balance Sheet
Mar 19 Mar-18 Mar-17 Mar-16 Mar-15
12 months 12 months 12 months 12 months 12 months
EQUITIES AND
LIABILITIES
SHAREHOLDER'
S FUNDS
Equity Share Capital 1,146.12 1,146.12 971.41 971.41 971.41

Total Share Capital 1,146.12 1,146.12 971.41 971.41 971.41

Reserves and 69,308.59 60,368.70 48,687.59 69,505.31 65,692.48
Surplus
Total Reserves and 69,308.59 60,368.70 48,687.59 69,505.31 65,692.48
Surplus
Total Shareholders 70,454.71 61,514.82 49,659.00 70,476.72 66,663.89
Funds
Equity Share 0 0.02 0.01 0 0
Application Money
Hybrid/Debt/Other 2,275.00 2,275.00 2,275.00 2,275.00 2,275.00
Securities
NON-CURRENT
LIABILITIES
Long Term 26,651.19 24,568.95 24,694.37 23,457.77 23,900.37
Borrowings
Deferred Tax 7,807.00 6,259.09 6,111.27 2,179.83 2,250.41
Liabilities [Net]
Other Long Term 2,798.63 2,927.91 3,644.69 842.66 1,087.74
Liabilities
Long Term 1,918.18 1,961.21 2,024.74 2,888.18 2,875.92
Provisions
Total Non-Current 39,175.00 35,717.16 36,475.07 29,368.44 30,114.44
Liabilities
CURRENT
LIABILITIES
Short Term 8.09 669.88 3,239.67 5,261.02 34.88
Borrowings
Trade Payables 10,969.56 11,242.75 10,717.44 7,706.13 5,801.98
Other Current 13,837.77 12,959.43 8,398.62 6,115.81 9,111.52
Liabilities
Short Term 778.23 735.28 700.6 2,005.03 1,675.41
Provisions

Total Current 25,593.65 25,607.34 23,056.33 21,087.99 16,623.79

Liabilities
Total Capital And 1,37,498.36 1,25,114.34 1,11,465.41 1,23,208.15 1,15,677.12
Liabilities
ASSETS
NON-CURRENT
ASSETS
Tangible Assets 70,416.82 70,942.90 71,778.97 24,901.24 25,071.38

Intangible Assets 805.2 786.18 788.18 527.35 177.14

Capital Work-In- 5,686.02 5,641.50 6,125.35 26,982.37 23,036.67

Progress
Intangible Assets 110.27 31.77 38.61 0 0
Under Development
Fixed Assets 77,018.31 77,402.35 78,731.11 52,410.96 48,285.19

Non-Current 38,929.25 9,636.56 8,355.90 52,360.42 52,164.24

Investments
Long Term Loans 231.16 213.5 211.97 3,787.88 3,166.77
And Advances

Other Non-Current 4,284.06 3,218.02 4,056.03 227.4 211.75

Assets
Total Non-Current 1,20,462.78 90,470.43 91,355.01 1,08,786.66 1,03,827.95
Assets
CURRENT
ASSETS
Current Investments 477.47 14,640.37 5,309.81 4,320.17 1,000.08
Inventories 11,255.34 11,023.41 10,236.85 7,083.81 8,042.00
Trade Receivables 1,363.04 1,875.63 2,006.52 632.8 491.46

Cash And Cash 718.11 4,696.74 970.31 1,014.67 478.59

Equivalents
Short Term Loans 55.92 74.13 27.14 1,243.48 1,781.77
And Advances
Other Current Assets 3,165.70 2,333.63 1,559.77 126.56 55.27
Total Current 17,035.58 34,643.91 20,110.40 14,421.49 11,849.17
 Assets
Total Assets 1,37,498.36 1,25,114.34 1,11,465.41 1,23,208.15 1,15,677.12

ANANLYSIS:

Share capital maintain constant in the year 2015-16-17 Rs 971.41 Cr, As well in the year
2018&19 also kept on same capital of Rs 1,146.12 Cr.
Reserves and Surplus kept on varies in year to year but in the last 2 years also kept on
increasing.
Shareholders’ funds consequently increase in the beginning year 2015&16, but in the 2017
decrease in the fund, consequently 2018&19 kept increasing.
Working capital also kept on negative but except 2018 Current liabilities are more compared
to Current Assets except in the year 2018.
Non-Current liabilities decrease and increasing reactively in respective year.
Liabilities also kept on increasing but in the year 2017 only fall down liability.
Non-current assets increase in the beginning year as well in the middle years kept on
decrease as well in the year 2019 ultimately increase.
Assets increase in the beginning years but in the year 2017 decrease as well it kept on
increasing in the assets.

CONCLUSION:
Hence budgetary control in an important tool for any organization to establish a budget for
future events. It helps organization in proper utilization and control of its resources.
Therefore the effectiveness of budgetary control depend on the availability and quality of the
forecast.
The process involves developing a sales forecast and, based on its magnitude, generating
production and manufacturing expense budgets needed by a specific firm. Once developed,
the budgeting system provides management with a means of controlling its activities and of
monitoring actual performance and comparing it to budget goals.
A comprehensive profit planning and control program involves budgeting the materials and
parts used in the production process. The budget process involving manufacturing expenses
includes the material usage and purchase budgets, direct labour budgets, and factory overhead
budgets.

REFERENCE:
 Moneycontrol.com
 Economictimes.com