International Journal of Management and Social Sciences Research (IJMSSR)
Volume 6, No. 8, August 2017
Budgeting and Budgetary Control System: A study on Selected
Indian Companies
Dr. K. Manoharan Nair, Former Associate Professor and Head of the Post Graduate Dept of
Commerce and Research Centre, Mahatma Gandhi College, Thiruvananthapuram
Alireza Kaab, Research Scholar, Deptt. of Commerce, University of Kerala, Thiruvananthapuram
ABSTRACT
Budgeting is very important and it determines the way in
which the organization can attain its financial and other
goals. It is an estimate about the future actions of the
management in the form of financial Statements. Once the
budget is set in quantitative or qualitative terms the
management try their best for not exceeding the target set.
But on account of dynamic nature of the environment both
internal and external the estimated figure will vary. As a
control measure they traise the variations between the
actual and the budgeted one and identify the causes of
such variations and take corrective measures for not
occurring such variations in future. One of the
components which is significant for internal control
system is budgetary control system (BCS).The objective of
the present study is to know the budgetary control system
in selected Indian companies.
Keywords
Budgeting, Budgets, Budgetary Control System (BCS),
Management Accounting System.
INTRODUCTION
Budgeting is very important in the sense that it determines
the way in which the organization can attain its financial
and other goals. Budgeting is an estimate about the future
actions of the management in the form of financial
Statements. Management accounting provides useful
information for management to develop strategies. In
order to achieve organizational objectives, implementation
of internal controls is necessary. One of the components
which is important to conduct internal controls is
budgetary control system (BCS). In India much attention
has been given to improving of budgetary control and
planning and their interrelationship in developing
countries like India. Budgeting is the process of preparing
a detailed statement of financial results that are likely to
happen in a period in a time to come. A budget is the sum
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ISSN: 2319-4421 1
of money allocated for a particular purpose and the
summary of intended expenditures along with proposals
for how to meet them .It helps to aid the planning of actual
operations by forcing managers to consider how the
conditions might change and what steps should be taken
now and by encouraging mangers to consider problems
before they arise. It also helps to co-ordinate the activities
of the organization by compelling managers to examine
relationships between their own operation and those of
other departments in a way to control resources;
communicate plans to various responsibility center
mangers, motivate managers to strive to achieve budget
goals , evaluating the performance of managers , provide
visibility into the company’s performance and for
accountability. In this context a study is made to know the
budgetary practices of selected Indian companies
LITERATURE REVIEW
Budgetary control allows for greater expansion
opportunities and provides the means to strengthen the
control of management within major companies and it can
be performs well only in highly managed companies
(Nicolas Berland (2001).
In a study on budgetary control system, David Otley
(2001) revealed that the assumption of budgetary control
is that it is the main integrative control method for most
business enterprises. The assumption being that an
organization’s business plan can be represented financially
by the budget and that the budget can be used as a
monitoring and controlling method for the complex issues
of the business plan.
Ruth Hamson, Len Bird (2002) in a study argued that
budget management and budgetary control is influenced
by three main elements: control, performance and people
all of which are governed by the culture of the
organization.
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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 6, No. 8, August 2017
Joshi. P.L., Javahar Al-Mudhaki, Wayne G. Bremser
(2003) conducted a study on corporate budget planning,
control and performance evaluation in Bahrain, examined
the budget planning as well as budgetary control systems
within organizations in Bahrain. The study concluded that
most of the companies prepare both fixed and variable
budgets and also they have tight budgetary control
systems.
In study by Alnoor Bhimani and David Otley (2007) found
that budgetary control systems and responsibility
accounting still form the backbone of the management
control systems of many organizations.
Budgetary control is the most common, useful and widely
used standard device of planning and control according to
Rashmi Rathi (2011).
Cheng-Tsung Lu (2011) in study concluded that budgeting
control system could not achieve effectiveness in
planning, motivating, negotiating, and controlling if there
was no support from the organizational members, and also
pointed out when the department managers have higher
budgetary motivation and more positive budgetary
attitude, the budgetary performance tends to be higher.
Sidhakam Bhattacharyya and Gautam Bandyopadhyay
(2012) in a study concluded that no budgetary control
system is effective unless it provides for the integration of
budgeting, accounting and financial accounting.
Budgetary control system is an effective way to reduce the
accounting errors (David A Palmer, 2012). Okpala (2013)
concluded that budgetary control has significant influence
on workers motivation which leads to savings in the
service charge expenditure.
Human factors within budgetary controls thus managerial
commitment, employees’ motivation, employees’ training,
competence as well as attitude affect the budget control
process (Kenneth Adongo and Ambrose Jagongo, 2013).
STATEMENT OF THE PROBLEM
Every organization irrespective of whether it is small,
medium or large made use the tool budgets and implement
it and compare the actual with budgeted and taken steps
for avoiding the occurrence of such causes in future . To
what extent these are made effective is the problem to be
looked into and hence the present study with the following
research questions:
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ISSN: 2319-4421 2
 What is the relationship between budgetary control
system and organizational efficiency?
 What are the issues related to budgeting and
budgetary control systems within an organization?
 How organizational efficiency can be improved
using budgetary control system?
OBJECTIVES OF THE STUDY
The objectives set for the study are:
 To investigate the relationship between budgetary
control system and organizational efficiency.
 To investigate the issues related to budgeting and
budgetary control system in an enterprise.
 To investigate ways by which organizational
efficiency can be improved using budgetary control
system.
METHODOLOGY
Method of Study: The study method is empirical which
tests the feasibility of solutions by applying statistical
measures.
Data Source: Both secondary and Primary data has been
used for the study
Secondary Data: The secondary data has been collected
from the literature survey and annual reports of the
companies selected for the study.
Primary Data: Primary data has been collected by using
Purposive Sampling Technique with a total sample of 50
respondents selected 10 each from 5 Companies selected
purposively by those companies use budgetary control
system in their organization for last five years.
Tools for Data Collection: The primary data has been
collected by using of Questionnaire and Interview
Schedule specifically developed for the purpose.
Tools used for Data Analysis: Simple statistical and
mathematical tools like percentages, mean and ranking
methods are used for analysis of data.
ANALYSIS AND INTERPRETATION OF
DATA
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International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 3
Volume 6, No. 8, August 2017

In the first part of analysis include the socio- economic 3. Educational Qualifications
background of the respondents and the second part analyze
the variables. Education is knowledge and this knowledge increases the
skill, maturity and potential of the managers. So the
Part A - Analysis on Socio Economic variables information is collected and the views of respondents on it
are depicted in Table 1.3.
1. Gender
Table 1.3 Educational Qualification
The gender dimension in the management of companies is
significant. The proportion between male and female of No. of
the sample respondents selected for the study are given in Qualification Responses Percent
Table 1.1. Valid Professional 33 66.0
Nonprofessional 17 34.0
Table 1.1: Gender wise Classification
Total 50 100.0
Gender No. of Percent
Responses Source: Primary Data
Valid Male 42 84.0
Table 1.3 indicates educational qualifications of
Female 8 16.0
respondents, 66 per cent of the respondents have
Total 50 100.0 professional qualification (graduates in MBA, PhD of
accounting) and 34 per cent have non-professional
Source: Primary Data education. It means majority have high professional
qualifications.
It is clear from Table 1.1 that 84 percent of respondents
are males while other 16 percent are females. It shows that 4. Experience
the majority of respondents are male.
The experience is yet another variable taken for analysis of
2. Age the management of rubber plantation in Kerala and the
collected data are recorded in Table 1.4
Another important personal profile variable is the age of
respondents .It also have an impact on determining the Table 1.4 Professional Experience
efficiency of control system in companies. The age wise
classification of respondents is shown in Table 1.2.
No. of
Professional Experience Responses Percent
Table 1.2: Agewise Classification
Valid 1-5 Years 8 16.0
Age No. of Percent 5-10 Years 12 24.0
Responses 11-15 Years 13 26.0
Valid Below 25 8 16.0 Above 15 Years 17 34.0
25-35 22 44.0 Total 50 100.0
Above 35 20 40.0
Total 50 100.0 Source: Primary Data

Table 1.4 indicates that 16 per cent of respondents have 1

Source: Primary Data
Table 1.2 shows that 16 per cent of respondents fall below
25 years of age, 44 per cent fall between 25 to 35 years
and 40 per cent are of the age group of above 35 years. It
means that majority are from the age group of 25 to 40
years.
to 5 years working experience, 24 percent have 5 to 10
years experience, 26 per cent have 11 to 15 years
experience and 34 per cent have above 15 years
experience. Majority of them have experience with 11 to
15 years.

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International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 4
Volume 6, No. 8, August 2017

Part B - Variable Analysis

1. Budgeting
Table 1.5: Process of Budgeting and its Efficiency

Strongly Strongly
Disagree Disagree Neutral Agree Agree Total
No – No – No – No – No – No –
per cent per cent per cent per cent per cent per cent Mean
1. Is there any budget preparing 7 7 2 4 30 50
77
process? (14.0) (14.0) (4.0) (8.0) (60.0) (100)
2. Does organization enjoy budgetary 2 3 2 15 28 50
87
control system? (4.0) (6.0) (4.0) (30.0) (56.0) (100)
3. Do you have budget committee? 3 7 3 12 25 50
80
(6.0) (14.0) (6.0) (24.0) (50.0) (100)
4. Is there relationship between 2 3 1 6 38 50
90
budgetary control and efficiency? (4.0) (6.0) (2.0) (12.0) (76.0) (100)
5. Does budgetary control system is 5 10 1 12 22 50
74
in a proper manner? (10.0) (20.0) (2.0) (24.0) (44.0) (100)

Source: Computed from Primary Data

Figures in brackets shows Percentage to total.

All responses about budgeting process and budgetary
control system within organizations summarized in table
1.5. in which 30 respondents representing 60per cent of
the total respondents indicated that their organizations
have budget preparation process, which means the process
of budget preparation need to be improved within
organization. The average mean level of satisfaction
recorded in this case is 77 per cent. The average mean
level of satisfaction recorded in this case is 87 per cent. In
it, 56 per cent of the respondents believed there is a
budgetary control system in their organizations. The
average mean level of satisfaction recorded in this case is
80 per cent Responses about existence of budget
committee in organizations indicated that 50 per cent of
respondents declared there is a budget committee in their
organization. The average mean level of satisfaction
recorded in this case is 90 per cent .Relationship between
budgetary control and efficiency obtained highest rank
since 76 per cent of respondents were strongly agreed that
there is a relationship between budgetary control system
and organizational efficiency. The average mean level of
satisfaction recorded in this case is 74 per cent . Only 46
per cent of respondents declared that implementation of
budgetary control system take place in a proper manner in
their organizations.

2. Relationship between Budgetary Control system and Organizational Efficiency

Table 1.6: Budgetary control system and organizational efficiency

Forecasting Future Better Cost Maximize Minimize Total

Events Planning Reduction Profitability Variances
No per cent No per cent No per cent No per cent No per cent No per cent
3 6.0% 15 30.0% 12 24.0% 10 20.0% 10 20.0% 50 100 %
No Rank No Rank No Rank No Rank No Rank Total
3 5 15 1 12 2 10 3 10 4 50

Source: Computed from Primary Data

As presented in table 1.7 only 3 (6.0per cent ) respondents budgetary control system. Interestingly, 15 (30.0per cent )
indicated that future events can be predicted through of the respondents indicated that budgetary control system

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International Journal of Management and Social Sciences Research (IJMSSR) ISSN: 2319-4421 5
Volume 6, No. 8, August 2017

leads to better planning and through good planning
organizational efficiency can be improved, while 12
(24.0per cent ) of respondents pointed out that cost
reduction is one of the components of budgetary control
system which can lead to organizational efficiency. 10
(20.0per cent ) of respondents indicated that maximization
of profitability is an important characteristic of budgetary
control system, and 10 (20.0per cent ) of respondents
believed that budgetary control system would diminish the
variances and eventually leads to organizational
efficiency. All the variables listed above are important
components of budgetary control system in order to
achieve organizational efficiency but the priority is
different in each organization. Some organizations
utilizing budgetary control system as a tool for cost
reduction while some other are using it as a managerial
tool to planning for future operations.
It is noticed from Table 1.6 that 20 per cent each of the
respondents viewed that minimize profitability and
minimize variances and another 24 per cent give
importance to cost reduction and30 per cent viewed that
better planning. Only 6 per cent pointed out that
forecasting and future events . In it first ranked variable is
Better planning according to 15 respondents, Second
ranked variable is cost reduction by 12 respondents , Third
ranked one is Maximise profitability by 10 respondents
and another 10 respondents ranked four as minimize
variance and only 3 respondents ranked fifth as
forecasting future events.

Table 1.7: Are there any issues in implementation of budgetary control system?

Strongly disagree Disagree Neutral Agree Strongly Agree Total

No per cent No per cent No per cent No per cent No per cent No per cent Mean
issues in
implementation of
11 22.0% 20 40.0% 0 0.0% 5 10.0% 14 28.0 % 50 100.0 % 56
budgetary control
system
Source: Primary data

Table 1.7 represents responses in regards to challenges in (62.0per cent ) of the respondents believed that there is no
implementation of budgetary control system. 14 (28.0per issue in implementation of budgetary control system in
cent ) of the respondents indicated that there is some their organizations. It can be interpreted that the budgetary
issues in implementation of budgetary control system in control systems in these organizations runs smoothly and
their organizations. It shows these issues should be senior management considered budgetary control system
addressed by the senior managers. Interestingly, 31 as efficiency component.
Table 1.8: What are the barriers in proper implementation of budgetary control system?

Undetermined Lack of Financial Senior Management Organizational Inaccurate

Responsibilities Experts Negligence Strategies Information Total
No per cent No per cent No per cent No per cent No per cent No per cent
9 18.0% 11 22.0% 26 52.0% 4 8.0% 0 0.0% 50 100.0%

Source Primary data

Table 1.9: Rank of Responses

Senior Management Lack of Undetermined Organizational Inaccurate

Negligence Financial Experts Responsibilities Strategies Information
Rank per cent Rank per cent Rank per cent Rank per cent Rank per cent
1 52 2 22 3 18 4 8 5 -

Source: primary data

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International Journal of Management and Social Sciences Research (IJMSSR)
Volume 6, No. 8, August 2017
It is seen from table 1.9 that first ranked variable by
respondents ( 52 per cent) is the senior management
negligence, second rank one is lack of financial experts (
22 per cent of the respondents ), third ranked one is
undermined responsibilities ( 18 per cent of respondents) ,
fourth ranked variable is organizational strategies and fifth
ranked one is inaccurate information .
CONCLUSIONS AND SUGGESTIONS
Budgeting is very important and it determines the way in
which the organization can attain its financial and other
goals. Hence, the current study conducted to investigate
budgeting and budgetary control system (BCS) within
Indian organizations. The study data analysis indicates that
budgetary control system is implemented in most of the
organizations but somehow it should be improved. Most of
the respondents agreed that there is a strong relationship
between budgetary control system and organizational
efficiency. Interestingly, finding of the study revealed that
budgetary control system serves different purposes within
Indian organizations, in some organizations BCS is used
for cost reduction and in other cases it used for maximize
profitability as well as to minimize variances. Eventually,
most of the respondents agreed that there are some barriers
in proper implementation of BCS in their organizations.
The findings indicated that most significant barrier in BCS
implementation is senior management. Hence, the senior
management plays prominent role in implementation of
BCS and the problems involved the management should
be addressed in order to achieve organizational goals.
The study recommends that in order to increase
organizational efficiency, senior management should put
in place measures to solve the problems associated in
budgetary control system procedure. Moreover, budget
participation should be take place within organizations in
order to enhance employee’s perception in regards to
budgeting and planning.
While this study extends the literature on budgeting and
budgetary control system, more studies in this field are
needed. The study recommends further research on
budgeting and budgetary control system since it is most
significant factor in organizational efficiency.
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including Financial Management and Control”,
Macdonald and Evans.
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ISSN: 2319-4421 6
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