CHAPTER-1 INTRODUCTION TO BUDGETORY CONTROL

Budgetory Control is a system of planning, budgeting and evaluation that emphasizes the relationship between money budgeted and results expected. Budgetory Control is based on the assumption that presenting performance information alongside budget amounts will improve budget decision-making by focusing funding choices on program results. Budgetory Control shift the focus of attention from detailed items of expensesuch as salaries and travel---to the allocation of allocation of resources based on program goals and measured results. It continues the presented set by other financial management programs initiated since the 1960s such as management by objective (MBO); zero-based budgeting (ZBB) and the planning, programming. And budgeting system (PPBS). Objective (1973) and zero-based budgeting (1977) surfaced in an environment of increasing discretionary spending, while Budgetory Control emerged during a time of declining budgets. To justify current program performance. To legislative staff, performance information can be a valuable government tool to improves

SCOPE OF STUDY 1. The study covers Budgetory Control of the company over the years 2009-2012 2. This study covers P&L Account Budget. 3. The study covers the performance of SAIRSINFO Company alone

METHODOLOGY: Secondary data: Data is obtained from reports and statements provided by SAIRSINFO. Relevant information has been gathered from books. LIMITATIONS OF THE STUDY 1. The study covers only historical data 2. The study covers only Budgetory Control of the company. 3. The study covers only profit and loss accounts. 4. Due to confidentiality of the company we cant interpret the analysis clearly

CHAPTER-2 INDUSTRY PROFILE INDUSTRY PROFILE

Overview of Indian IT Industry The Indian IT industry is growing steadily despite the global meltdown in the year 2009. When the whole of the world witnessed the negative growth, Indian IT industry still managed to register a growth of 5.5%. The industry is about to register the historic landmark of US $ 50 billion exports this year, according to NASSCOM President, Som MIttal. The domestic market is also slotted to witness 12% growth, this year. Potential size of Indias offshoring industry is estimated at US $ 120 to 180 billion by 2015. The industry currently employs around 1 million people and provides indirect employment to around 2.5 million people. It is expected to add another 1, 50,000 jobs in the next fiscal according to NASSCOM. Indian IT/ ITes sector is growing substantially with its

The phenomenal success of the Indian IT- ITeS industry can be attributed to the favorable government policies, burgeoning demand conditions, healthy growth of related industries and competitive environment prevalent in the industry. The interplay of these forces has led to putting the industry on the global map. History and Evolution of IT Industry The evolution of IT industry can be studied in 4 phases: Phase I: Prior to 1980 The software industry was literally nonexistent in India until 1960. Software used in the computers till that time, were in built with the systems. Government protected the hardware industry through high tariff barriers and licensing. However, in the West, the need for software development was gradually being felt as the software in built in the system was not sufficient to perform all the operations. The Government of India therefore, realized the potential for earning foreign exchange.

In 1972, the government formulated the Software Export Scheme. This scheme made the provision of hardware imports in exchange of software exports. TCS became the first firm to agree to this condition. The year 1974 marked the beginning of Software exports from India. Phase II: 1980- 1990 Despite the government initiatives, the software exports were not picking up because of two reasons mainly:

as well as the procedure for obtaining the same was very cumbersome.

To counter these, the government formulated a New Computer Policy in 1984, which simplified import procedures and also reduced the import duty on hardware for software developers. In an attempt to make, software industry independent of the hardware industry, the government in 1986, formulated Software Policy which further, liberalized the IT industry. According to this policy, the hardware imports were de-licensed and were also made duty free for the exporters. This along with the world wide crash in the hardware prices reduced the entry barriers substantially. In 1990, government established Software Technology Parks of India. This scheme was formulated to increase the exports of software and services. Phase III: 1990- 2000 This decade made several significant changes in the economy, including trade liberalization, opening up of Indian economy to foreign investment, devaluation of the rupee and relaxation of entry barriers. These changes attracted many foreign entities (MNCs) to our nation. These MNCs in India, introduced Offshore Model for software services, according to which, the companies used to service their clients from India itself. This model further graduated to Global Delivery Model (GDM). Global Delivery Model is a combination of Onsite and Offshore Model. In this model, the Offshore Development Centre is located at various locations across the globe. During this period due to the entry of many players in the Indian market, the competition got intensified. Therefore, the players started investing in research and development to distinguish their services from others. Phase IV: Post 2000

The global problems like the Y2K, the dotcom crash and recession in the US economy, proved to be a boon to Indian IT industry. The Y2K problem demanded the existing softwares to be compatible to the year 2000. Due to the shortage of US based programmers during this period, many mid sized firms were forced to utilize the services of Indian firms. This had placed the Indian IT industry on the global map. Post 2002- 03, the industry had registered a robust growth rate because of increase in the number of clients, large sized contracts and a strong global delivery model.

Industry Segmentation IT industry can be broadly classified into three sectors:

- BPO

Software: IT Software comprising of the (a) Software Products and (b) Engineering and R & D Services, forms the smallest sector of the Indian IT industry. a. Software Products: The market for software products is growing rapidly as the Small and Medium Enterprises (SMEs) as well as large organizations are utilizing the services of software in simplifying their works. The sector is highly concentrated with the top 10 firms, dominating the market. IT Software comprises of the the i. Infrastructure Software ii. Enterprise Application Software.

Infrastructure Software:The Infrastructure software connects the people and systems across an organization. It helps in efficiently executing the business processes, share information and the manage the various touchpoints with the customers and the suppliers. It can be of the following types:

t systems

-system software

Enterprise Application Software:-

It is a software specifically designed to solve an enterprise problem. The application software performs various business functionalities like accounting, production scheduling, customer information management, etc. The Enterprise application softwares currently available are:

-learning b. Engineering and R & D Services: This sector has recently originated in India. Many players are trying to tap this market by developing their engineering capabilities. IT Services: India is one of the leading provider of IT services. The basic model followed is known as Offshoring wherein Indian firms cater to the specific requirements of its clients by employing efficient project and quality management skills for its execution. This segment comprises of : (a) Project- oriented services: These services are delivered as individual projects. The services are catered according to the needs and wants of the clients, and the expertise of the vendor. These services can be delivered onsite or offshore, or can be a combination of both also. These services include the following services: IT Consulting: The players in this service line advise clients to streamline their business using IT. They help them in devising IT strategy, IT architecture, IT assessment and planning etc. IT consulting in India is still at a very nascent stage. Major companies which are involved in this service are Wipro, TCS, Satyam, Infosys. Systems Integration: This comprises a whole bouquet of services which are very specific to the requirements of the end user. The range of services included are:

o Integration of various systems deployed by the organization- CRM, ERP, SCM etc. o Integration of business processes and logistics

o Configuration of customized software o Database Maintenance o Integration of legacy systems with the new software or hardware CADM: These services include designing, upgrading and maintainance of software to suit the user requirements. These services dominate the project oriented services market. These services are best suited for offshoring, that is why, these services dominate the Indian export basket. Network Consulting and Integration: These services offer planning, construction and designing of data networks. The range of services in this service line includes: o Network architecture design o Network connectivity o Systems Management o Project Management o Network Maintenance etc.

Software Testing: It checks the quality of a software product or service. It is basically a technical investigation to identify and rectify errors to meet specific quality parameters. Software Testing operates in three spheres: o Response Testing: Ensures that parameters from which the responses are elicited from the target audience are operational as well as efficient enough. o Security Testing: Ensures that all the security parameters are risk free

o Load Testing: Ensures that the software can handle the load density so as to reduce the down time.

(b) IT Outsourcing: When an organization contracts another organization for managing, deploying and maintaning its IT architecture or system, it is called as IT Outsourcing. It includes: deploying, maintaining, and upgrading a firms IT systems. vices offered in this segment varies depending on the requirements of the client. The services offered in IS Outsourcing can be: o Desktop Management

o Help Desk Support o Management of Operation systems o Management of Applications systems o Management of Anti Virus systems o Back up equipment service etc. (c) Training and Support: It includes three segments: software on the clients systems. yment and Support: It involves deploying specific hardware devices on the clients systems.

organization Information Technology systems. It is imparted to provide organization specific skills.

IT- enabled Services: It consists of those services which are delivered using software as a means of production and Internet as a means of transmission. According to AT Kearney, India is considered to be the most preferred destination for companies which are looking for off shoring their IT and backoffice functions. The factors favoring the growth of this sector in India are:

Present Industry Structure The Indian IT industry comprises of well established billion dollor firms as well as start ups or the emerging players. The industry can be described as fragmented yet concentrated. In terms of the expanse of presence of the small and medium enterprises (SMEs) and their offerings, they can be termed as Fragmented. But, on the other hand, when the dominance of the leading players are taken into consideration, because of their earnings as well as their offerings, the industry can be reffered to as Concentrated. The industry can be categorized into:

Offshore Global Services Provider

Tier II Players: These players have their revenues greater than US $ 100 billion. The number of players in this category is also low (10- 12), but they account for 25 per cent of IT services and 4- 5 per cent of BPO exports. Due to limited number of clients, service lines and verticals, these players have registered a lower growth rate than the Tier I players. Offshore Global Service Providers: This category has around 30- 40 players who have registered their sales revenue of US $ 10- 500 billion. These players are recording inorganic growth through acquisitions in low cost destinations including India. But, due to complex local market conditions, they are facing challenges in integrating Indian operations. Pure Play BPO providers: The number of players in this category have hovered around 40- 50. They account for around 20 per cent of BPO exports. These players are facing serious challenges in terms of increasing customer expectations in terms of quality and delivery of service. Captive BPO Units: There are about 150 players in this category. They account for 50 per cent of BPO exports. They are also increasing their presence in Tier II cities, primarily for cost and resource considerations. Emerging Players: The number of players in this category is over 3000. They account for about 10- 15 per cent of IT services exports and 5 per cent of BPO. These players are facing severe challenges as they have limited access to markets and the lack delivery scales. Advantage India Technically Skilled Professionals: India has a huge reservoir of technically sound manpower. This has proved to be one of the most critical success factor for Indian IT sector. This growth is also complimented by the demographic profile of India, where over 50 per cent of the population is below 25 years of age. The growing number of world class educational institutions along with the policy for educational loans, have geared the growth of the industry. English speaking population: Because of Indias colonial past, the medium of education in India is primarily English. This has proved to be boon to the industry. India is the second largest nation in the world in terms of English speaking population, first being USA. Robust Telecom Infrastructure: The telecom industry in India is well established. The telecommunications network in India, is the third largest network in the world and the second largest among the emerging nations in Asia. The availability of superior, robust and reliable telecom connectivity has added to the success of the whole industry in India.

Rendering Customized, end to end and Niche Services/ Solutions: Due to the increasing pervasiveness of IT and huge potential for earning foreign exchange, Indian firms have slowly graduated from giving customized solutions to end to end services and also niche solutions/ services. Lower costs of offshore outsourcing: The initial driver for offshoring to India was cost. But, India has proved to deliver quality services at affordable costs. According to AT Kearney, offshoring to India results in saving 25- 60 per cent of the base cost. Established IT hubs in India [Source: STPI, Tramell Crow Meghraj] Figure : Established IT hubs in India 1. Bangalore: -09 were 2085 (5% growth as compared to the year 2007-08). growth of 21% in the year 2008-09.

fiscal 2005-06, the state of Karnataka accounted for 37.6 percent of the total software exports from India and the city of Bangalore alone accounted for about 97 percent of it. Thus around one third of all of Indias software exports are from the city of Bangalore.

2. Hyderabad: registered units by the end of 2008-09 were 1060

3. NCR- Delhi: of 2008-09 were 1938

4. Kolkata -07: 166 (28 added in 2006-07)

5. Mumbai l STPI registered units by 2006-07: 630 (40 added in 2006-07)

6. Pune -07: 635 (108 added in 2006-07) urce

7. Chennai -07: 900 (131 added in 2006-07)

Emerging IT hubs in India Slowly and steadily the Tier 2 and Tier 3 cities are also emerging to become IT hubs. The major advantage which these cities provide are

ssionals

Growth of the Industry The Indian IT industry has been growing at a rapid pace by offering a wide range of products and services. This growth can be attributed to the exports of lower end services, but slowly and steadily the Indian IT industry is moving towards rendering higher end services.

The growth of the industry can be studied by observing the growth in all the segments of the industry. There has been a growth in the exports as well as domestic sales. 1. IT Software: This segment represents the smallest segment of the Indian IT industry. It comprises of (a) the Software products and (b) engineering and R& D services. Major Threats to the Industry 1. High Attrition Rate: Staff shortage can prove to be a major bottleneck to the growth of the industry. According to McKinsey & Co., only 25 percent of the technical graduates are competent enough to work in the offshore IT industry in India. In the BPO sector also, only 1015 per cent of the graduates are suitable for employment. Therefore, managing attrition rate is becoming a big task for the IT companies in India.

High attrition rate results in loss of skilled manpower, loss of skill sets etc. Apart from loss in skill sets, cost of recruitment, training and development of the new recruits also becomes a major investment for these companies. 2. Competition from other emerging nations: Chinese IT hubs like Beijing and Shanghai are set to overtake Indian hubs by the year 2011, according to a report by IDC. These cities are competing with India on account of their stable socio- economic environment, excellent infrastructure, low attrition rates and skilled talent pool. 3. There is a need for improvement in the urban infrastructure. According to McKinsey, further growth of the industry has to come from small districts, outside the Tier 1 and Tier 2 cities. 4. Lack of fluency in languages other than English, e.g. French, Spanish, Italian etc. is proving to be a weakness of the Indian IT industry. 5. End of Tax Benefits at STPIs: There is a dissimilarity in the tax regimes at STPIs. This would lead to conversion of these STPIs into SEZ units. 6. Overdependence on US Economy: Almost 70% of the IT industry revenues comes from USA. Therefore, any downscale in the US market, adversely impacts the Indian market too. E.g. recent downsizing and job cuts due to recession in the US market.

7. Rupee Appreciation: As most of the earnings are in foreign currencies, therefore Rupee appreciation becomes an area of concern for the industry. 8. Lack of Product Innovation: India specialises in services but not in products. The nation lacks in product innovation, which can be considered a major area of concern. It will be difficult to maintain competitive advantage if product innovation doesnt occur. 9. Limited Domestic Market: The domestic market is still in the nascent stage in India. This makes the whole industry vulnerable to export market only. The Indian Information Technology industry represents one of the most successful industry showing consistent rapid growth. In a report, Perspective 2020: Transform Business, Transform India, prepared by Mc Kinsey, the export revenues of Indian IT industry will touch US $ 175 billion by the year 2020. The domestic sales revenue will also contribute US $ 50 billion by the year 2020. Therefore, we can say that the industry is shining and will continue to do so as well.

COMPANY PROFILE

Sairs Info Solutions established in 2008 with an objective to provide complete range of services for Clients. Sairs Info Solutions a leader in technology management, Sairs is the company of choice for clients, partners and employees. With many pioneering firsts to its credit Sairs has always led the way in powering the intelligent enterprises to outperform. Vision To be a respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people and to achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society. An enriching workplace for employees to excel through innovation and teamwork Mission To achieve this as a organization, we operate within the framework of core values which include cohesive management, financial stability and strength, professionalism, stable structure, strong

performance ethic, shared value, team-ship and empowerment, honesty and integrity, motivated staff, transparency and honesty of actions, etc. These practices are geared towards delivering Continuous Quality Improvement (CQI) results to our clients on Just in Time (JIT) basis in all circumstances. Service Reliability Our commitment, the hallmark of all our Execution of projects / targets is to make sure that the design reliability of the system is available to the user. Delivering high fidelity services and solutions. Time-tested institutionalized processes with a firm belief that quality is a cost-saver About Us

Sairs Info Solutions offers you the freedom to be outstanding. We are a global team, whose expertise and cooperative approach help us realize our clients' objectives. By joining Sairs, you can live and breathe the excitement of working with some of the top firms around the globe, while staying at the cutting edge of technology. We believe in hiring the best talent and then enabling it to grow. By providing an infrastructure that allows continuous learning and progress, we grant you the opportunity to push your career to new heights. Services Software Development Web Designing & Development Business Automation Solutions Cloud Applications Enterprise Search Solutions EMR Applications Application Development Multimedia Development e - Learning Solutions CRM Applications Application Integration E-commerce Applications ERP Applications Social Media Applications Internet Marketing

Legacy Systems Migrations

Service Overview

Software Development Sairs has the extensive expertise, experience and resources to develop web applications that best suit our clients needs, budget, schedule and existing infrastructure. We strive to focus on the customer and deliver solutions designed around their requirements rather than focusing on a specific technology and expecting the customer to adapt to the technology and platform of our choice.

Cloud Computing/Hosting Cloud computing comes into focus only when you think about what IT always needs: a way to increase capacity or add capabilities on the fly without investing in new infrastructure, training new personnel, or licensing new software. Cloud computing encompasses any subscription-based or pay-per-use service that, in real time over the Internet, extends IT's existing capabilities. We provide cloud hosting solutions.

Web Design Development Our services feature the creation of high traffic Internet homepages with striking visuals, customized content and great attention to user interface details. We develop uncompromising solutions that draw from our unique resources & insights to achieve client-driven goals..

Content Development It is possible to have an excellent web site, dramatic flash animations,world-class advertising campaigns but still no business conversions. One of the crucial factors that come into play here is Content Development.

Product Development We are pioneered in developing customized applications for desktop applications. We have expertise in developing desktop applications that suit various requirements like network applications, security systems, database systems and file sharing applications etc. which suit your

custom needs. We have developed various desktop applications for our esteemed clientele which include products like health care, P2P file sharing application, hotel/flight reservation systems & Gym management etc.

Search Engine Optimization Optimizing the key things required to reach and maintain top rankings in Internet searches is Search Engine Optimization (SEO), which refers to ensuring a strategically enhanced and effective positioning of a particular website on the World Wide Web. As one would imagine, this is a process that requires continuous upgrading and maintenance through efficient technological solutions and our company works to provide you with exactly that kind of result-oriented visibility..

Data Base Administration Database technology is one of the most powerful tools to enable businesses to manage mountains of data efficiently. Databases are an integral part of the success of any business software application..

Application Development Custom application development tailored to the clients' specific business requirements, we deliver rich internet applications combining our technological expertise and an established development methodology. Telecom Services Sairs provides superior, affordable, convenient and easy-to-use communication services. As a telecommunication company in a competitive market, sairs objective has always been to add value, connect communities internationally, and improve customer care. Our mission is to be recognized as a standard of excellence in the telecommunications industry through our promise of excellence, dedication to knowledge, competitiveness and emphasis on teamwork, offering high quality products of advanced technology at competitive prices. We are committed to being good players always maintaining business ethics, honesty and integrity. Sairs has been the leading provider of telephone services to ethnic businesses and consumers in India. Our facilities-based network infrastructure has allowed our customers unprecedented

savings for telecommunication services. The company also works with national and international long-distance carriers transacting with the world's emerging economies. We offer high levels of satisfaction to every customer by understanding their needs and cultures, providing exceptional value and delivering reliable communication services. RF Survey Engineer Making survey of location for selecting appropriate place for Installation of cell site, deciding GSM Antenna Height, Orientation & Tilts, preparing RF survey report as prescribed, used various softwares & Equipments. Transmission Design Engineer Checking LOS between two sites MWs for transmission link between them, deciding the angles of Mw, Polarisation, frequency & Size, preparing transmission survey report as prescribed, used various softwares & Equipments. Drive Test & Optimisation Engineer Checking Network parameters & making changes ( Hardware & Software) according to improve the coverage, preparing drive test report & PPTs( Power Point Presentations), used various softwares & Equipments.

CHAPTER-3 LITERATURE REVIEW

BUDGET

INTRODUCTION: Modern management focuses more on the success of the concern and wants that all operations should be forecasted and as far as possible planned ahead and the actual

results compared with the planned ones. Two new techniques are applied, namely budgetary control and standard costing for these two functions of planning and control. Budget is very essential aspect in every walk of life-national, domestic and business. Budget is an instrument of management used as aid in the planning, programming and control of business activity. Budgeting is an art of budget making. Budgeting is a powerful tool to the management for performing its functions efficiently. It is a forecast of programme of operation based on the expected operating efficiency. Budgetary control is applied to a system as management and accounting control by which all operations and output are forecasted as far ahead possible and actual results when known are compared with budget estimates. It attempts to show the plan in financial terms.

MEANING: A financial and/or quantitative statement, prepared and approved prior to define of time, of the policy to be pursued during that period for the purpose of attaining a given objective - The Chartered Institute of Management Accountants, England. ESSENTIALS OF BUDGET: A budget is prepared prior to a defined period of time. It is prepared for the definite future period. The policy to be followed to attain the give objectives must be laid before the budget is prepared.

 The budget is monetary and /or quantitative statement of policy It should specify units to be produced, broken down into size and styles, as well as cost of production. It should analyze all the factors affecting the section/departments and the business as a whole. It should help in planning future income and expenses. It should harmonize departmental programmes. It should serve as a medium of propagating policies throughout the business enterprise. It should help stabilizing production and harmonize production and sale programmes. NEED FOR BUDGET: Budgets are helpful in coordinating the various activities of the organization with the results that all the activities proceeding to the objective. Budgets are means of communication. Ideas of the top management are given the shape of a budget and are passed on to the sub-ordinates that have to give them the practical shape. It is helpful in developing a teamwork, which is very much needed for the very success of an organization Budget is necessary to plan for the future, to motivate the staff associated, to coordinate the activities of the different departments and to control the performance of various persons operating at different levels. ESSENTIAL CONDITIONS FOR APPLYING BUDGETARY CONTROL: Focus on objectives: Budget must be done in terms of objectives and polices of the concern. Consistent delegation: Fixed duties and obligations are required to be allocated to individual managers at different levels of organization for framing and executing budget. To secure necessary co-ordination, departmental budgets are integrated and woven into a master-budget for the concern as a whole Proper targets: There should be adequate checks and safeguards against the adoption of too high or too low estimates while setting budget targets.

 Appropriate period: Every business requires some short-term budgets as well as longterm budgets. 1. short-term budgets: sales budget, operating expenditure budget, the revenue and expense budget and the cash budget. 2. Long-term budgets: capital expenditure budget, research budget, research budget and the management training and development budget. Budgeting is a continuous process and requires perfect harmonization between longterm and short-term budgets. Communication of planning promises: The communication of planning promises assumes importance while preparing and interpreting departmental and subsidiary budgets. Provisions for flexibility: flexibility is one of the essential attributes of budgeting. Any alteration in budget figures must always be done at the highest level of management after through scrutiny.

ADVANTAGES OF BUDGETARY CONTROL:

Budgetary control has many advantages in the working of an industrial undertaking. Some of the important advantages are It clearly defines the goals of the business concern. It helps in making plan to attain these goals. It determines the policies of the concern. It controls expenditure. It provides complete information regarding amount of capital needed for the budget period. It helps the management in controlling the causes of inefficiency. It acts as a tool for administration. It centralizes management control. It aids in measuring the performance of each department of the concer

BUDGET CLASSIFICATION: 1. Fixed budget 2. Variable budget 3. Main budget 4. Master budget 5. Subsidiary budget 6. Functional budget 7. Sales budget 8. Production budget 9. Capital budget 10. Materials & purchase 11. Labour budget 12. Cash budget 13. Zero based budget 14. Performance budget

1. FIXED BUDGET:
According to ICMA, London a fixed budget is a budget which is designed to remain unchanged irrespective of the level of activity actually attained It is based on a fixed volume of activity and shows only one volume of output and related cost. It is not adjusted according to the actual level of activity attained. Thus, if it is forecast that the organization will operate at 60% of its capacity. A budget is drawn that reflects the costs at 60% capacity. There is no provision to adjust the budget if the actual operations are at 75% or 50% of capacity. A fixed budget is useful only when the actual level of activity corresponds with the budgeted level of activity. But this, generally does not happen, as such, a fixed budget is not useful for managerial purposes

2. VARIABLE BUDGET:

According to ICMA, LONDAN, a variable budget is a budget which is designed to change in accordance with the level of activity actually attained. Thus, it provides the budgeted costs at any level of activity. Business activities cannot be accurately on account of uncertainties of business environment. It contains several estimates for different assumed circumstances instead of just one estimate, and provides for automatic adjustments with change in the volume of activity. Variable budget is useful tool in controlling operations in real business situations operating in an unpredictable environment.

3. MASTER BUDGET:
The master budget is the summary budget incorporating its functional

budgets. All the operational budget and financial budgets are integrated into master budget. This budget is prepared by the budget officer for the benefit of the top-level management. This Budget is used is to coordinate the activities of various functional departments. It is also used as an effective control device.

4. FINANCIAL BUDGET:
Financial budgets are concerned with cash receipts and disbursements, working capital expenditure, financial position and results of business operations. The commonly used financial budgets include cash budget, working capital budget, capital expenditure budget, budgeted balance sheet, etc. 4.1 SALES BUDGET: A sales budget is an estimate of expected sales during a budget period. It is the starting point on which other budgets are also based. sales manager is made responsible for preparing sales budget. He all uses all possible information available from internal and external sources. Sales budget must be prepared area wise for each product. The budgeting must be done in terms of sales of sales figure for each month, so that all operating budgets can also be prepared. The degree of accuracy with which sales are estimated determines the success of budgeting exercise.

4.2 PRODUCTION BUDGET: It is forecast of the number of units produced during the budget period. This budget answers the question as what is to be produced and when should it produced. It is prepared in relation to the sales budget. The production budget is the responsibility of the factory manager. If a factory has more than one production department, the production budget may be split and it can be prepared by each department The following factors are: 1. Sales budget 2. Plant capacity 3. Lag time 4. Stock quantity to be held 5. Availability of key factors 6. Production planning.

4.3 CAPITAL EXPENDITURE BUDGET: The budget lays down the amount of estimated expenditure to be incurred on fixed assets that are required to achieve the production targets stated in the production budget. As the amount involved in the capital expenditure is high, requires careful attention for top management. The budget is based on the annual forecasts of capital expenditure of various divisions. 4.4 MATERIAL & PURCHASE BUDGET: This budget is prepared as a follow up to the production budget. It will enable the purchase department to plan the purchase of raw materials at different times. It is concerned with determining the quantity of direct materials required for production. The period for material budget is relatively shorter than that of the sales and production budgets.

The stock of materials in hand at any time added to the materials required for production. The time lag between the order for purchase and the actual receipt of material, availability of material due to seasonality, price trend in the market, should be considered in estimating the desired stock to be held at any point of time.

4.5 LABOUR COST BUDGET: Labour is classified as direct and indirect labour. Direct labour cost represents the wages paid to the workers employed directly in the manufacturing activity. Indirect labour costs represents all other labour costs such as supervisor salary, wages paid to the store- keepers etc. 4.6 CASH BUDGET: A cash budget is a forecast of expected cash in take and outlay. It is an estimate of cash receipts and disbursements during a future period of time. It is prepared by the management Accountant himself. The excess of receipts over disbursements is called cash surplus. The excess of disbursement over receipts is called Cash deficit. The surplus or deficit is adjusted for the cash balance at the beginning of the period. Preparation of cash budget involves forecasting all possible sources from which will be received and the channels in which payments are to be made so that a consolidated cash positions is determined 4.7 ZERO BASED BUDGET: It implies that all activities of the organization should be viewed. The basic future of the zero-based budget is that while preparing their budgets, the department should not take any thing for granted and. The budget making for ensuring year should not be started from ground zero instead of treating the current budget as the base. 4.8 SELLING AND DISTRIBUTION COST BUDGET: The budget includes all expenses relating to selling and distribution of goods. These expenses may be analyzed according to products, territories, salesman, etc. the fixe under this category may be estimated on the basis of past experience and anticipated changes. The responsibility for preparing this budget lies with the executives of sales departments.

2. BUDGETING: DEFINITION OF BUDGETING: Budgeting can be defined as forecasting and pre-planning for the next period using past experience, market trends and present position OBJECTIVES: TO make periodical evaluation of management polices. To provide basis for examining the achievements of the industry. To provide check over expenditure in various departments. To make a programme for systematic developments To decide basis for the expenditure of funds. To provide basis for checking of working of the concern by seeing their efficiency and econom ADVANTAGES OF BUDGETING: It provides check over shifting the responsibility. By budgeting financial position of the concern is made clear. A check on the performance and efficiency of the industry is provided It is essential to show budgets while taking loan banks. It helps in making the polices for the coming period. BUDGETARY CONTROL: The established of the budgets relating to the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted result either to secure by individual action the objectives of that policy or to provide a firm basis for its revision. --IMA, London ADVANTAGES OF BUDGETARY CONTROL: Budgetary control has many advantages in the working of an industrial undertaking. Some of the important advantages are: It clearly defines the goals of the business concern. It helps in making plans to attain these goals. It determines the policies of the concern.

 It controls expenditure. Provides complete information regarding amount of capital needed for the budget period It helps the management in controlling the causes of inefficiency It acts as a tool for administration. It centralizes management control. It aids in measuring the performance of each department of the concern CAPITAL BUDGET: INTRODUCTION: Capital budgeting or capital expenditure budgeting is concerned with planning and control of capital expenditure. Capital expenditure is defined as one, which involves the current outlay of cash in return for an anticipated flow of future benefits are available in the long run. Capital budgeting decision may be defined as the decision of the firm to invest its current finances most efficiently in long term productive activities, with expectations of flow of future benefits over a long period The crux (vital part) of the capital budgeting problems is the allocation of available resources of the firm to the various investment proposals. As the demand on resources is almost higher than the availability of resources. Capital budgeting covers issues like decisions, which are broadly classified BUDGETORY CONTROL: Budgetory Control is a system of presentation of public expenditure in terms of functions, programmes, activities and projects. It is a financial and work plan conceived in terms of function programmes, activities and projects with their financial and physical aspects closely interwoven in one document. It is on-going annual process of management planning and control, which enables an organization to accomplish its corporate goals by involving people from top to bottom for formulating and implementing a time-bound and realistic action plan. The Hoover commission in U.S.A. first used the term Budgetory Control, in 1949. United Nation highlighted the importance of programme and Budgetory Control

for developing countries in 1955 and 1947. The Indian administrative Reforms budgeting both in government of India and the states. This recommendation was accepted by some leading organizations in public and private sectors too. The performance budget outlines the programme both in financial and physical terms. The budget has been framed and prepared in a systematic way, which will be used as the sole medium for authorization of expenditure. The submission of the performance budget to the government in accordance with Article 103(b)(v) of the articles of association of the company. Prior sanction of the competent authority as per the schedule of delegation of power is obtained for making commitments. No expenditure in excess of the ceilings stipulated in the budget to unforeseen reasons, bords approval will be obtained at an appropriate time. The money concept was given more prominence in conventional system of budgeting 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 in such budgeting system control of performance in terms of physical unites or the related costs cannot be achieved. The budgets are established in such a way so that each item of expenditure is related to a specific responsibility centre and is closely linked with the performance of that standard. Developing. Work programmer and performance expectation by assigned responsibility is the main issue involved in the goals and objectives of the enterprise. Bharat dynamics limited prepares performance Budget which can be called as master budget because it is a consolidated summary of the functional budgets in capsule from available in one report. The accuracy of all the functional budgets is checked and it gives an overall estimated profit position of the organization for the budget period. This budget is very useful for the top management because it is usually interested in the summarized meaningful information provided by this budget. OBJECTIVES OF BUDGETORY CONTROL: The main purposes to be achieved by Budgetory Control system are: To correlate the physical and financial aspects of every function, Programme and activity.

 Improve budget formulation, revenue and decision making at all levels of operations. Facilitates better appreciation review. Enables a more effective performance audit. Measures progress towards accomplishment of long-term as well as short-term goals.

STEPS IN BUDGETORY CONTROL SYSTEM: The steps involved in the establishment of a successful system of Budgetory Control are: Establishment of well responsibility centre or action points where operations are performed and financial transactions in terms of money takes place. Establishment of well responsibility centre and a programme of expected performance in physical units of hat centre. To forecast the amount of expenditure under the various classification heads to meet the physical plan. Performance reporting indicating the result of analysis of the variance from the budget is done like that of variance reporting. BENEFITS OF BUDGETORY CONTROL SYSTEM: Budgetory Control system has the following benefits: Improves communication between levels of organization. Improves involvement of different levels of management of the organization in setting up targets and evaluating performance. Enables the sectional managers to gain competence in planning and monitoring of the performance of the activities of sub-units which they are in charge. Enables an organization to prepare realistic business plan from root level upward and work out its financial, manpower and other resources implications, thereby ensuring a satisfactory growth. Enables to controlling department to exercise effective control on the performance of section for identifying strength and weakness and initiating corrective actions.

 Helps to assess the effect of decision making at various levels of administration from the level of administration to the level of supervisor, middle and top managers. LIMITATIONS OF BUDGETORY CONTROL SYSTEM: Though the technique of Budgetory Control system offers great potentialities for management; its introduction must be approved with caution. The following are limitations of system: a) It requires greater financial discipline, trained manpower, a regular and efficient system of recording and reporting financial and physical data, and effective coordination among various departments and budget authorities. b) There is a problem of measurement of performance both physical and financial. Its usefulness is somewhat limited in respect of most of the government department activities where it is impossible to have a common yardstick to measure physical performance. c) It calls for suitable modification in the accounting structure to be in alignment with the functions, progress and activities of the department. d) If Budgetory Control system is to be utilized a control tool in the hands of management, it needs some rational method to control actual physical progress of work and projects.

In every business planning is the most important function to perform. Planning of different firms depends upon so many factors. Planning is done for comparing the actual performance with standard performance. Budgets are also prepared in advance. Budgets are prepared to check the availability of finance according to the demand of project. So budgetary control is also essential tool of management to control cost and maximizes profits.

Meaning of budget: A budget is a detail plan of operations for a specific period of time. In the present era everyone is with the term budget because it essential in life. A budget is prepared for the effective utilization of resources, which will help in achieving the set objectives. Budgets are also very important in individual life as it is important in business firms. The following are the essential of budget: (a) It is prepared in advance and is based on future plan of action. (b) It relates to a future period and is based on objectives to be attained. (c) It is a statement expressed in monetary or physical unit prepared for the formulation of policy.

Meaning of budgeting: budgeting is basically implementation of budgets.

Meaning of budgetary control: Every business firms have main objective to maximize the profits and to minimize the cost. An organization cannot run properly without a good budgetary system. Budgetary control system is very helpful in bringing economy in business. Budgetary control is applied to a system of management and accounting control by which all the operations and output are forecasted in a proper manner to achieve the best possible profits. The essential of budgetary control: (i) (ii) Establishment of budgets. Executing responsibilities in order to perform the specific tasks to attain the objectives. (iii) (iv) (v) Continuous comparison of actual performance with standard performance. Taking corrective actions if there is any deviation. Revision of budgets.

Steps in installation of a system of budgetary control: A system of budgetary control in firm should be installed after taking care of following requisites of budgeting. (i) (ii) (iii) What is likely to happen? What are the objectives to achieve? How to minimize the cost?

(iv)

What is the allotted time to complete the production?

In order to make an effective system of budgetary control following steps should take under care:

Organization chart: An organization should have a proper chart from where authority and responsibility of each executive get clear. If organization chart is not clear then there may be conflicts among the employees. If duties are clear among the workers then every person will be answerable for his performance. Nobody can blame to other for the poor performance. Determination of objectives: it is very important that the objectives should be very clear to all the executives in the organization. Having determined the objectives of budgetary control the following future problems will have to be sorted out: Laying down a plan for the implementation of the firms objectives. Coordination of the activities of the different departments. Controlling each function to get best possible results. Budget manual: The budget should be in writing. It should be like a rulebook in which objectives should be clear. Following of the some important matters covered in budget manual. A statement regarding the objective that how that objective can be achieved. Functions and responsibilities should be clear. Timetable for all stages of budgeting. Reports, statement and other records to be maintained. Responsibility for budgeting: Budget controller: there should be someone budget controller. Chief executive should be responsible in the form of budget controller for budget programme. Budget controller should be technically sound person. Budget committee: budget controller by his own may not be successful in all the process. There should be a proper to assist him all the time. There should be members from all the departments of the organization like production, finance, sales etc. each head of the department will have his own subcommittee and person will be responsible to his respective head. Fixation of budget period: By budget period we mean the period for which we are going to prepare a budget. Period of budget depends on so many factors as (i) nature and size of business (ii) the controlling techniques applied. A seasonal nature business need short term budget and for a regular nature business we can opt a long-term budget plan.

Determination of key factors: key factors always very important for every organisation. Budgetary control system should be capable of using key factors in a proper manner. Key factors may b the raw material, labour, finance etc. budgetary control system must give guidance to select a profitable unit among more than one option if any. Motivation: budgetary control should be motivating to the employees. The system should be applicable to those only ho are responsible about their duty. The budget should cover all the phases. Making of forecasts: after studying all the steps then forecast should start for the future. There should be alternative forecast for the future. The best forecast should send to top management for converting that forecast in budget. Approval from top management: The top management should approve the final budget. Without the approval of top authorities budget controller cannot pass the budget.

Standard costing: standard costing is a predetermined cost. It is a determination of cost of a product before production. In standard costing production cost is compared with the set standards. So standard costing is the preparation of standard costs and applying them to measure the variations from actual costs analyzing the cause of variations with a view to maintain maximum efficiency in production. It is a technique, which uses standard for costs and revenues for the purpose of control through variance analysis.

Difference of budgetary control and standard costing. 1. Standards are based on technical assessments whereas budgets are based on past actual adjusted to future trends. 2. Budgetary control deals with the operations of the firm as a whole and standard costing is applied to manufacturing of a product. 3. Standards are basically set for production and budgetary control is for all the incomes and expenditures of the business. 4. Budgets set for the upper limit of expenses, which a firm can make for actual expenditure and standards are set for the targets to achieve.

5. Budgets are expected costs to be forecasted for the requirement of material, cash and other resources and standard costs are not to tell the expected cost but rather what the costs should be under specific conditions.

CHAPTER-4 DATA ANALYSIS

COMMON SIZE PROFIT AND LOSS ACCOUNT FOR 31ST DEC

PARTICULARS Net Sales Less: COGS (Cost of goods sold)

2009

2010 3,925,325

% 100

3,043,448 100

2,194,478 72.10 848,970 Gross Profit 27.90

4,104,743 -179,418

104.6 -4.57

Less: operating Expenses 174,202 Depreciation Selling Expenses Administration Expenses 27,056 966,796 5.72 0.89 31.77 208,101 17,657 397,494 5.30 0.45 10.13

-319,084 Operating Profit

-10.48

-802,670

-20.45

Add:Non-Operating Incomes 102,182 Service Incomes Other Incomes 318,803 3.36 10.48 742,560 66,668 18.92 1.70

101,901 EBIT

3.35

6,558

0.17

Less:Non-Operating Expenses 44,428 Interest Paid 57,473 PBT 40,885 Less:Incomes Paid 16,588 Net profit 0.55 -33,753 -0.86 1.34 3,779 0.10 1.89 -29,974 -0.76 1.46 36,532 0.93

INTERPRETATION: The percentage of the gross profit has decreased from 27.90 in 2009 to -4.57 in 2010. This is due to increased in cost of goods sold from 72.10% in 2009 to 104.6% in 2010. It is due to increase in raw material prices and labour rates and inefficiency of the purchasing and production departments. The operating expenses are more with the company has getting loss for both years. The Non-operating incomes has getting more profit with its EBIT position is good for both years. The net profit is decreasing from 0.55 in 2009 to -0.86% in 2010. It should maintain its COGS with sales.

COMMON SIZE PROFIT AND LOSS ACCOUNT FOR 31ST DEC

PARTICULARS Net Sales Less: COGS (Cost of goods sold)

2010

2011 3,614,471

% 100

3,925,325 100

4,104,743 104.6 -179,418 Gross Profit -4.57

3,489,604 124,867

96.5 3.45

Less: operating Expenses 208,101 Depreciation Selling Expenses Administration 17,657 397,494 5.30 0.45 10.126 240,224 10,414 645,853 6.65 0.29 17.87

Operating Profit

-802,670

-20.45

-771,624

-21.35

Add:Non-Operating Incomes

Service Incomes Other Incomes

742,560 66,668

18.92 1.70

67,362 493,559

1.86 13.66

EBIT

6,558

0.17

-210,703

-5.83

Less:Non-Operating Expenses

Interest Paid

36,532

0.93

69,032

1.91

PBT

-29,974

-0.76

-279,735

-7.74

Less:Incomes Paid

3,779

0.10

12,056

0.33

Net profit

-33,753

-0.86

-291,791

-8.07

INTERPRETATION: The percentage of the gross profit has increased from -4.57 to 3.45. This is due to decreased in cost of goods sold with capable to sales. The operating loss getting for both years. Because of more selling and administrative expenses. The net loss is getting for both years. In this also we have more cost of goods sold.

COMMON SIZE PROFIT AND LOSS ACCOUNT FOR 31ST DEC

PARTICULARS Net Sales Less: COGS (Cost of goods sold)

2011 3,614,471

% 100

2012 4,417,676

% 100

3,489,604 124,867 Gross Profit

96.5 3.45

4,874.071 -456,395

110.3 -10.33

Less: operating Expenses 240,224 6.65 Depreciation Selling Expenses Administration Expenses Operating Profit 10,414 0.29 645,853 17.869 -771,624 -21.35 292,689 25,085 88,800 -862,969 6.63 0.57 2.01 -19.53

Add:Non-Operating Incomes

Service Incomes Other Incomes EBIT

67,362 493,559 -210,703

1.86 13.66 -5.83

37,428

0.85

386,261 8.74 -439,280 -9.94

Less:Non-Operating Expenses

Interest Paid

69,032

1.91

133,955

3.03

PBT

-279,735

-7.74

-573,235

-12.98

Less: Income tax Paid

12,056

0.33

7,355

0.17

Net profit

-291,791

-8.07

-580,590

-13.14

INTERPRETATION: The gross profit is decrease from 124.867 in 2011 to -456,394 in 2012 because of increasing cost goods sold. The operating loss getting for both years. Because of more selling and administrative expenses. The net loss is getting for both years. In this also we have more cost of goods sold.

CHAPTER-5 FINDINGS & CONCLUSIONS

The organizational arrangement has not received adequate attention of the management. A separate specialized budget department did not exist for preparation, implementation and review of budget. Budgets are prepared on the basis of past performance and experiences. There is no co-ordination between the departments while preparing budget. Only demand, supply and price are in influenced for preparation of the budget. External factors affecting the Budgetory Control system in SAIRSINFO are: Limited and exclusive customer base Delay in technology transfer from collaborators. Involvement of many external agencies right from the technology transfer to the final product acceptance

CHAPTER-6 SUGGESTIONS
a) Financial feed back information vis--vis budget motivation is largely confined to higher-level management. It should be communicated to middle line level for better control and morale of the people. b) Re-planning is to take place at the time of half-yearly review on the basis of experience which the corporation had in the first six-months. c) A complete copy of the budget may be supplied to the budgeters well in advance and any change in the budget, after finalization due to inevitable reasons may be made only after discussion with the concerned sub-ordinates. d) First line managers should realize that technical performance standards and budgets are the guide and yardsticks for the achievement of their target. e) The study reveled that most of the employees are ignorant of even their role in budget development process of their organization. This may lead to mistrust and hostility resulting in low productivity. Hence the budget officer should keep professional contacts with people especially from purchase. Sales and personal and keep them informed about the financial and technical standards. f) It would be better to have frequent consultations and clarification regarding technical figures with line manager so that they have the same perspective and understanding .

CHAPER-7 BIBLIOGRAPHY:

S. P. JAIN & K. NARANG kalyani publishers, 9th edition, cost accounting. P. L. MEHTA sultan Chand publishers, 9th edition, managerial economies. O. p. KHANNA - 2001 edition, industrial engineering and management. N. K. PRASAD books syndicate PVT. LTD,9th edition, principles and practice of cost accounting. PRASANNA CHANDRA 2000 edition, financial management. BATTACHARYA cost accounting