Project on Basanth Nagar Kesoram Cement Industries Limited

Description
The 85-years old Indian cement industry is one of the cardinals and basic infrastructure which enjoys core sector status and play a crucial role in the economic development and growth of a country

INTRODUCTION
&
OBJECTIVES OF STUDY
1
INTRODUCTION
BUDGET:
Budget is essential in every walk of our life – national, domestic and Business.
A budget is prepared to have effective utilization of funds and for the realization of
objective as efficiently as possible. Budgeting is a powerful tool to the management
for performing its functions i.e., formulation plans, coordination activities and
controlling operations etc., efficiently. For efficient and effective management
planning and control are tow highly essential functions. Budget and budgetary control
provide a set of basic techniues for planning and control.
A budget fi!es a target in terms of rupees or uantities against which the actual
performance is measured. A budget is closely related to both the management function
as well as the accounting function of an organization.
As the size of the organization increases, the need for budgeting is
correspondingly more because a budget is an effective tool of planning and control.
Budget is helpful in coordinating the various activities "such as production, sales,
purchase etc# of the organization with result that all the activities precede according to
the objective. Budgets are means of communication. $deas of the top management are
given the practical shape. As the activities of various department heads are
coordinated at the much needed for the very success of an organization. Budget is
necessary to future to motivate the staff associated, to coordinate the activities of
different departments and to control the performance of various persons operating at
different levels.
Budgets may be divided into two basic classes. %apital and operating budgets.
%apital budget are directed towards proposed e!penditure for new projects and often
reuire special financing.
&he operating budgets are directed towards achieving short'term operational
goals of the organization for instance, production or profit goals in a business firm.
(perating budgets may be sub'divided into various departmental of functional
budgets.
2
OBJECTIVES OF STUDY
THE STUDY HAS THE FOLLOWING:
? &o provide the material frame work of budget and budgetary control
? &o describe the profit of the organization as a backdrop for undertaking a
study of budgetary control system.
? &o analyze the budgetary system in practice in )esoram %ement $ndustries
*imited with particular reference to their objectives and phases of
organizational and re'appropriation.
? $n addition to the analysis of the conventional budgetary system in practice in
)esoram %ement $ndustries *imited. &he study aims at evaluation and
modification to the current budgetary system with reference to the various
types of budgets. &he scope in the formulation of performance budget is also
studied.
SOURCES OF DATA:
&he data of Basanth +agar )esoram %ement $ndustries *imited, have been
collected mainly from secondary sources viz.,
• Form the concerned officers of the )esoram %ement $ndustries *imited
• )esoram %ement $ndustries *imited journals.
• Accounting books, records.
• )ey books of concerned title.
• ,tatistical records
• )esoram %ement $ndustries *imited library.
3
LIMITATIONS:
? -stimates are used as basis for budget plan and estimates are based mostly on
available facts and best managerial judgment
? Budgetary control cannot reduce the managerial function to a formula. $t is
only a managerial.
? &ool which increase effectiveness of managerial control.
? &he use of budget may be to restricted use of resources. Budgets an often
taken as limits.
? -fforts may therefore not be made to e!ceed the performance beyond the
budgeted targets.
? Freuent changes may be called for in budgets due to first changing industrial
climate.
? $n order that a system may be successful, adeuate budgets education should
be imparted at least through the formative period. ,ufficient training programs
should be arranged to make employees give positive response to budgetary
activities.
? &he study is the limited up to the date and information provided by )esoram
%ement $ndustries *imited and its annual reports.
4
ORGANISATION PROFILE
5
PROFILE OF THE INDUSTRY
&he ./'years old $ndian cement industry is one of the cardinals and basic
infrastructure which enjoys core sector status and play a crucial role in the economic
development and growth of a country. Being a core sector this industry was subject to
price and distribution controls almost uninterruptedly from world war'$$ when
government of $ndia announced the partial decontrol of price and distribution as the
market price of cement began to raise response to decontrol manufacturing cement
became increasingly attractive and the industry e!perienced substantial e!pansion.
As the supply in response to the 01.2 partial decontrol was significant in
3arch 01.1, price and distribution control were finally dispensed with it was one of
the first major industries in the country to be so deregulated.
OVERVIEW OF THE INDUSTRY
&he word cement means any substance applied for sticking things. But cement
is the most vital and important material for modern construction as a binding agent. $n
the ancient times, clay, bricks and stones have been used for construction work.
&he 4omans were using a binding or cementing 3aterial that would harden
under water. &he first systematic effort was made by 5,3-A&$(+6 who under took
the erection of a new lighthouse in 07/8. 9e observed that the production obtained by
burning limestone was the best cementing material for work under water.
After Fifty years :$%A& a French %hemist, produced hydraulic cement by
burning finely ground clay and clay and used it in the paste. %ement invented by
;(,-<9 A,<=$+ in 0.2>. ,ince hardened cement paste resembled <ortland stone
found in -ngland in color, he named it as 5<ortland %ement6 a name, which has
carried over the century. <ortland cement was first manufactured in :nited ,tates of
America in 017/.
6
$n $ndia cement was produced for the first time in 01?> by ,outh $ndia
$ndustries *imited in 3adras. &his :nit had capacity of @? tons per day was based on
lime from sea.
By 010@, however three units started their operations with a combined
installed capacity of 7/,??? tons per annum. $n 010>, indigenous production fees for
short of domestic demand necessitating an import of 0,8/,72@ tones shipment
difficulties and foreign trade relations during the first world war years acted as a
catalyst for the development of indigenous industry, and by 012> the total installed
capacity grew to /,/1.?? tons per annum.
$n 018@, all the %ement %ompanies with the e!ception of ,(+- AA**-B
<4(&*A+= %-3-+& %(3<A+B *$3$&-= merged to from the A,,(%$A&-=
%-3-+& %(3<A+$-, *$3$&-=. &his has more facilitated a cost reduction as well
as uniformity in uality. By 01>7 the installed capacity of the $ndustry raised to 2.2
million tones per annum.
After partitions, five of the cement producing units in the country went to
<akistan and total installed capacity of the eighteen units that remained in $ndia was
0./ million tones per annum. &his increased to @.. million tones by 01/?'/0.
$n the three decades 01/?'.?, the capacity e!pansion was between 7 to .
million tones per decade. &he targets set in respect of additional capacity generation
was released with the impetus given by the partial decontrol announced in 01.2,
several units lockup project for e!pansions of capacity and modernization which
contributed towards increased production.
DEFINITION OF CEMENT:
%ement may be defined as 5it is a mi!ture of calcium silicate and aluminates6.
Chich have the property of setting and hardening under water. &he amount of silica,
Alumina who is present in each crust is sufficient to combine with calcium, o!ide
"%ao# to from the corresponding calcium silicate and aluminates.
CLASSIFICATION OF CEMENT:

%ement is @ types.
PU!!OLANTIC CEMENT:
$t consists of mi!ture of silicate %alcium and Aluminum. ,hows the hydraulic
property when it is in the form of powder and being mi!ed with suitable proportion of
lime. &he rate of hardening is much slower and the comprehensive strength developed
is about a half of <ortland cement. $t is found more resistant to the chemical action
than others.
NATURAL CEMENT:
&his is natural occurring material. $t is obtained from cement rocks. &hese
cement rocks are claying limestone containing solicits, aluminates of calcium. &he
selling property of this cement is more than the <ortland cement but is comprehensive
strength is half of its.
"
PORTLAND CEMENT:
0. (rdinary <ortland cement.
2. 4epaid hardening <ortland cement.
@. *ows heat cement.
>. Chite or colored cement.
/. Cater proof <ortland cement.
8. <ortland slag cement.
7. <ortland pozzolana cement.
.. ,ulfate 4esisting cement.
METHODOLOGY:
&he proposed study is carried with the help of both primary and secondary
sources of data.
PRIMARY DATA:
&he primary data is collected by interacting with the finance manager and
other concerned e!ecutives at the administrative office of the company.
SECONDARY DATA:
All the secondary data used for the study has been e!tracted from the annual
reports, manuals and other published material of the company.
SCOPE OF THE STUDY:
#
,ince it will not be possible to conduct a micro level study of all cement
industries in Andhra <radesh, the study is restricted to )esoram %ement only.
LIMITATIONS OF THE STUDY:
&he following are the limitations of the study
0. &he study is limited based on data provided by the companyDs financial
statements. ,o the limitations of the statements are eually applicable of this
study.
2. &he study is limited for a period of / years i.e., from 2??@'2??..
INDIAN CEMENT INDUSTRY $ PRESENT STATU
After the declining of the industry in ;uly 0110 it reacted positively to the
policy changes. +ew capacities created and the volume of production increased. Form
a situation of improving cement, the country started e!porting due to high uality and
cost effectiveness. After liberalization the black market in cement also disappeared.
%urrently $ndia stands second largest in the cement production worldwide after %hina.
(n the other hand per capita consumption in $ndia is only books as compared to the
world average of 28?kgs. &he industry has , 1 companies owning 00 , plants. $n the
matters of e!ports the government considers cement as an e!treme focus area.
9owever $ndian cement in the global market is not very competitive due to high
power and full costs. $n order to improve its position in the international market,
technological up gradation is essential in terms of process, product diversification cost
reduction, uality control and energy saving.
ABOUT THE INDUSTRY
&hese chapter e!aminers a profile of )esoram %ement $ndustries *td.i.e., its
history, location organization structure etc.,
LOCATION:
1%
)esoram cement industry is one of the leading manufacturers of cement in
$ndia. $t is a day process cement plant. &he plant capacity is ..28 lakhs tones per
annum. $t is located at Basanth +agar in )arim +agar district of Andhra <radesh,
Basanth +agar is .km away from the ramagundem railway station linking madras to
+ew =elhi. &he chairman of the company is sty. B.) Birla
HISTORY
&he first unit at Basanth +agar with a capacity or 2.0 lakhs tones per annum
incorporating suspension'preheated system was commissioned during the year 0181.
the second unit was setup in year 0170 with a capacity of 2.0 tens per annum and "he
third unit with a capacity of 2./ lakhs tons per annum went on stream in the year
017.. the coal for this company is being supplied iron ,ingareni collieries and the
power is obtained from A<,-B. &he power demand for the factory is about 20 3C.
)esoram has got 2 =E, set of > 3C each installed in the year 01.7.
)esoram cement has set up a 0/)C capacity power plant to facilitate for
uninstall power supply for manufacturing of cement start at 2> August 2??7 per hour
023C, actual power is 0/3C.
Birla ,upreme in popular brand of )esoram %ement from its prestigious plant
of Basanth +agar in A<, which has out standing track record. $n performance and
productivity serving the nation for the last two and half decades. $t has proved its
distinction by bagging several national awards. $t also has the distinction of achieving
optimum capacity utilization.
)esoram offers a choice of top uality portioned cement for light, heavy
constructions and allied applications. Fuality is built every fact of the operations.
&he plant layout is rational to begin with. &he limestone is rich in calcium
carbonate a key factor that influences the uality of final product. &he day process
technology used in the latest computerized monitoring overseas the manufacturing
11
process. ,amples are sent regularly to the bureau of $ndian standards. +ational council
of construction and building material for certification of derived uality norms.
&he company has vigorously undertaking different promotional measures their
product through different media which includes the use of newspapers, magazines,
hoardings etc.
)esoram cement industry distinguished it self among all the cement factories
in $ndia by bagging the +ational productivity Award consecutively.
For two years the year 01./'01.7. the federation of Andhra <radesh %hamber
G commerce and industries "FA<<%%$# also conferred on )esoram %ement. An
award for the best industrial promotion e!pansion effort in the state for the year 01.>.
)esoram also bagged FA<%%$ awarded for 5Best Family <lanning -ffort in the state6
for the year 01.7'01...
(ne among the industrial giants in the county today, serving the nation on the
industrial front. )esoram industries *td has a cheue red and eventful history dating
back to the twenties when the industrial 9ouse of BirlaDs acuired it. Cith only a
te!tile mill under its banner 012> it grew form strength to strength its activities 0?
newer fields like transparent paper, spun pipes, refractories, tires and other products.
*ooking to wide gap between the demand and supply of a vital commodity
cement, which plays, :$ important role in national building activity the Eovernment
of $ndia had de'licensed the cement industry in eh year 0188 with a view to attract
private entrepreneurs to augment the cement production. )esoram rose to the
occasion and divided to set up a few cement plants in the country.
)esoram cement undertaking marketing activities e!tensively in the states of
Andhra <radesh, )arnataka, &amilanadu, )erala, 3aharashtra and Eujarat. $n A<
sales depots are located in different areas like )arim +agar, Carangal, +izamabad,
Aijayawada and +ell ore. $n other states it has opened around 0? depots.
THE AWARD WON ARE:
12
)esoram cement bagged prestigious awards like national awards for
productivity and technology and conversation and several state awards for year 01.>.
)esoram cement is best family planning effort 5in the federation of Andhra <radesh
chamber of commerce and industry and also national award for two successive years
01./ and 01.8. +ational award for mines safety for two years 01./'.8 G 01.8'01.7.
$t has also bagged the national award for energy efficiency for the year 01.1'011? for
the performance among all cement plants in $ndia. &hus award stall by national
council for cement and building material "+%%B3# in association with the
government of $ndia.
)esoram bagged the prestigious Andhra <radesh state productivity
award in 01.7'01.1 also anne!ed state award for industrial management in 01..'.1
and also 5Best industrial promotion e!pansion efforts6 in the estate and Bajamanyza
4atna and best efforts of an industrial unit in the state to develop rural economy was
bagged for its contribution towards the responsibility of rural and community
development programmers of the year 0110. $t also bagged the 3ay =ay award 5of
the government of Andhra <radesh for the best management and the <andit ;awaharlal
+ehru silver rolling trophy for the industrial productivity effort in the state of Andhra
<radesh by FA<%%$ and also the $ndia Eandhi memorial national award for
e!cellence. Best management award of the government of Andhra <radesh for the
year 011@.
=uring the last @ years the government of Andhra <radesh has given the
following awards Best awards for the year 011>.
&o keep the ecological balance they have also undertaken massive tree
plantation in the factory and government of $ndia has nominated township areas and
them for A4$),93$&4A award. Best effort of an industrial unit in the state for rural
development 01>>'1/ presented by chief minister in 3arch 0118.
$n the year 3arch, 2??1 5Best 3anagement award 2??16 for the best
3anagement practices in )esoram %ement, <resented by %hief 3inister.
CEMENT PRODUCTION WORLDS WIDE
13
COUNTRY 1#"1 1#"3 1#"6 1#"# 1##% RAN&S
%9$+A .@ 0?. 088 20? 20? 0
;A<A+ .. ./ 7@ .2 .7 2
:,A 8/ 80 70 7? 72 @
$+=$A 20 2/ @8 >/ >. >
$&A*B >@ >? @8 @> >0 /
E-43A+B @? 2. 2> 27 >? 8
&o day in $ndia cement industry is producing /..@ million tones per annum
indication surplus conditions while its demand is /8.7 million tones lies, per annum.
+ow the cement market has become Hbuyer marketD which was a Hselling markerD till
017?Ds and so the uality G brand taken an upper edge for cement marketing.
&o day installed at $ndia cement industry is 770 lakhs tones. But in $ndia 0?8
major plants are producing /.@ lakhs tones while a $ndia cement demand is /81 lakhs
tones leaving the balance for e!ports.
INDIA'S LARGEST CEMENT COMPANIES POST AC(UISITION
14
COMPANY
C)*)+, -./.-0,1
0+ TPA
C)*)+, 2
34 5.6)5
*A4,-+ G &4B( 02.? 2?
A%% 00.@ 1@
E4A,$3 1.7 2.
$+=$A+ %-3-+& 8.8 12
E:;A4A&9 A3B:;A 8./ 0??
WEA&NESSES:
a. &he per capita consumption of the cement in $ndia is very low.
b. &he transport costs in $ndia are very high.
c. &he cement industry is facing with acute power shortage and raw material
problem.
d. &he industry is also facing major packaging problems.
OPPORTUNITIES:
a. &he industry has tremendous potential for growth in $ndia.
b. $n near future cement is going to replace tar for the construction of roads.
c. &here are good prospects for e!port with cement e!port promotion council.
d. &he government polices of reduction in e!cise duty and e!empting cement
from the just packaging may act as boon to the industry.
THREATS:
15
? &he surplus levels are increasing as the production of the cement is
much greater than the consumption.
? $n the present scenario of stiff competition there is a declining trend of
price.
? &he performance of the smaller unit is badly hit by major takeovers.
? &he crisis situation in ,outh -ast Asian countries may create problem
to the e!ports of the industry.
AIMS:
? %ontinuous effort too improving productivity.
? -valuating individual skill trough training and motivations.
? &otal involvement through participantDs management activities.
? %reating healthy and safe environment.
? ,ocial development.
16
STATE WISE CEMENT PLANTS
S7NO STATE
NO7 OF CEMENT
PLANTS8LARGE9
?0 Assam 0
?2 Andhra <radesh 01
?@ Bihar 7
?> =elhi 0
?/ Eujarat 0@
?8 9aryana 2
?7 9imachal <radesh >
?. ;ammu and )ashmir 0
?1 )arnataka 1
0? )erala 0
00 3eghalaya 0
02 3aharastra .
0@ 3adhya <radesh 2@
0> (rissa @
0/ 4ajasthan 0/
08 &amilnadu .
07 :ttar <radesh /
0. Cest Bengal 2
TOTAL 123
1
D0-,3:5 34 &)53:.* 0+;<5,:0)5 60*0,);
C=.0:*.+
? ,yt. B.). Birla
D0-,3:5
? ,mt. ).E. maheshwari
? ,hri. <ramod )haitan
? ,hri. B.<. Bajoria
? ,hri. <.). %hokesy
? ,mt. +eeta 3ukerji
? "+ominee of $.%.$.%.$.#
? ,hri. =.+ 3ishra
? "+ominee of *.$.%.#
? ,hri Amitabha Ehosh
? "+ominee of :.&.$.#
? ,hri <.) 3alik
? ,mt 3anjushree )haitan
S)-,.:1
? ,hri ,.). <arilk
S)+03: E>)-<,0?)5
? ,hri ).%.;ain "3anager of the company#
? ,hri ;.=. <oddar
? ,hri (.<. <oddar
? ,hri <.). Eoyenka
? ,hri =.&andon
1"


A<;0,3:5
? 3essrs <rice Caster house
S<@50;0.:1 C3*/.+0)5 34 &)53:.* I+;<5,:0)5
? Bharat Eeneral G &e!tile $ndustries *imited
? )$%3 $nvestment *imited
? Assam %otton 3ills *imited
? ,oftshree -states *imited
1#
INTRODUCTION OF BUDGET &
BUDGETARY CONTROL
2%
INTRODUCION T BUDGET BUDGETING BUDGETARY CONTROL
&he management is efficient if it is able to accomplish the objective of the
enterprise. $t is effective when it accomplishes the objectives with minimum effort
and cost in order to attain long'range efficiency and effectiveness management must
chat out its course in advance. A systematic approach to facilitate effective
management performance is profit planning and control or budgeting. Budgeting is
therefore an integral part of management in a way, a budgetary control system has
been described as a historical combination of a 5goal setting machine for increasing
an enterprises profits and a goal achieving machine for facilitating organizational co
ordination and planning while achieving the budgeted targets6.
MEANING OF BUDGET:
$t is a financial and uantitative statement, prepared and approved prior to a
defined period of time of policy to be pursued during that period for purpose of
attaining a given objective. $t may include income, e!penditure and employment
capital.
$n other words is a pre'determined detailed plan of action developed and
distributed as a guide to current operations and as a partial basis for the subseuent
evaluation of performance.
MEANING OF BUDGETING:
&he process of planning all flows of financial resources into with in and from
an entity during some specified future period. $t includes providing for the detailed
allocation of e!pected available future resources to projects, functions, responsibilities
and time periods.
From above definition it is clear that budgeting is the actual act of preparing
the budget. $t is the process of evolving the final statement. Budget is the end product
of budgeting.
21
MEANING OF BUDGETORY CONTROL:
$t is the process of establishing of departmental budgets relating the
responsibilities of e!ecutives to the reuirements of a policy, and the continuous
comparison of actual with budgeted results, either to secure by individual action the
objectives of the policy a firm basis for its revision.
First of all budgets are prepared and then actual results are the comparison of
budgeted and actual figures will enable the management to find out discrepancies and
take remedial measures at a proper time. &he budgetary control is continuous process,
which helps in planning and co ordination. $t provides a method of control too. A
budget is a means and budgetary control is the end result.
$n the word of ;.A ,olt 5budgetary control is the system of management
control and accounting in which all operations are forecast and so as possible planned
ahead and actual results compared with the forecast and the planned ones.
ESSENTIALS OF BUDGETARY CONTROL:
Budgeting, or the process of preparing the budget, is the starting point for
budgetary control =istribution of budgets pertaining to each function to all the
relevant section within organization.
%ollection of actual data pertaining to till budgeted activities. %ontinuous comparison
of actual performance with budgeted performance. $nitiation of corrective action to
ensure that actual performance is in line with budgeted performance 4evision of
budgeted if it is felt that the budgets prepared are no longer relevant on account of
unforeseen developments.
22
OBJECTIVES OF BUDGETARY CONTROL:
&he primary objective of budgetary controlDs to help the management is
systematic planning and in controlling the operations of the enterprise. &he primary
objective can be met only of there is proper communication and coordination amongst
different within the organization. &hus the objectives can be stated asI
17 PLANNING:
Businesses reuire planning to ensure efficient and ma!imum use of their
resources. &he first step in planning is to define the broad aims and objectives of the
business. &hen, strategies to achieve the desired goals are formulated and tentative
schedule of eh proposed combinations of the various factors of production, which is
the most profitable for the defined period. Budget influences strategies that need to be
followed by the originations. $t cultivates forced planning aiming managers.
27 COAORDINATION:
%o'ordination is managerial functions under which all factors of production
and all departmental activities are balanced and integrated achieve the objectives of
the organization. Budgeting provides the basis for individual in all department to
e!change ides on how best the organizations objectives can be realized. -!ecutives
are forced ot think of the relationship between their department and the company as a
whole. &his removes unconscious bases against other departments. $t also helps to
identify weaknesses in the organization structure.
37 COMMUNICATIONS:
All people in the organization must know the objectives, policies and
performances of the organizations. &hey must have a clear understanding of their part
in the organizations goals. &his is made possible by ensuring their participation in the
budgeting process.
47 CONTROLS AND PERFORMANCE EVALUTION:
%ontrol ensures control by continuous comparison of actual performance with
the budgeted performance. Aariances are highlighted and corrective action can be
23
initiated. BudgetDs also from the basis of performance evaluation in an organization as
they reflect realistic estimates of acceptable and e!pected performance.
BUDGETB BUDGETING AND BUDGETARY CONTROL:
A budget is B*:- <4$+& of a plan e!pressed in a uantitative terms.
Budgeting is a techniue for formulating budgets. Budgetary control relates to the
principles, procedures, and practice of achieving given objectives thorough budgets.
From the above definitions we can differentiated the three terms as budgets are
the individuals objectives of a department, etc, where as budgeting may be said to be
the act of building budget. Budgetary control embraces all and in addition includes the
science of planning the budgets to effect on overall management tool for the business
planning and control.
ESSENTIALS OF BUDGETARY CONTROL:
&he proper organization is essential for the successful preparation,
maintenance and administration of budgets. A budgetary committee is formed which
comprises the departmental heads of various departments. All the functional heads are
entrusted with the responsibility if ensuring proper implementation of their respective
departmental budgets.
&he chief e!ecutive is the overall in charge of budgetary system. 9e
constitutes a budget committee for preparing realistic budgets. A budget officer is the
convener of the budget committee who co'ordinates the budgets of different
departments. &he managers of different departments are made responsible for their
departmental budgets.
24
BUDGET OFFICER:
&he chief e!ecutive appoints budget officer. ,uch budget officer also called as
5budget controller or budget director6. 9is rank should be eual to other functional
managers.
&he budget officer does not have the direct responsibility of preparing the
budgets. &he various functional managers prepare the budgets. 9is role is that of a
supervisor. &he budget officer has the specific duty of administering the budget. 9e is
responsible for timely completion of budgeting activity by various departments and
for co'ordination between them so the t there is a proper link between them. 9e is
empowered to scrutinize the budgets prepared by different functional heads and to
make changes in them. $f the situation so demands.
&he budget officer works as a coordinator among different department. 9e
continuously monitors the actual performance of different departments. 9e determines
the deviations in the budgets and takes necessary steps to rectify the deficiencies, if
any. 9e also informs the top management about the performance of different
department.
&he budget officer will be able to carry out his work only if is conversant with
the working of all the departments he must have technical knowledge of the business
and should also possess accounting knowledge.
37 BUDGET COMMITTEE:
A budget committee is formed to assist the budget officer. &he heads of all the
important departmentDs are made members of this committee. &he committee is
responsible for preparation and e!ecution of budgets. &he members of this committee
put up the case of their respective departments and help the committee to take
collective decisions, if necessary. &he budget committee is responsible for reviewing
the budgets prepared by various functional heads. %o ordinate all the budgets and
approve the final budgets, the budget officer acts as coordinator of this committee. All
25
the functional heads are entrusted with the responsibility of ensuring proper of
ensuring proper implementation of their respective final departmental budgets.
47 BUDGETS CENTERS:
A budget centers is that part of the organization for which the budget is
prepared. A budget center may be a department, section of a department or any other
part of the department. $deally, the head of every center should be a member of the
budget committee. 9owever, it must be ensured that each budget center at least has an
indirect representation in the budget committee.
&he establishment of budget centers is essential for covering all parts of the
organization becomes easy. Chen different centers are establishment. &he budget
centers are also necessary for cost control purposes.
57 BUDGET MANUAL:
a# A budget manual is a document that spells out the duties and responsible of the
various e!ecutives concerned it specifies among various functional areas. A
budget manual covers the following matters.
b# A budget manual clearly defines the objectives of budgetary control system. $t
also gives the benefits and principles of this system.
c# &he duties and responsibilities of various persons dealing with preparation and
e!ec ton of budgets are also given in a budget manual. $t enables the
management to know the persons dealing with various aspects to budgets and
provides clarity on their duties and responsibilities,
d# $t gives information about the sanctioning authorities of various budgets. &he
financial powers of different managers are given in the manual for enabling he
spending amount on various e!penses.
e# A proper table for budgets including the sending of performance reports is
drawn so that every work starts in time and systematic control is e!ercise.
f# &he specimen forms and number of copies to be listed for budget repots is also
stated. Budget involved should be clearly stated.
g# &he length of various budget periods and control points is clearly given.
h# &he procedure to the followed in the entire system is clearly stated.
26
i# A method of accounting to be used for various e!penditures is also stated in
the manual.
&he budget manual helps in documentation the role of every employee, his
duties, responsibilities the ways of undertaking various tasks etc. thus it also in
reducing ambiguity at any point of time.
67 BUDGET PERIOD:
A budget period is the length of time for which a budget is prepared. $t
depends upon a number of factors. &he choice of a budget period depends upon the
following considerations. &he types of budget "longJshort#
• &he nature of demand for the products.
• &he timings for the availability of the finance.
• &he economic situations of the cycles.
All the above mentioned factors are taken into account while fi!ing the period
of budgets. $n this budgeting process the financial manager has to take the financial
decision on the budgets.
&he financial manager usually responsible for organizing this budget, he must
perform the following functions.
? &o decide the general policies and guidelines.
? &o officer technical advice
? &o suggest changes
? &o receive and review individual budget estimates
? &o reconcile divergent views
? &o co'ordinate budgeting activities.
? &o approve budgets with or without revisions.
? &o scrutinize control reports later on
? &o scrutinize budget repots later on
2
? &o disseminate these guide lines.
CONTINUOUS BUDGETING SYSTEM:
A continuous budgeting system is a method of having two different budget
periods with in the same budget. &he purpose of having this system is to have greater
control in terms of operational activities without losing sight is to have greater control
in terms of it results in incorporating the effect of changes in the short term on the
long'term targets of the organization.
DETERMINATION OF &EY FACTOR:
&he budgets are prepared for all functional areas. &hese budgets are interring
dependent and inter'related. A proper co'ordination among different budgets in
necessary for budgetary control to be successful. &he constraints on some budgets
may have an effect on other budgets too. A factor which influences all other budgets is
known as 5key factor or principal factor6.
&he key factor may not necessity remain the same. &he raw materials supply
may be limited at one time but it may be easily available at another time. ,imilarly,
other factors may also improve at different times. &he key factor highlights are
limitations of the enterprise. &his will enable the management to improve the working
of these departments where scope for improvement e!ists.
2"
RE(UISITES FOR A SUCCESSFUL BUDGETARY
CONTROL SYSTEM
For making a budgetary control system successful reuisites are reuired.
17 CLARIFYING OBJECTIVES:
&he budgets are used to realize objectives of the business. &he objective must
be clearly spelt out to that budgets are properly prepared. $n the absence of clear
goals, the budgets will also be unrealistic.
27 PROPER DELEGATION OF AUTHORITY AND RESPONSIBILITY:
Budget preparation and control is done are every level of management. -ven
though budgets are finalized at top level but involvement of persons from lower levels
of management is essential for their success. &his necessitates proper delegation of
authority and responsibility.
37 PROPER COMMUNICATION SYSTEM:
An effective system of communication is reuired for a successful budgetary
control. &he flow of information regarding budgets should be uick so that these are
implemented. &he upward communication will help in knowing the difficulties in
implementation of budgets. &he performance reports of various levels will help top
management in budgetary control.
47 BUDGET EDUCATION:
&he employees should be educated about the benefit of budgeting system.
&hey should be the benefits of budgeting system they should be educating about their
roles in the success of this system. Budgetary control may not be taken only as a
2#
control device by the employees but it should be used as a tool to improve their
efficiency.
57 FLECIBILITY:
Fle!ibility in budgets is reuired to make them suitable under changed
circumstances. Budgets are prepared for the future, which is always uncertain, even
though budgets are prepared by considering the future possibilities but still some
adjustment. Fle!ibility makes the budgets more appropriate and realistic.
67 MOTIVATION:
Budgets are to be implemented by human beings. &heir successful
implementation will depend upon the interest shown by the employees. All persons
should be motivated to improve their working so that budgeting is successful. A
proper system of motivation should be introduced for making this system a success.
3%
TYPES OF BUDGETS:
31
17 LONG ATERM BUDGETS:
&he long'term budgets prepared for a long period of five to ten years. &hey are
concerned with planning the operations of a firm over a considerably long period of
time. &he financial 5controller6 e!clusively for the top management usually prepares
long'term budgets. &hese budgets are very useful in terms of physical units "i.e.
uantities# or percentages, since accrued values may be difficult to forecast over such
long'period. %apital e!penditure, research and development budgets, etc, are
e!amples of long'term budgets.
27 SHORT TERM BUDGETS:
,hort'term budgets are budgets prepared for a short period of one to two year.
&hey are prepared for those activities the trend in which cannot be for seen easily over
long periods. &hese budgets are very useful incase of consumer goods industries such
as sugar, cotton, te!tiles, etc. they are generally prepared in terms of physical units
"i.e.. uantities# as well as monetary units "i.e. values# materials budget. -ach budget
etc, are e!ample of short'term budget. &hey are useful to lower level of management
for control purpose.
37 CURRENT BUDGETS:
%urrent budget is a budget, which is established for use over a short period of
time and is related to current conditions. &hus current budgets are essentially short
term budgets adjusted to current "i.e., present or prevailing# condition or
32
circumstances. &hey are prepared for a very short period. ,ay, a uarter or a month.
&hey related to current activities of the budgets.
47 INTERIM BUDGETS:
$nterim budgets are budgets, which are prepared in between two budget
periods. &hese budgets may get integrated with the budget of the following period.
CLASSIFICATION OF BUDGETS ACCORDING TO CONTENT:
Budgets may be classified into budgets in physical terms and into budgets in
monetary terms.
A9 BUDGETS IN PHYSICAL TERMS:
Budgets in physical terms are budgeted that budget in terms uantities only.
&hey do not include corresponding rupee value. *ong'term budgets are usually
prepared in physical terms. -!amples of such budgets are production budgets,
material budget etcK
B9 BUDGETS IN MONETARY TERMS:
Budgets in monetary terms are budgets that budget in terms of uantities as
well as their corresponding rupee value, sales budget, purchase budget, etc are
e!ample of such budgets. Budgets such as cash budget, capital e!penditure budget,
etc that may not have physical uantities also from part of budgets in monetary terms.
CLASSIFICATION OF BUDGETS ACCORDING TO FUNCTION:
Budgets can be classified intoI
0. operating budgets
2. financial budgets
@. master budgets
33
19 OPERATING BUDGET:
&hese budgets relate to different activities or operations of a firm. &he number
of such budgets depends upon the size and nature of the business, the commonly used
operating budgets areI
0# ,ales budgets
2# <urchase budgets
@# 4aw material budgets
># *abour budgets
/# Factory utilization budget
8# 3anufacturing e!penses or works overhead budget
7# Administrative and selling e!penses budget etc.
&he operating budget for a firm may be constructed in terms of programmes or
responsibility areas, and hence may consist ofI
<rogramme budget
4esponsibility budget
A9 PROGRAMME BUDGET:
$t consists of e!pected revenues and costs of various products or projects that
are &ermed as the major programmes of the firm, such a budget can be
prepared for each product line or project showing revenues, cost and the
relative profitability of the various in locating areas where efforts may be
reuired to reduce costs and increase revenues. &hey are also useful in
determining imbalance and inadeuacies in programmes so that corrective
action may be taken in future.
B9 RESPONSIBILITY BUDGETS:
Chere the operating budget of a firm is constructed in terms of responsibility
Areas, such a budget show the plan in terms of persons responsible for achieving
them. $t is used by the management as a control them. $t is used by the management as
a control device to evaluate the performance of e!ecutives who are in charge of
various cost centers. &heir performance is compared to the targets "budgets#, set for
them and proper action is taken for adverse results.
34
4esponsibility areas may be classified under three broad categoriesI
%ost Je!pense center
<rofit center
$nvestment center
29 FINANACIAL BUDGETS:
Financial budgets are concerned with cash receipts and disbursements,
working
%apital, financial position and results of business operations. &he commonly used
financial budgets include cash budget, working capital budget and income statement
budget, statement of retained earnings budget, budgeted balance sheet or position
statement budget.
39 MASTER BUDGETS:
&he master budget is the summary budget incorporating its functional budgets.
All &he operational and financial budgets are integrated into the master budget. &he
budget officer for the benefit of the top level management prepares this budget. &his
budget is used to coordinate the activities of various functional departments. $t is also
used as an effective control device.
CLASSIFICATION ON THE BASIS OF FLECIBILITY:
A9 FICED BUDGET:
According to $%3A *ondon a fi!ed budget is a budget which is designed to
4emain unchanged irrespective of the level of activity actually attained it is based on
a fi!ed volume of activity and shows one volume of output and related cost. $t is not
adjusted according to the actual level of activity attained.
A fi!ed 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 fi!ed
budgets is not useful for managerial purposes.
B9 FLECIBILE VARIABLE SLIDING SCALE OR CONTROL TYPE
BUDGETS:
35
According to $%3A *ondon a fle!ible budget is a budget which is designed to
%hange in accordance with the level of activity actually attained. &hus a fle!ible
budget changes according to the change in the level of activity. $n other words it
provides the budgeted costs at any level of activity.
Business activity cannot be accurately predicted on account of uncertainties of
Business environment. A fle!ible budget contains several estimates for different
assumed circumstances instead of just one estimate, it provides for automatic
adjustments with changes in the volume of activity. 9ence, a situations operating in
an unpredictable environment.
36
BUDGET AND BUDGETARY SYSTEM IN
&ESORAM CEMENT INDUSTRIES LTD7
3
!ERO BASED BUDGETING:
Lero'based budgeting is the latest techniue of budgeting and it has increased
use as a managerial tool. &his techniue was first used in America in 0182, by the
former president America, ;immy %arter.
As the name suggests, it is starting from a 5scratch6, the normal techniue of
budgeting is to use previous years cost levels as a base for preparing this yearDs
budget. &his method carries previous years inefficiencies to the present year because
we taken last year because we taken last year as a guide, and decide 5what is to be
done this year when this much was the performance of the last year6.
$n zero based budgeting every year is taken as a new year and previous year is
not taken as a base, the budget for this year will have to be justified according to
present situation, zero is taken as a base and likely future activities are decided
according to present situations. $n zero base budgeting a manager is to justify why he
wants to spend. &he performance of spending on various activities will depend upon
their justification and priority for spending will have to be proved that an activity is
essential and the amounts asked for are really reasonable taking into account the
volume of activity.
3"
BUDGET AND BUDGETARY SYSTEM IN &ESORAM CEMENT
INDUSTRIES LIMITEDB BASANTH NAGARB &ARIM NAGAR
&he budgeting process is used in the performance budgeting for the
construction of phase. Chich includes pre'commission activities. Besides meeting the
essential reuirements of managerial control. &he budgeting e!ercise also covers the
long'term capital budgeting, which is presented in the from of annual plan.
OBJECTIVES OF THE BUDGETARY SYSTEM:
? &o prepare annual budgets in such a manner those managers at various levels
in the organization carry out periodical e!ercise in respect of each contact or
responsibility center for physical planning and matching resources broke up
into monthly targets or cash flows.
? &o introduce and operate responsible for achievement of specified targets with
the resources allocated for the purpose.
? &o bring about effective co'ordination of all activities of the organization of all
activities of the organization and to gear up service divisions to meet
effectively the reuirement of projects.
BUDGET PERIOD AND PHASING:
&he budget period or annual budgets should correspond with the financial
year. &he budget should be drawn up for the ensuring financial year in the form of
budget estimates financial year in the form of 4evised -stimates "4.-# in addition, the
budget are to be reviewed on monthly basis by project review teams, in the light of
actual e!penditure and projections in the budget period. Budgets should indicate
monthly phasing of e!penditure and targets for the first and uarterly phasing for the
second half of the year. At the time of review of the budget estimates to frame revised
estimates the uarterly phasing should be broken up into monthly phasing.
3#
Chile drawing up the actual budget in (ctober every year, the long'term
capital budget for ongoing and new schemes should be formulated as a part of the
e!ercise for preparation of Annual plan. &he long term capital budget should indicate
for a period of si! years following the budget period project wise annual phasing of
the capital e!penditure and physical schedules resource based network.
BUDGET HEADS:
For uniform accounting, it is essential that costs are collected for each system
of the factory tough this may involve splitting up of payments against contracts which
embrace more than one system. Allocation of the cost as system wise affords a sound
basis for cost accounting, inter'firm comparisons and provides valuable inputs to data
bank. Budget provisions are related to project estimated and monitoring of actual
e!penditure where as control cables for part control and instrumentation system.
Factory piping which include pipelines, for ash water mains, compressed air system
and civil works piping.
Au!iliary pumps for water treatment plant and civil works system. $f there are,
any contracts not covered in the budget heads provision for such contracts should be
shown against the appropriate system head by adding code number.
5 TYPES OF BUDGETS IN &ESORAM CEMENT INDUSTRIES
LIMITED:
According to the nature e!penditure budget are classified as under
? =irect capital outlay on works
? &echnical consultancy
? $ncident e!penditure during construction
? -mployee cost
O,=): )5,.@605=*)+, )>/)+5)5:
? &raining and recruitment
? <reliminary e!penses
4%
? 3isc. brought'out assets
? &ownship budget
BRIEF ECPLANATION TO THE NATURE OF ECPENDITURE
INCLUDED IN EACH BUDGET INDICATED BELOW:
INCIDENTAL ECPENDITURE DURING CONSTRUCTION
PERSNNEL PAYMENT:
&hese comprises of salaries, wages, allowance, contribution to <F and other
funds and welfare e!penses such as *$%, 3edical reimbursement, canteen subsidy
etc., and provision for areas of salaryJ=.A.
OFFICE AND OTHER ECPENSES:
-!penses incidental to construction and capital works not traceable directly to
incidental e!penditure, during contribution euipments, vehicle running e!pense,
office rent. %ost of drawings, traveling e!penses, printing G stationery,
communication e!penses, advertisement for tenders etc., are major items in this
category.
TRIANING RECRUITMENT & OTHER DEFFERED REVENUE
ECPENDITURE:
&he first part of the budget consist of e!penses for training e!ecutives,
and non'e!ecutive trainees, rent for training halls and e!penses for management
development courses. &he second part consists of e!penses for recruitment such as
advertisement for recruitment, interview e!penses for to candidate etc., the third part
combines preliminary e!penses including share registration lees and research and
development e!penses.
MISCELLANEOUS BOUGHT OUT PASSESS:
Aehicles, furniture and fi!tures euipments, hospital and medical euipment,
miscellaneous assesses town ship figure in this budget.
41
REVIEW OF PROJECT BUDGET:
MONTHLY REVIEW:
At monthly intervals, the budgets should be reviewed by project review
committee "<4%#. <roject budget should report actual e!penditure against budget
heads. Corks heads and corporate budget by the 7
th
of the month following the
reporting month. &he monthly review should be e!amined by project review team
"<4&#, who should record reasons for any aviations and action proposed for
e!pending works in the minutes of the meetings reasons for any variations in the case
of budget heads e!ceeding 0?M of the budget estimates revised estimates or which
ever is lower 4s./ lakhs should be analyzed and reported upon.
(UATERLY REVIEW:
<4& should conduct a uarterly budget review with a view to projecting
anticipated e!penditure during the year against approved budget estimatesJ revised
estimates. As time is essence of such review, only a uick estimate of anticipated
e!penditure for individual budget heads involving provisions e!ceeding for individual
budget heads involving provisions e!ceeding 4s /? lakhs in each case should be made
and reported upon in minutes of <4&. For this purpose, project budget should furnish
all the relevant data to general manager "project# and planning and systems by the 0?
th
of the month following the uarter project budget committee should review the actual
e!penditure and assess anticipated e!penditure contract co ordinationJengineers in
charge the assessments of anticipated e!penditure should be furnished by the project
budget committee to general manager "project# by the @?
th
of the month following the
uarter under review.
42
BUDGET OF SERVICE DIVISION D CORPORATE BUDGETS:
A review of budgets of service and corporate divisions should be conducted at
uarterly intervals by corporate budget committee "%,D%#. for this purpose, corporate
accounts should report actual e!penditure up to the end of the uarter by the 0?
th
of
the month following uarter to corporate budget and budget co'ordination of the
remaining period of the year should be sent to corporate budget should be sent to
corporate budget should put up a consolidated report division wise and project wise to
corporate budget committee "%B%# by the 0/
th
of the may, August, +ovember and
February every year.
OBJECTIVES OF THE CURRENT BUDGETARY CONTROL
SYSTEM IN &ESORAM CEMENT INDUSTRIES LIMITED7
$n current to corporate budgetary control system – operating phase has been
compiled to achieve the following objectives.
? &o control actual performance with reference to standards J norms adopted in
the budget, ascertain the deviations analyze and establish the reasons.
? &o identify constraints in generation and tamely action for estimation of
constraints.
? &o monitor the generation of internal resources so as to ensure availability of
adeuate funds.
? &o prepare revenue budget so as to forecasting the periodical profitability of
the organization.
? &o develop standards J norms of performance in the various areas of operation
and maintenance based on the e!perience.
? &o involve managers at various in the process of developing performance
budget so as to introduce the concept of responsibility accounting and
participate management.
43
? &o ensure effective co'ordinate planning of all activities so the all the inputs
and services necessary for achieving the physical targets are available at
appropriate time.
? &o create cost consciousness among the managers responsible for decision
making.
? &o provide data regarding operational norms and costs for the purpose of
formulating tariff.
? &o provide data a basis for assessment of working capital reuirements.
? &o control the working capital particularly book debts, spears and other items
or inventory.
? &o improve profitability and internal resources generation.
SCOPE OF THE PERFORMANCE BUDGET:
&he budget for operation and maintenance activities will be called
performance budget operation. &his, in effect means that all financial targets in the
budget will be based on performance targets in physical terms.
&he current budgetary control system operation phase envisages generation
and transmission line projects as independents investment centers. $t becomes
applicable to a project in the year in which it plans to commercialize its first
generation unit. 9owever, the budgeting for e!penses "net of revenue# from the date
of synchronization to the date of commercial generation "i.e. during trail run# is to be
taken case of in the capital budget of the respective project. ,imilarly, in the case of
transmission line project, the system becomes applicable from the year in the date
commercial generation of the first unit of generating project, with which this line is
associated, which ever is later. For subseuent lines, the ( G 3 will be prepared from
the energisation.
&he sum totals of budgets of the cost centers will be the budget for the
investment center. 9ow ever, the budget for the profit center will be worked out by
apportioning the revenue and cost of various cost centers to individualDs profits
centers bases on specified norms.
44
&he performance budget operation will consists of following budgets along
with the supporting schedules
A. Budget balance sheet
B. Budget profit and loss account
%. 4evenue budget
$n addition, separate budgets for revenue activities other than operation for
research and development consultancy contracts etc.
&he e!penses in respect of developmental e!penditure for improvements,
additions, replacement, renewals, balancing facilities etc., are of capital nature and
will be budgeted for in the construction budget of budgetary control system –
construction phase.
&o facilitate management control the system also envisages, phasing of these
budgets into monthlyJuarterly targets. &he actual performance then will be reasons
for variations will be analyzed and established for taking corrective remedial actions.
&he scope also includes projections of internal resources for a period ranging from /
to 0/ years and updating of /years plan as well as perspective plan of the company.
STAGES IN THE FORMULATION OF PERFORMANCE
BUDGET:
&he system provides for a two stages formulation for 5performance budget'
operation6 the stages are given below.
45
INITIAL PROPOSAL:
$n the initial proposal, the project is reuired to indicate yearly targets. $n he
addition, to furnishing basic information like synchronization and commercial
generation dates
%onstraints on coal operation at less than the designed specification, calorific
value of raw material and lime stone, material consumption in physical terms for
items whose consumption value in 4s./ lakhs or more, planned shut down for a
maintenance and overhauling and norm for various operation parameters provided for
design specification and in the tariff agreements to the corporate budget committee.
$n the initial proposals is planned to be submitted after considering these
factors and keeping in view the perspective plan of the organization, fi!es as well as
norms for various operating parameters. &hese targets and norms are then
communicated to all stations and transmissions line offices in the last week of ;uly to
be used for formulating detailed budget in the firm of final proposal.
FINAL PROPOSALI
Budgeted balance sheet, budgeted profit G loss account and budgets in the
form of cash budget along with the proposal will consist of detailed supporting
schedules for each of the investment center J cost center. &his final proposal needs to
be submitted to corporate center with in @ weeks of receiving approval for initial
proposal.
&he final proposal, after approval by board, will become the basis of
monitoring performance for cost centers and investment centers.
&he freuency and e!tent review and monitoring will be done is underI
i. &he monitoring of actual performance against budgeted targets for investment
center J profit center on monthly basis and for cost centers on uarterly for
remedial J corrective actions.
ii. &he review of performance budget on uarterly basis to assess the anticipated
profitability.
&he first step in the preparation of performance budget, ( G 3 is formulation of
maintenance and overhauling schedules for Boiler and to which generation, then
46
considering the grid demand, the availability or inputs and factory problems. &he
utilization of capacity will be worked out on month'month basis for the budget period
the gross generation targets can be worked and accordingly.
NECT GENERATION:
&he sales value will be determined from uantum of net generation "i.e. gross
generation au!. %onsumption#
AUCILIARY CONSUMPTION D CONSUMPTION BY UTILITES:
&he cement consumption by each of the cost centers for individuals unit
au!iliaries, station au!iliaries as well as transformer losses are to be estimated
separately based on designed specifications and added in order to workout total
au!iliary consumption rather than fi!ing a overall percentage. ,imilarly consumption
by utilities will also need to be indicated by concerned cost centers J departments like
township and construction department. &his will be valued at cost net generation to
arrive at the sales values for owns consumptions.
CHEMICAL CONSUMPTION:
&he chemical are used by many cost centers for treatment of water. &he
consumption of chemicals will be correlated with volume of water treated and certain
norms will have to be developed for different type of chemicals and different types of
treatment.
Based on these norms, each of the cost centers will indicate consumption of
chemical in uantitative as well as financial terms. &he cost center wise reuirement
will be consolidated to arrive at total chemicals consumption to be charged to profit
and loss account. &he valuation of chemical will be done at current prices only.
EMPLOYEE COST:
&he basis employee cost will be approved manpower budget effective for
respective years of budget period. &he estimation of employee cost is to be done for
each grade considering mid'point of the scale as basis pay and after adding various
allowance like =.A., 9.4.A., %.%.A6 project allowance etc., as admissible in
respective grades. &his is to be worked >1 out or each of the budget period based on
4
e!isting strength "at the time of estimation# in each grade and additions during each
uarter "taking 7?M satisfaction for additions#.
&he provisions for *&%, medical reimbursement, <F and other welfare
e!penses are to be made based on trend of e!penses in previous years and taking into
account polices changes, if any. &he details of welfare e!penses like liveries and
uniforms, safety e!penses, accident compensation, games G sports, canteen subsidy
etc., are to list out as per chart of account. &he provisions for incentive, bonus and
payments of one time nature are to be shown separately based on total employee cost
for e!ecutives, supervisors and non'supervisors and total man power in these
categories, separate rates of cost per employee will be worked out for each of these
categories as under.
0. ,alaries and allowance
2. %ontribution to <F and other funds
@. Celfare e!penses
&he cost center of employee cost will be worked out based on these rates
separately for e!ecutives, supervisors and non'supervisors. &his will again be
consolidated separately for operations. 3aintenance and common service
function. &he employee cost of common function will be appropriated between
construction and ( G 3 budgets in the ratio of capital e!penditure and sales
during the respective years.
REPAIRS & MAINTANANCE:
$n line, with costing system following three activities can represent major
classification of repairs and maintenance.
0. 3ajor overhaul
2. <reventive maintenance
@. Break down maintenance
4"
+ormally budgeting will be done for the former twoI under each activity
separate estimates will be prepared for consumption of materials and maintenance
jobs. &his estimation will be done at each of the sub cost center wise details are
reuired to be mentioned.
&he consumption material for repairs and maintenance will be classified into
spares, lubricants, loose tools and plants, consumables and others.
&he cost center wise total separately for three activities will be added to arrive
at summary of material consumption and maintenance jobs, which will be reflected in
the profit G loss account.
&he material consumption especially of spares can be estimated based on the
e!pected life of various consumption J spears in the installed euipment the freuency
of breakdowns in the past and the reuirement for prevented maintenance and major
overhauls. &he actual life of components may be different from that indicated in the
manufacturerDs specification. &herefore, it is very difficult t estimate reuirements of
spares. But this new station it will be advisable to collect such information from old
stations that have gained e!perience in this field.
+ormally maintenance of euipment through contractors should be avoided.
But in certain areas, if the e!pertise and in house capability or sufficient man power is
not available, maintenance jobs can be got done through contractors. ,uch contracts
will need to be listed out separately. $f any owner supply items are covered in such
contracts the cost of these items will be included in the material cost.
FACTORY & GENERAL OVERHEADS:
All the items of e!penditures under this head will be estimated based on past
trend with due adjustment for policy changes. &he estimates will be given by cost
center needs for items identified with respective cost centers. &he total administrative
cost of service cost centers will be allocated between construction and ( G 3 in the
ration of capital e!penditure and sales during the respective years.
4#
DEPRECIATION:
&his is to be charged as per -, act from the year following the year in which
assets have been capitalized. &his will be done separately by each of the cost centers
on the basis of capitalized value and rates of depreciation furnished by site finance
and account for different categories of assets. %ost center'wise depreciation will be
added at total depreciation for the investment center.
INTEREST ON FICED CAPITAL:
As per e!isting accounting policy, the interest is to be charged to profit G loss
account based on the loan content in the capitalized assets restricted to total accrued
interest on the actual loans.
For budgeting purposes, interest will be worked on euated loan content or euated
loan which ever is less.
E(UATED LOAN CONTENT:
-uated loan content is to taken as /?M if total capital cost and adjusted for
number of operating months in respective years. $n case of both generating factory
and transmission lines with associated factory, the cost for each profit center will be
taker as per actual or anticipated capital cost.
&he euated loan content is to be individual unitDs transmission lines
separately for each of the phases J stages. &he total capital cost will be taken as
proposed in the performance budget construction.
5%
ANALYSIS AND INTERPRETATION
51
THE &ESORAM INDUSTRIES LIMITED
REVENUE BUDGET
TABLEAI
SL7NO PARTICULAR
B<;E),);
)5,0*.,); 43: ,=)
2%%#A1%
A-,<.6 43: ,=) 1).:
2%%#A1%
1 S.6)5
Fi!ed cost recovery 72> 72.> 80. 80..
Aariable cost recovery .>? .>.? 7>? 7>.?
Fuel price adjustment recovery .2? .2.? .8@ .8.@
(wn consumption 0@2 [email protected] 0>. 0>..
T3,.6 34 1 2/08 2/0.8 2@81 [email protected]
2 A?):.E) 0+,)+50?)5 0?2 0?.2 1. 1..
3 O,=): 0+-3*) /8 /.8 >1 >.1
GRAND TOTAL 81F2F39 264 2674 2516 25176
52
INTERPRETATION
&he data pertaining to the generation and consumption of cement at )esoram
$ndustries limited have been obtained from the year 2??1'0? and represented in table
'0. &he aspect included are total generation of cement in "crores 4s# and utilization for
au!iliary consumption, raw material consumption and line stone respectively.
=uring the year 2??1'0? the sales, fi!ed costs, variable cost, fuel price, own
%onsumption was decreased. Chen the estimated budgeted so sales consumption is
[email protected] respectively.
=uring the year 2??1'0? the average intensive are decreased 1..M the other
$ncome also decreased >.1M respectively.
Finally with regard to the result in revenue budget of )esoram cement industries
limited totally decreased 2/0.8M in the year 2??1'0? respectively.
53
THE &ESORAM INDUSTRIES LIMITED
O/):.,03+.6 E>/)+;0,< B<;E), 43: ,=) Y).: 2%%#A1%
TABLE $ II
R5 0+ -3:5
SL7
NO
PARTICULAR
BUDGETED
ESTIMATED
FOR THE 2%%#A1%
ACTUAL FOR THE
YEAR 2%%#A1%
AMOUNT RSDMT AMOUNT SDMT
1 VARIABLE COST
4aw 3aterial >2? >2.? >/? >/.?
*ime stone >/? >/.? >7? >7.?
T3,.6 34 1 "% "7% #2% #27%
2
OPERATIVE
MAINTENANCE COST
%hemical water 0@? 0@.? 0/? 0/.?
4epair G maintenance 2.? 2..? @?? @?.?
-mployee cost @2? @2.? @/? @/.?
,tationary general e!penses 8/ 8./ .? ..?
4ebate 00 0.0 0@ 0.@
,hareofoperating e!penses . ?.. 0? 0.?
T3,.6 A2 16"4 16"74 #%3 #%73
3 FINANCE CHARGES
=eprecation >2 >.2 0/ 0./
54
$nterest on fi!ed capital 0. 0.. 2? 2.?
T3,.6 34 $ 3 6% 67% 35 375
GRAND TOTAL 81F2F39 144 1744 1#16 1#176
INTERPRETATION
(bserved from the above table that the operational e!penditure budget of
)esoram cement industries limited in the year 2??1'0?.
$n the year 2??1'0? variable cost components the raw material consumption >/M
increased and the line stone consumption >7M also increased.
$n operating G maintenances cost components chemical G water, repair G
3aintenance, employee cost, stationary G general e!penses, rebate and share of other
e!penses is all are fluctuating with the e!penses of the year 2??1'0?. 9owever the
total operating maintenance costs are 1?.@M decreasing respectively.
$n finance charges depreciation and interest on fi!ed capital, has been included
&he total finance charges recording decreasing of @./M in the year 2??1'0?
respectively.
Finally with regard to the operational e!penditure budget of )esoram cement
$ndustries limited the total profit has increase with 010.8M during the year 2??1'0?
&he overall budgets results of )esoram cement industries limited is earning
3ore profits.

55
CASH FLOW STATEMENT
43: ,=) 1).: )+; 31
5,
M.:-=B 2%1%
F3: ,=) 1).: )+; 43: ,=) 1).: )+;
31
5,
M.:-= 2%1% 31
5,
M.:-= 2%%#
A7 C.5= 463G 4:3* O/):.,0+E A-,0?0,0)5
N), P:340, @)43 T.> 3B41B"B32B"#2 "%B #2B #2B132
A;H<5,*)+,5 43::
=epreciation /., @?, />,?22 /0, /7, 08,782
*oss Jprofit on fi!ed assets soldJ discarded /, >/, ./, 221 "/, 78, 0/, 772#
*oss on sale of long term investment"other than trade# @,/.,1/2 ''''''''
$ncome from long term investments"other than trade# ">,10,>8,/.0# "2,80,@7,/27#
$nterest paidJpayable on loans etc. @@,/?,@?,@7/ @2,7/,@7,770
$nterest receivedJreceivable on loans etc. "2,/?,//,/8@# "1,?/,20,>2/#
<rovision for doubtful debtsJadvancesJdepostits written back "@,.2,0/,001# ''''''''
<rovision for doubtful debts J deposits"net# ''''''' 1@,>>,@1>
=ebts J advances J deposits written off /,@>,/?,87? //,77,@1>
*ong term investments"other than trade# written off 7,7?? ''''''
*iabilities no longer reuired written back "2, ?1, 7@,.2.# ">, >7,12,@1?#
:nrealised lossJgain on foreign currency "2,1/,18,?7@# 01,0/,?7/
<rovision for distribution in value of investments ''''''''' 0,0?,?1,2@2
(perating profit before working capital changes 4B2"B13B42B3 1B46B13B41B33"
A;H<5,*)+,5 43::
$nventories "0,20,81,7/,@@># "2>,1>,2>,80/#
&rade and other receivables "/?,07,>?,@17# 2,12,82,28.
&rade payables 8/,80,?2,/1> "2?,?0,@/,@0.#
56
%ash generated from operations 2,10,.7,21,2>? 0,?>,0?,>@,81@
=irect ta!es "paidJ refund "net# "1@,>1,.?,870# 8,@0,/7,171
N), -.5= 4:3* 3/):.,0+E .-,0?0,0)5 1B#"B3B4"B56# 1B1%B42B%1B62
CASH FLOW STATEMENT
43: ,=) 1).: )+; 31
5,
M.:-=B 2%1%
F3: ,=) 1).: )+; 43: ,=) 1).: )+;
31
5,
M.:-=B2%1% 31
5,
M.:-=B2%%#
R5 R5
B7 C.5= 463G 4:3* 0+?)5,0+E .-,0?0,0)5
<urchase of fi!ed assets ">,07,22,.7,7@1# "2,22,?@,0@,.10#
,ale of fi!ed assets 8,22,@0,?.7 8,.@,8.,1./
<roceeds from sales of refractory unit
",old in 2??>'?/# 0,/?,??,??? 8?,??,???
$nvestments in shares "2,.8,22># "2,?0,.7,17>#
<roceeds from sale of share etc. 0@,>2,>78 '''''
$ncome from long term investments >,10,>/,..0 2,80,@7,/27
*oansJ deposits given "8/,?/,??,???# "0,0/,1?,??,???#
4evision of loans J deposits given 0,??,.?,??,??? 0,>.,?.,2/,???
$nterest received on loans etc. 2,0@,22,877 .,?7,@8,188
N), -.5= <5); 0+ 0+?)5,0+E .-,0?0,0)5 83B66B5%B3%B"429 81B2B"%B33B3"9
C7 C.5= 463G 4:3* 40+.+-0+E .-,0?0,0)5
3oney refused "including securities premium# @,0/? >,/??
<roceeds from
*ong term borrowings @,>7,??,??,??? 0,1@,??,??,???
,hort term borrowings 00,/@,2/,.2,188 /,/@,81,?.,22@
<ayments for debentures ".,/1,88?# "2@,7@,2//#
4epayments of
*ong term borrowings "7?,@0,??,//7# ">.,@7,@1,20.#
,hort term borrowings 00,11,@>,>?,??? "/,10,>2,@?,.>0#
$ncrease in cash credit and overdrafts from banks 2@,@8,27,/7/ 7,88,7/,77?
$nterest paid ">.,27,22,/?2# "@@,.>,@0,@8?#
=ividends paid "including ta!es# "@/,?8,11,?.0# "0@,?/,>2,02/#
N), -.5= 4:3* 40+.+-0+E .-,0?0,0)5 1B%B53B#%B#"5 6B42B1B6#4
5
+et increase in cash and cash euivalents 2,>0,?.,702 /,?>,@1,171
(penings cash and cash euivalents 2>,.@,0@,821 01,7.,@/,.87
%ash and cash euivalents taken over conseuent
on amalgamation ''''''''''' @7,7.@
C6350+E -.5= .+; -.5= )I<0?.6)+,5 2B24B22B341 24B"36B13B62#
P:340, .+; 6355 .--3<+, 43: ,=) 1).: )+; 31
5,
M.:-=B2%1%
,chedule 4s 2??1'0? 2??.'2??1
INCOME
,ales 2/,08,>/,.1,@81 0.,77,.0,//,21>
*essI -!cise duty @,?7,>8,21,?@? 2,8>,8@,.?,7/2
+et sales 22,?8,18,8?,@@1 8,0@,07,7>,/>2
(ther income 0@ >1,?>,?8,>0? /@,7>,21,820
22B5"B%%B66B4# 16B66B#2B%4B153
ECPENDITURE
4aw materials and finished goods 0> 1,2?,1.,@/,87. 7,80,0>,/1,122
Administration e!penses 0/ 1,?@,>@,?@,7.0 7,>?,/0,87,/78
=epreciation
"note 0"c# and 08 on schedules07# /1,/2,@.,/?1 /@,?/,88,22/
*essI transfer from capital reserve
4evaluation of fi!ed assets 0,20,7>,>.7 0,>.,>1,>1@
N+ote 0"c# on schedule 07O /.,@?,8>,?22 /0,/7,08,782
$nterest 08 @@,/?,@?,>.7 @2,7/,@7,770
1#B16B22B33B"5 15B"5B##B12B%31
PROFIT BEFORE TACATION 3B41B"B32B"#2 "%B#2B#2B132
<rovision for ta!ation Nnote 0/ on schedule 07O 7/,??,??,??? @>,??,??,???
<rovision for benefit ta! "e!cluding 4s 0@1717
4eferred to the note 07 on schedule 07# 0,0?,??,??? 0,22,??,???
PROFIT AFTER TACATION 2B65B6"B32B"#2 45B%B#2B132
<4(F$& AAA$*AB*- F(4 A<<4(<4$A&$(+ 2,8/,8.,@2,.12 >/,7?,12,0@2
APPROPRIATIONS
<roposed dividend '''' 0@,72,21,1/>
&a! on proposed dividend '''' 0,12,>8,/?0
4etain dividend 0.,21,7@,272 '''''
&a! on remain dividend 2,/8,82,??0 '''''
Eeneral reserve @?,??,??,??? /?,??,??,???
/?,.8,@/,27@ 2?,8>,7?,>//
B.6.+-) -.::0); ,3 5-=);<6) 2 2B41B"1B#B61# 25B%6B15B6
5"
-arning per share /..?. 1.11
+ote on the accounts 07
&he schedules referred to above from an integral part of the profit and loss account
&his is the profit and loss account referred to in out report of given data.
B.6.+-) 5=)), .5 ., 31
5,
M.:-=B 2%1%
,chedule 4s @0.?/.2?0? @0.?/.2??1
17 SOURCES OF FUNDS
a# %apital 0 >/,7>,08,@8/ >/,7>,0/,.>?
b# 4eserves and surplus 2 8,?.,81,2.,278 @,7?,.?,.>,@??
6B54B43B44B641 4B16B%5B%%B14%
2# *oans funds
A# ,ecured loans @ 8,>@,01,7?,08/ >,0@,@8,.@,/1?
b# :nsecured loans > 2,21,8?,21,/8/ 2,?7,1.,8?,11>
"B2B#B##B3% 6B21B35B44B5"4
=eferred ta! liability 0,02,>?,12,@71 0,?7,01,00,02?
16B3#B64B3B25% 11B44B5#B55B"44
27 APPLICATION OF FUNDS
0# F$P-= A,,-&, /
A# gross block 08,71,@0,7/,87? 02,0/,21,@0,7@7
b# *ess depreciation 7,20,1@,>2,/.. 8,.?,@0,>?,@7.
%# net block 1,/>,@.,@@,?.2 /,@>,17,10,@/1
=# work'in'progress 0,/?,.?,8.,01/ 2,?.,2>,?/,8.?
11B%5B1#B%1B2 B43B21B#B%3#

2. $nvestment 8 2.,.7,27,1?7 21,?0,/?,.00
@. %urrent loans and advance
a# $nventories 7 @,78,/@,27,777 2,//,0.,/2,>>@
b# ,undry debtors . 2,>/,1>,/2,/.0 0,/>,@7,2/,2>7
c# %ash and bank 1 27,2>,22,@>0 2>,.@,0@,821
d# (ther current asset 0? 00,.0,11,>02 0>,>2,8>,0@>
e# *oans and advance 00 2,?8,22,>7,280 0,@?,11,77,0.7
"B6"B11B4#B32 6B%#B"1B32B64%
*essI current liabilities and
<rovisions 02
a# %urrent liabilities 2,28,.2,12,?./ 0,80,2@,@?,/./
b# <rovisions 0,@/,7?,>1,220 78,20,1>,?80
@,82,/@,?0,@?8 2,@7,>/,2>,8>8
+et current assets /,?/,/.,?.,?88 @,72,@8,?7,11>
16B3#B64B3B25% 11B44B5#B55B"44
5#
+ote on the accounts 07
&he schedules referred to above from an integral part of the balance sheet
&his is the balance sheet referred to in our even data

CONCLUSIONS
AND
SUGGESTIONS
6%
CONCLUSIONS
-very organization has pre'determined set of objectives and goals, but
reaching those objectives and goals only by proper planning and e!ecuting of the
plans economically.
&he )esoram %ement $ndustries *imited is objectives of planning promoting
and organizing an integrated development of %ement %ompany.
&he corporation mission of )esoram %ement $ndustries is to make available
and uality cement in increasingly large uantities, the company will spear head the
process of accelerated development of cement sector by e!peditiously.
&he organization needs the capable personalities as management to lead the
organization successfully, the management makes the plans and implement of these
plan are e!pressed in terms of budget and budgetary control.
&he )esoram %ement $ndustries *imited has budget process in two stages.
(ne is the capital e!penditure budget and another is operating maintenance budget,
the capital e!penditure budget shows the list of capital projects selected for
investment along with their estimated cost, operating G maintenance budget refers to
the repairs G maintenance budgets, the special budgets are rarely used in the
organization like long'term budgets, research G development budget and budget for
consultancy.
&he )esoram %ement $ndustries *td. $s to make available and uality cement
efficient resources and implementation of sophisticated technology and cement
generation and also creating ambience of collective working of its employees.
61
SUGGESTIONS
<lanning has become the primary function of management most of the
planning relates to individual and individual proposals. Budgets are nothing but his
e!pressions, largely in financial terms, budgetary control has, therefore become and
essential tool of management for controlling and ma!imizing profits.
? &he company objectives of the organization and how they can be achieved
through budgetary control
? &ime tables for all stages of budgeting follow
? 4eports, statements, forms and other record to be maintained
? %ontinuous comparison of actual performance with budgeted performance.
62
BIBLIOGRAPHY
? F$+A+%$A* A%%+&$+E 4< &4$A-=$
? F$+A+%$A* 3A+AE-3-+& $.3. <A+=-B
? ..
&9
A++:A* 4-<(4& (F )-,(4A3 %-3-+& $+=:,&4$-,
*$3$&-=
? F:+=A3-+&A* (F F$+A+%$A* 3A+AE-3-+&
<4A,A++A %9A+=4A
=-&A$*-= <4(;-%& 4-<(4& (F )-,(4A3 %-3-+& $+=:,&4$-,
*$3$&-=
GGG7E33E6)7-3*
63

doc_707723245.doc