a Project Report on Budgetary Control at Ranna Sugars

CONTENTS

SL NOPARTICULARPAGE NO

1Executive Summary1

2Objective Of the Study2

3Introduction3

4Industrial Profile4

5Company Profile6

6Organization Profile7

7Introduction to Budgetary Control38-50

8Data Analysis and Interpretation51-61

9Findings62

10Suggestion63

11Conclusion64

12Bibliography65

13Annexure66

EXECUTIVE SUMMARY

RANNA SUGARS. Is the co-operative company. The project has been undertaken on the topic A STUDY ON BUDGETARY CONTROL at RANNA SUGARS As budgetary control helps to understand goal of the concern whether it may be short or long term goal.As the budget is playing an important role in any organization which helps to compare the actual performance with the budgeted performance .The concept of the Budget and way of adaptability, which creates new challenges to industrial sector for surviving in this current competitive edge. It indicates the progress of the concern by way of its sales or profit, market shares, process of the concern etc.

OBJECTIVES OF THE STUDY:

1) To study the existing budgetary controls method & practices at Ranna Sugars .

2) To compare the budgeted figures with actual figures and Comparison of financial statements for different financial years.3) To find out any loopholes in the budgetary control system.

4) To Forecast the future and plan to avoid losses but more positively to maximize the profits METHODOLOGY: PRIMARY SOURCE: The information of the budgetary control where obtained from.Departmental heads.

Discussion with manager of costing.

Budgetary control statement.SECONDARY SOURCE This type means secondary datas are collected from Office records.

Files & manual.

Annual Reports.INTRODUCTION:

Budgetary control is the important aspect for industry development because budgets provide yard stick against which the actual performance is measured. It always helps to the top management to take the appropriate decision to motivate and directing their personnel towards well set plans and policies of the company.

By considering the advantage of the budgetary control the Ranna Sugars also adapted this system. In Ranna Sugars they were maintaining the monthly budget with the help of daily reports. The daily reports must contain the item like production efficiency, sugar cane utilization, man power requirement, consumption of electricity, wages etc. With this the budgetary control manager prepares a monthly profitability statement of a particular month & submitted that one of the appropriate authority like production manager. By this statement or submitted report, they will take correct decision about the organizational activities.

A study has been conducted on the BUDGETARY CONTROL which is most probably adopted in the Ranna Sugars organization.

Budgetary control i.e. a most powerful tool to the management for performing its function i.e. formulating plans, coordinating activities and controlling operations etc, effectively as well as effectively.

Now a day, the number of companies are compete with each other for the survival in the present market. Whether it may be other sugars industries .but no one company can comete without proper planning. So the Cost-Budgetary control may help them to make proper decision in the number of various fields.

Budgetary control is applied to a system of management & accounting control by which all operations & output are forecasted as for ahead as possible. And actual results are known that are compared without budget estimates.

The budgetary system integrates key managerial functions as it links top managements planning function with the control function performed at all the levels in the managerial hierarchy. A more accurate budget can be developed for those activates where direct relationship exists between inputs & outputs. These input, output are base for developing budgets & exercising control.

INDUSTRIAL PROFILEIndian sugar industry

India is the largest consumer & second largest producer of sugar in the world. The Indian sugar industry second large agro industry Located in the rural India. The Indian sugar has a turnover of rs.500 billion per annum & it contributes almost rs.22.5 billion to the central & state exchequer as tax, cess & excise duty every year. Indian sugar industry has been a focal point for a socio-economic development in the rural areas. About 50 million sugarcane farmers & a large number of agricultural labors are involved in sugarcane cultivation & ancillary activities, constituting 7.5 % of the rural population. Besides, the industry provides employment to about 2 million skilled/semi-skilled workers & others mostly from the rural areas. The industry not only generates power for its own requirement but surplus power for export to the grid based on by-product-bagasse. It also produces ethyl alcohol, which is used for industrial &portable uses,& can be used to manufacture ethanol, an ecology friendly &renewable fuel for blending with petrol.

The sugar industry in the country uses only sugarcane as input; hence Sugar Companys have been established in large sugarcane growing states like Uttar Pradesh, Maharashtra, Karnataka, Gujarat, and Tamil Nadu & Andhra Pradesh. In the year 2005-06 these six states contributed more than 85 % of total sugar production in the country; Uttar Pradesh, Maharashtra & Karnataka together contribute more than 65 % of total production

Product Profile: The main & direct product of the sugarcane is a sugar. The factory has by-products like distillery, arrack, co-generation & ethanol etc.

Sugar distillery

L arrack

M compost

S1 power by Co-generation

S ethanol

L=large M=medium S1=small S2=small2

Size of bags: 50kg &100kg

Packing: plastic & jute bags.COMPANY PROFILE:

LOCATION : The RAYATAR SAHAKARI SAKKRE KARKHANE NYIYAMIT RANNA NAGAR TMMAPUR Factory: Timmapur Mudhol, Tq: Mudhol

District: Bagalkot

ESTABLISHED IN :25/11/1999

REGESTERED NO :DSK/REG/182-83

WEEKLY HOLIDAY :SUNDAYWORKING SHIFT :4 am to 12 pm, 12 pm to 8 pm, 8 pm to 4 am

CHAIRMAN :R.S.Talewad

VOICE CHAIRMEN : Anant Rao Gorphade

M.D

: S.S.PujariFINANCIAL INSTITUTION :The Karnataka State Co-operative sugar Factories

OF THE COMPANY , Bangalore

BANKERS OF THE :IDBI Bangalore

COMPANY

D.C.C Bank Timmapur,

D.C.C.Bank Mudhol

DCC Bank Bijapur

ARAE OF OPERATION : Andra Pradesh, Uttar Prades, Tamilnadu, Maharashtra(NATIONALLY) Bihar

(LOCALLY) : Mudhol, Bagalkot,Bilagi, Jamakhandi, BadamiAWARD : PARTHA SARATHI

COMPRTATORS : Nirani sugars Prabhulingeshwar sugar Pvt

WORKERS : 947

,

NO OF SHAREHOLDER : 10822

PRODUCT : Sugar

BY PRODUCT : Two Types Product

Molasses

Bagasse

ORGANISATIONAL PROFILE Chairman : Shri. R.S.Talewad

Voice chairman

: Shri, AnantRao Ghorpadhe.

Managing Director

: Shri, S.S.Pujari

Board of Directors

: Shri, Ashok M Patil.

Shri, Uday V Sarwad

Shri, K.S.Patil

Shri, G.P.Patil

Shri, L.S.Chinnanavar.

Shri, Ramesh. Tungal

Shri, L.S.Talewad.

Shri, Rajugouda Patil.

Shri, Dayanand Patil.

Head of Department:

Finance

: Shri, S.K.Kulkarni.

Administration

:

Cane section

:

Production

: Shri, R.N.Patil (Chief engineer).

BACKGROUND AND INCEPTION OF THE COMPANY:

The RAYATAR SAHAKARI SAKKRE KARKHANE NYIYAMIT (R.S.S.K.N) is a large scale Agro-based sugar industry. It covers under Co-operative sector.

This factory was registered on 29th July 1982 itself and government has given licensee for 2,500 TCD (Tone Capacity per day). In the same year government has given registration number is DSK/REG/182-83 dated: 27/07/1982. From that onwards it started issuing the shares to the public this issuing of shares comes to end in the year 1997. During these periods they purchased 200 acres of land at Timmapur (Mudhol Taluka) village at a cost of Rs.24 lakh. The 1st trial crushing was taken in the month of May from 19/05/1999 to 10/06/1999. The performance of the factory in this period is as under.

Total Cane Crushed123.28MT

Sugar produced407989Qtls.

Recovery12.50

The 1st regular season starts in the yar of 1999-2000, from 25th NOV 1999 to 28th

June 2000 (217 days). The progress achieved during this season is as follows:

Total Cane Crushed4,07,989 MT

Sugar produced5,10,015 Qtls

Recovery12.50%

Molasses produced17,360 NT

The estimated project cost of R.S.S.K.N Sugar factory was Rs.47.250res as prepared by the Karnataka State Co-operative sugar Factories , Bangalore. And this report has been appraised by the IFCI, New Delhi.10%Member sharesRs.4,725 corers

30%GovernmentRs.14,175 corers

60%Term loan from Financial InstitutionsRs.28,350 crores

Total47,250 crores

Vision To become one of the dignified company in the country.

To give due importance for the development of society. Mission To employee support and farmers development for the fullest extent.

Improving our operation activities.

Quality policy:

The quality policy is to meet & exceed customer satisfaction by

Adopting better quality management system practices

Setting suitable objectives & targeted of reviewing them periodically for continually improving the effectiveness of the quality management system

ORGANISATIONAL STRUCTURE

1] ADMINISTRATIVE DEPARTMENT:

Administrative department is classified into five sections share, sales, purchases, store, time office and security.A) SHARE SECTION:

The share section is one of the important section because more than half of the share capital is collected from the share holders.There are five classes of shares:

A Class- Grower members

B Class- Co-operative institution

C Class - State government

D Class- Non grower members

E Class- Outside are members.The person who wants to become a member has to follow the procedure/rules. He has to fulfill appropriate application given by the share section authority. If the Directors approve the application, then only he is treated as shareholder of the factory. After the approval he has to pay the amount equivalent to face value of the share.

There is no transferability of share. If at all he wants to transfer his shares, he has to transfer to such a person who is the member of the factory. Ife transfers to another person it

not valid and such shares get cancelled. For the identification of its members, the factory issues share certificates and identity cards to such shareholders.

This section gives identity card only. This section is also send notice to the concerned members on behalf of the factory. They maintain two types of books of accounts

B) TIME OFFICE SECTION:Function-

1) Distribution of salary according to the workers attendance.

2) Sanctioning of leaves to workers.

3) Maintaining working bell.

4) It maintain present and absent record daily.

5) It reports daily attendance to concerned section.

6) Showing the absent report to the HOD7) It maintains salary regester book

There are 581 workers working in this factory. As this is a new establishment of all working on daily wages. Within a few months the management is going to take workers as permanent at present only on leave in a month is sectioned to the workers.

STRUCTURE

The factory runs three shifts in a season-ShiftStarting timeClosing time

1st Shift4am12pm

2nd Shift12pm8pm

3rd Shift8pm4am

One general shift 8.30am to 5.30pm for both season and off season.

Types of Leaves:

1. Sick leaves:

Sick leave provided to employees 15 days Per year

2. Casual leaves: Casual leave provided to employees 12 days Per year

3. Earn leaves: If employee attends 30 days in a month then he is eligible for 3 days Earn leave

C) TELEPHONE OPERATING SECTION: In this section EPABX system is i.e. Electronic Private Automotive Branch Exchange. Hear only one person is operating in this section. He is the person who connects the incoming calls to different departments of the factory and also out going calls.

D) WATCH & WARD SECTION:

The main function of this section is to secure factor related assets. It maintains books regarding in & out vehicles & visitors. Report to concerned section & to general accounts.

Total number of security guards is 35. There are 7 to 8 security guards in every shift.

Structure F) COMPUTER SECTION:The total number of employees working in this department is 4. This section is to maintain all types of records that are very important for the organization and the following departments are computerized in the factory,

Weight bridge department

a) Cane accounts department

b) Time office department

c) Laboratory department

d) Stores department

e) Sales department

f) Purchase department

g) General accounts department

h) Sales accounts sectionSTRUCTURE:

Function

1) Designing of the packages required.

2) Programming of the LAN.

3) Maintaining of server.PURCHASE SECTION:This section gives identity card only. This section is also send notice to the concerned members on behalf of the factory. They maintain two types of books of accounts viz.

It is also a important section in administrative department in performing the activities of purchasing. In this section there are two employees, one is purchase manager and another one is purchase assistant. The purchase manager issues the purchase order from various section of the factory. He estimates the cost purchase and accordingly he go for direct purchases or purchases through purchase committee.

SOME SPECIFIC CONDITONAL TO PURCHASE MATERIAL:The material received or any reason what so ever will be returned to the suppliers at their own cost.

The material should be recently packed if any breakage, leakage it is the responsibilities of the supplier

All the disputes arising out of the transaction

Sales tax will have refunded if changed extra

The order will be treated as canceled if goods are not supplied then the specific period

FUNCTIONS:

Purchasing materials Calling quotation

Placing before meeting for decision

Passing bill to Account section for paymentSTRUCTURE

3] SALES SECTION

This section will take care of all the sales transactions like sale of

Sugar,

Molasses,

Bagasse.

Scrap material.

STRUCTURE:

In the sugar industry sugar is sold according to central govt. guidance & release.

Marketing & advertising is not necessary in sugar industry. Any how customer relationship is necessary to convert the stock into cash.

Function 1) Getting order from parties.

2) Arranging for delivery to parties.

3) Maintaining record of sales.

4) Sending report to managing director

5) Stocking planning godown maintainance

Sales of the sugar are done in two ways

a) free sales

b) levy sales

a) Free sales:

Government allows the sugar factory to sale certain percentage of sugar by calling tender is known as free sales.

b) Levy sales:

This means to sell the product to the govt. i.e. to sell the product under the guidance of the govt

5) Account section Finance is the lifeblood of business one cannot imagin a business without finance department because it is the central point of all business activities. Finance dept. of RSSKN factory plays a very important role, as it is here that decision with to procurement & utilization of funds are taken. Such decision includes the preparation of various budgets, allocation of funds for various activities or division of the firm as well as distribution of profits etc.

An account section is also including in the finance dept. it helps in achieving the objectives of the company. Proper management of the fund is necessary for effective management Structure:

CANE DEVELOPMENT DEPARTME

Objectives of the CDD:

To get best quality of cane at a right time To improve the variety of the cane To provide all facilities like seeds, fertilizers, unloading and loading charges Main objectives are to receiving exactly 3500 To undertake seeds development programIN CANE DEVELOPMENT YEARDATECANE DAYSSUGAR DEVELOPMENTRECOVERY PRODUCTION

1999 - 0025/11/1999 TO 28/06/2000217407989 51001512.50

2000 - 0119/11/2000 TO 15/05/2001178352938 43630011.91

2001 - 0229/10/2001 TO 05/04/2002159354028 42467011.41

2002 - 0321/10/2002 TO 29/04/2003191503083 58570011.47

2003 - 0405/11/2003 TO 13/01/200469115321 12700010.68

2004 - 0521/10/2004 TO 18/01/200590105687 11585010.88

2005 - 0602/11/2005 TO 21/04/2006170351953 40015111.39

2006 - 0728/10/2006 TO 09/06/2007225520288 60854911.60

2007 - 0820/11/2007 TO 26/05/2008189379020 44669911.65

2008 - 0902/10/2008 TO 25/02/2009145238681 25540010.60

6 )PRODUCTION DEPARTMENT: To utilize the installed capacity of 3500 in proper manner the following personality the duty to manage the Production department.

The production department is one of the core parts in every process based industry. In addition, it plays a vital role in the organization for smooth going in every sugar industries; Production department is divided in to two sections.

a)Engineering department

b)Manufacturing departmenta) Engineering Department.STRUCTURE:

Mechanical section : This includes all the mechanical process that is right from the cane weighment till milling ( obtaining of sugar juice ) for further processing. This section includes 4 main steps they are..

a. Cane weighment arrangementsb. Cane unloading arrangement

c. Cane preparation

d. Milling

Cane Weighment Arrangements: Cane weighment is totally computerized process. Hear the cane weightment is carried through electronic platform called weighs bridge. This electronic platform is of two types. One with the capacity of 40 tons for lorry and tractors and other with a capacity of 10 tones for only cart.

Hear after weighing the cane a slip is provided so that particular farmer which has the details of total weight of the cane, total trips, timing, vehicle number, variety of sugarcane and other details. And after this when the vehicle comes back after unloading the sugar cane, empty vehicle weight all their data stored in the computer and final copies are listed for further actions.

Cane unloading arrangements: Hear the weighed sugar cane is unloaded and sent further for cane preparation. Further unloading cane there are 2 unloaders with the help of sling attached instruments cane is loading on the feeding table.

Cane preparation: After feeding the sugar cane on feeding tables with the help of levelers which avoid overloading of sugar cane is sent to primary cutter, which cut the sugar canes in to small pieces, further fine fibers are obtained from there process by passing them in the fibrizer.

Milling: After fibrizering the cane passing the prepared fiber cane through a set of mills carries on milling weighted hot water is also added in the course of crushing for better extraction of juice. After crushing the juice is sent for further processPower generation

Process chart of Co-generation

Water treatment

Make up water

Feed water tank

Deareator tank

[Heating 1100 C]

Pumping

Stream drum

Turbine

Generator [electricity]Functions of power generation department are given below. To generate power at high quantity.

To distribute it to different areas, as KPTCL.

To provide better working conditions to their workers for safety.

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

Around 8.5 MW is exported to KPTCL.

Power production 12.5 MW per hour.

Stores Section Various section spare parts are stored in stall system and all the units are computerized and given a code number. Bin card and other system are followed hear. These stores materials are normally required for preventive maintenance during seasons and off seasons for servicing and overalling

Function

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

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

3) To make approval memo for verification of materials.

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

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

6) To make classification & codification of materials.

7) Receipt of material.

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

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

10) Getting indents from departmental head & issuing it.

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

12) To maintain minimum level of materials.

13) Infringing purchase department when material requiredStructure

Store section is also important section in the administrative department. All types of materials are kept in this section. Which are required for the factory smooth running. The section works day and night. Shift is changing every 8 hours. This section is maintained by the stores keeper. The main work of this section is providing the materials to the required departments.

Those stores section maintains some books like :

a. Transport.

b. Bin card.

c. Daily issued.

d. Monthly issued.

It is also one of the section under Administration department, there are total of 7 employees working in this section.

STORES ACCOUNT: After receiving the materials from suppliers quantity will be verified. The details of the materials will be entered in to transport registered and approved memo will be sent to the concerned departments for getting quality approval. They keep bin cards for each different items receipt from the suppliers with details.

DIESEL BANK:

They issue diesel to the party against indents brought by the parties and issued is entered in the daily issue register.

TOOL ROOM:

Tool room is personnel issue the materials to the workers on temporary loan and retainable basis entering in the register.

List of the registers:

1. Transport register.

2. Approval memo book.

3. Bin card files.

4. Purchase order.

In store there are two sections

1) Transport entry table.

2) Store receipt table. 1) Transport entry table:

They maintain records the receipt of material at what data, at what time, vehicle number, &quantity in kg. Acknowledgement from vehicles etc.

2) Store receipt table

The store keeper maintain the record of receipt of materials, serial nos made of transport, purchase order reference, bill nos the name of the supplier etc. the store keeper has given proper condition to the material to identify the materials.

b) MANUF ACTURING DEPARTMENTManufacturing section is again divided in to 2 sub sections

Laboratory

Godown

LABORATORY:

Laboratory plays a significant role in sugar production. The Key activity of laboratory is checking the content of sugar in the sugar cone and fixing the correct shape and size of sugar. The la prepared hourly reports which advise on the addition of other chemicals in the production.

Other concerned activities of the laboratory: It determines the percentage of water contents in the dilution of the juice.

It determines as well as managing the temperature of boiling juice.

Choices of colors and size of sugar.

To manage time and quality.

It decides the percentage and contents of chemicals to be added during production.

It finds the pH of water through universal indicator.

Structure

Function

1) It takes care of quality of sugar juice.

2) It mixes the chemical as per requirement.

3) It examines the sugar quantity.

Chemicals used in the production of sugar. Burnt-lime bleaching agent and pH controls (juice clarification)

Sulphur major bleaching agent.

Orthophosphoric acid-bleaching agent.

Flocculent - setting aid.

Caustic soda - clearing.

Common salt- clearing

Washing soda - clearing.

Phosphoric acid - setting.

Hydrous a pan bleaching agent ( color ).

Viscosity reducer- for reducing viscosity

Ammonium biflouride formalin-quality maintain and preservative.

Mill sanitation chemical to prevent generation of bacteria and increases the rate of boiling.

Mesopropile alcohol.

Commercial HCL. Bleaching powder for cleaning purpose.

Ole acetate used for lab. SUGAR:

It means something sweet in form of taste.FORMULA:

Carbon dioxide + Water = sucrose + oxygen

12CO2 +11H22O11+12O2

RAW JUICE: Before sending ra juice to process house it has to be weighted in order to excise the chemical control and making material balance for efficient control of the process.

JUCE HEATING: In this process the raw juce is heated and is converted to clear juce the required temperature is 100c to 105c in the boiling house.

SULPHURED JUCE: In this process the raw juce is added with time and sulphur gas and is mixes temperature 105c to 110c. and the sulphur juce received from in the from milk will be coloured.

CLARIFICATION: In this process through the vacuum filters the mud particles and the juce filtration takes places.

EVAPORATION: In the process the juce is boiled to make it solid. The solid from of sugar is than again passed to sulphur tank.

CENTRIFUGATION: In this the mass masscult is cured I,e sugar crystals separated from the liquor in high speed centrifugal machine of around 1200/RPM

GRADATION: Is the last process in the manufacturing of sugar. It collects the totally mixed sugar from the centrifugal section through happen and sugar passes from it each elector sugar is lifted to mixer part from the grader part the sugar is separated by grad wise it has grades.

BAGGING: The sugar is packed in 100kg, 50kg,& 25kg bags with latest with a technology of bagging with the mechanized stitching.

STORAGE: After it is sent to god own for storage through machines Factory has totally 2 big Godowns with a capacity of 2.5 lakhs each.

GODOWN SECTION:

Godown section is also one of the important part of the factory. Where the finished sugar is stored. This factory has 15 godowns; there are 2 big godowns its capacity 2 lakhs bags and other 13 godowns capacity 30000 bags. STRUCTURE:

Varieties of Sugar cane:

1.COC671 {Early Maturity}

2.CO8011 {Middle Maturity}

3.CO86032 {Early Maturity}



Civil sectionStructure

1) Planning for new project.

2) Water supply to the factory & quarters.

3) Looking over cleanliness of the factory.

4) Making arrangement for the functions.

5) Maintenance of factory building.

6) Maintenance of roads, which are constructed by factory.

7) Maintaining distillery plant.

INFRASTRUCTURE SECTIONThe infrastructure is one of the co-operative sectors in sugar production, which is located in rannaagar, at timmapur village and is 16KM away from Mudhol. It is located near the bank of Ghtaprabha River, so the factory has obtained the premises for lifting Water from this river for factory use.

THE INFRASTRUCTURE FACILITIES PROVIDED TO THE EMPLOYEES IN THE FACTORY LIKE:

Canteen and mess facility

Medical facility

Housing facility

Safety measures

Guest house facility

Contingencies

Insurance facility Etc;

GENERAL OBJECTIVES OF BUDGETARY CONTROL ARE AS FOLLOWS:

1) Planning:

A budget is a plan of the policy to be pursed during the defined period of timed to attain a given objectives. The budgetary control will force management at all levels to plan in time all the activities to be done during the future periods.

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

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

The budget serves as a mechanism through which managements objectives and polices are affected.

It is bridge through which communication is established.

The most profitable course of plan is selected.

Budget is a complete formulation of the policy of the undertaking to be pursed for the purpose of attaining a given objectives.

2). Co-Ordination: The common objectives of the firm may be successfully achieved by the way of budgetary control because it stimulates the co-operation of all concerns with the co-ordinates the various activities.

3) Communication: It is necessary in an efficient organization that all people be informed about the objectives, polices, programmers and performance. This is made possible through their Participant in the budgeting process. Budgets inform each manager of what others have agreed to do. They also inform managers of the resources available objects and targets.

Thus the budgeting system integrates key managerial functions as it links top managements planning function with the function performed at all the levels in the managerial hierarchy. But the efficiency of the budget as a planning and control device depends upon the activity in which it is being used. A more accurate budget can be develop for those activities where direct relationship between inputs and outputs. The basis for developing budgets and exercising control.

CONCEPT OF BUDGETING:

One of the primary objects of cost accounting is to provide information to business management for planning and control. Budgeting act as a toll of both planning and control. Budgeting is a formal process of financial planning using estimated and accounting data.

DEFINITION OF THE BUDGET:

The Institute of Cost and Management. Accounts (UK) defines

A budget as a a financial and/or quantities statement, prepaid and approved prior to a defined period of time, of the policy to be pursed during that period for the purpose of attaining a given object. It may include income, expenditure and the payment of capital.

RELATION BETWEEN BUDGETING AND FORECASTING:

Budgeting and forecasting are used interchangeably According to the national association of accountants (USA)forecasting is a process of predicating or estimating a future happening, Forecasting is an essential part of the budgeting process. Forecasting is estimating future events and their effects on the budget. Forecasting comes to an end after mere estimating. Budgeting is a process of preparing budgets and further control aspects are involved in its procedure.ESSENTIALS OF BUDGET:

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

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

It is a statement expressed in monetary and for physical units prepared for the implementation of policy formulated by the management.

CONTROL AND PERFORMANCE EVALUATION:

Budgeting entries into control at three points:

When a budgeted is being formulated, departments analyze their plans for the future and submit estimates as per their requirements, justifying each of their demands by demon string a need.

After budgets of different departments have been reviewed and approved they become targets that set desirable limits on spending.

At the end of the budget period, a comparison of actual expenditure with budget expenditure is made as a means of judging performance and fixing responsibility foe deviations.

ADVANTAGES OF BUDGETING:

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

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

budgeting provides a valuable means of controlling income and expenditure of a business as it is a plan for spreading

Budgeting provides a too through which managerial polices and goals are periodically evaluated, tested and established as a guidelines for the entire organization.

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

Budgeting coordinates and correlates all business activates.

The use of budgeting in an organization develops an attitude of Cost Consciousness, stimulates the effective use of resources, and creates an environment of profit-mindedness throughout the organization.

The uppermost point is that budgets provide a discipline that brings planning to the fore front as a key managerial responsibility.

Budgeting encourage productive competition.

CLASSIFICATION OF BUDGETS:

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

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

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

B. According to flexibility Fixed budget: A budget prepared on the basis of fixed or a standard level of activity. It does not change with respect to level of activity.

Flexible budget: A budget is prepared depend upon the level of the

Activity.

OPERATING AND FUNCTIONAL BUDGETS:

1) Sales budget:

The most important budget, which all other budgets are contingent upon, is the sales budget. All budgets, such as production budget, selling & distribution budget & other all affected by the sales budgeted & are depended upon the revenue derived from sales.

Forecasting sales:

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

1) Information concerning past performance.

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

3) Data concerning the industry & generally business.

2) Production budget:

A production budget is stated in physical units. Essentially the production budget is the sales budget adjusted for inventory changes as follows.

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

3) Production cost budget:

A production cost budgeted summaries the materials budget, lab our budgeted, the factory budget, and may be expressed and analyzed by departments and or products. It is also known as manufacturing budget.

4) Direct material budget:

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

Use of direct material budget

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

Delivery of material when needed.

2. It helps in fixing minimum and maximum levels of inventories in stores department.5. Direct labor budget:

The labor budget estimates the labor, adequate in number and grades, to enable the production budget to be achieved. It is generally preferable to prepare a separate direct labor budget and to include indirect labor in the factory over head budget.

6. Factory overhead budget: This budget is prepared on the basis of chart of accounts which reflects different expenses accounts & which properly classified expenses accounts and details the cost centers or departments factory overhead budgeted where in overhead costs have been classified in to fixed and variable components.

i. Inventory budget:

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

a. Selling expenses budget:

It is also known as the marketing expenses budget. The selling cost budget is made up of a number of cost items, some of which are fixed and some variable. Fixed expenses are salaries and depreciation; the principal variable expenses are commission, travel advertising and bad debts.

b. Administrative expenses budget

The Administrative expenses budget covers the administrative costs for non-manufacturing business activates. The administrative expenses budgets contains expenses like directors remunerations, legal charges, audit fees, salaries, rent office expenses, interest, property tax, put etc.

BUDGETED INCOME STATEMENT

A budgeted income statement summaries all the individual Budgets i.e. sales budgeted, cost of the goods sold budget, selling budget, and administrative expenses budget. This budget determines income before taxes (If the tax rate is available, net income after taxes can also be computed).A system of budgetary control installation in an organization is very much beneficial which may be result in proper planning & control of activates. It ultimately results in minimizing costs and maximizing profits.

If the company wants to prepare the budgets for future period of time, it is very much essential that company have to consider the past performance. Thus the past performance is treated as vital basis for the future period. Suppose in case of past performance is not available than the company has to follow the following process.

A. DETERMINATION OF THE OBJECTIVES:

The installation of budgetary control system needs to have proper objective i.e. for what purposes it has been installed. The objective may be

Minimizing costs or maximizing profits.

Co-ordination of activities of different departments.

Controlling the management functions.

B. ORGANIZATION FOR BUDGETING:

Under this process the authorities and responsibilities of each executive are clearly stated. i.e. delegation of work means dividing the work between departmental heads.

C. BUDGET MANUAL:

The budget manual is a written document, which specifies the objective of the budgeting organization & procedures.

SOME IMPORTANT MATTERS COVERED IN A BUDGET MANUAL A statement related to objectives of the organization & how they can be achieved through budgetary control.

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

Timetables for all stages of budgeting.

A statement related to functions and responsibilities of each executive.

There should be proper classification of accounts, which are lost, revenues and other financial amounts are to be classified with their respective nature.

D. REPONSIBILITY FOR BUDGETING:

1. Budget controller: The chief executive is ultimately responsible for the budget program and past of work designated as budget controller. The budget controller should have knowledge of technical skill of the business and report to chief executive.

2. Budget committee: Budget committers are framed for true delegation of authority and responsibilities. The work should be divided under different heads i.e. Sales, production, and finance etc. The duty of budget committee to submit, discuss and finally approve of the budgeted big figures.

E. FIXATION OF THE BUDGETED PERIOD:Budgeted period:

The period for which a budget is prepared & employed.

The budget period depend upon:

The nature of the business.

The control techniques.

F. BUDGETED PROCEDURE:

The procedure followed while designing and operating a budgetary control system depends upon the nature of the business.

THE PROCEDURE AS FOLLOWS:

1. Determination of key factor:

Key factor is that factor the extent of whose influence must first be assessed in order to ensure that functioned budgets are reasonably capable of fulfillment.

Ex: Sales, production, purchases, cash etc.

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

2. Making of forecasts:

Forecast is nothing but estimation of probabilities for a given period. Forecasts are made regarding sales, production cost and financial requirements of the business.

3. Consideration of alternative combinations of forecasts:

Alternative combination of forecasts is considered for efficient of overall plan with the motive to maximum profits.

4. Preparation of budgets:

After finalization of forecasts the budgets will be prepared.

5. Choice between Fixed & Flexible budgets:

A fixed budget is based on a fixed volume of activity. It is ineffective & meaningless because of actual capacity utilization may vary from month to month or quarter to quarter.

A flexible budget is prepared for changing levels of activity. The flexible budget considers the fixed and the variable costs separately. 1. Start with a canned budget worksheet.

2. Go through your check book or bills for the last two to three months and add and delete categories from the worksheet to fit your expenditures.

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

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

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

6. For each expense category, try to determine a budget amount that realistically reflects your actual expenses while setting targeted spending levels that will enable you to save money.

7. Once you're comfortable with your expense categories and budgeted amounts, enter expenditures from your checkbook from the last month.

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

9. Subtotal the income and expense categories.

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

11. If the number is negative, your expenses are greater than your income. Your situation can probably be greatly improved by changing your spending habits.

12. If you have a positive net income, transfer most of it to a savings or investment account at the end of each month. Extra cash left in a regular checking account has a way of getting spent.

13. After you've tracked your actual spending for a month or two, analyze your spending to identify where you can comfortably make cuts.

14. Once you've got the budgeting process in place, take an in-depth look at your largest spending categories, brainstorm about ways to reduce spending in specific categories, and set realistic goals

Tips:

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

2. Make your categories detailed enough to provide useful information, but not so detailed that you become bogged down in trivial details.

3. Think of your budget as a tool to help you get out of debt and save money, not as a financial diet. NEED FOR THE STUDY:

To make myself well known about organization structure at Ranna Sugars. To get the knowledge about budgetary performance through trend analysis and over all performance of Rona Sugars through primary and secondary data. So studying the various practices carried out in finance will be helpful to me in my MBA course. LIMITATIONS:

Considering the scope mentioned above, some or few limitations are arising i.e. the Rona Sugars is big organization. This finance & accounts is also big departments. But due to shortage of training period, I am concentrating only on the budgetary control of costing departments.

Time constraints. Only Three years data is used for the analysis of the studyDATA ANALYSIS AND INTERPETATION

2) COMPARISION OF PREVIOUS BUDGETED FIGURES WITH SUBSEQUENT YEARRECEIPTS

Sl.NoParticular2006-2007

At Rs. In LakhsActual Income2007-2008

At Rs. In LakhsActual Income2008-2009

At Rs. In LakhsActual Income

1Sugar Sales9487.501985.407187.507189.506440.001593.86

2Sale of By Products1053.5057.371046.36679.13909.362672.92

3Dividend7.557550.467.55360.503.601371.05

4Interest on Loans 14.401285.632.001003.173.025619.10

Comparisons of Actual expensesSl.NoParticulars2006-07

At Rs. In LakhsActual exp'sAt Rs.in Lakhs2007-08

At Rs. In LakhsActual Exp's At Rs.in Lakhs2008-09

At Rs. In LakhsActual Exp's At Rs. In Lakhs

1Sugarcane purchased7250.006162.815230.005230.004400.005616.18

2Reconstruction expenses2.0079.283.003.003.0015.13

3Vehicles management8.00114275.508.0080.0012.00108,00

4Interest on loan1800.00756040.981800.0018000.001600.008268.57

5Salary to staff264.0048219.82264.0018000.00338.0070.49

6Auditors fees2.001874.942.502.503.002.79

7 Rent and taxes8.0018723.3620.00200.0020.0015.98

8Insurance10.0051.7110.00100.0010.000.17

9Repairs and maintenance of machinery200.00191679.06300.003000.00300.00235.84

10Telegram and telephone charges5.002655.464.0040.003.002.95

11Bank commission 4.002960.784.00-------1.500.74

2) COMPARISION OF PREVIOUS BUDGETED FIGURES WITH SUBSEQUENT YEARRECEIPTS

Sl.NoParticulars2005-2006

At Rs. In Lakhs2006-2007

At Rs. In Lakhs2007-2008At Rs.in Lakhs2008-2009

At Rs. In Lakhs

1Sugar Sales6160.009487.507187.506440.00

2Sale of By Products877.211053.501046.36909.36

3Dividend10.007.557.553.60

4Interest on Loans 3.001,442.003.02

5Loss1370.891007.51--------------

TOTAL8421.1011557.508243.417355.98

PAYMENTS


Amt Rs. In Lakhs2006-2007

Am Rs. In Lakhs2007-2008

Am Rs.IN Lakhs2008-2009

Amt Rs. in Lakhs

1Sugarcane purchased4900.007250.005230.004400.00

2Reconstruction expenses10.102.003.003.00

3Vehicles management6.008.008.012.00

4Interest on loan1400.001800.001800.001600.00

5Salary to staff250.00264.00264.00338.00

6Auditors fees3.002.002.503.0

7 Rent and taxes6.008.0020.0020.00

8Insurance10.0010.0010.0010.00

9Repairs and maintenance of machinery300.00300.00300.00

10Telegram and telephone charges4.005.004.003.0

11Bank commission 1.754.004.001.50

12Other expenses1831.001904.00442.50418.50

13Net Profit carry forward to C/B155.41246.98

TOTAL8421.1011557.508243.417355.98

A) 2006-07 Receipts.



At Rs. in LakhsIncrease

In %Decrease

In%

1Sugar Sales6160.009487.5054.00%-------

2Sale of By Products877.211053.5020.09%-------

3Dividend10.007.55------24.50%

4Interest On Loans3.001.44------52.00%

5Loss1370.891007.51------26.50%

TOTAL8421.1011575.1037.45%-------

INTREPRETATION

Sugar sales increased by 54.00% in the year 2006-2007 compared to 2005-2006. Sales of by product decreased by 20.09% in the year 2006-2007 compared to 2005-2006 Interest on loans decreased by 52.00% in the year 2007-2008 compared to 2006-2007

PAYMENTS:-2006-2007


At Rs.in Lakhs2006-2007

At in Rs.LakhsIncrease

In %Decrease

In %

1Sugarcane purchased4900.007250.0047.95%------

2Reconstruction expenses10.102.00------80.20%

3Vehicles management6.0080.0033.33%------

4Interest on loan1400.001800.0028.57%------

5Salary to staff250.00264.005.60%------

6Auditors fees3.002.00------33.33%

7 Rent and taxes6.008.0033.00%------

8Insurance10.0010.00-------------

9Repairs and maintenance of machinery300.00------------

10Telegram and telephone charges40.005.00-----87.50%

11Bank commission 1.004.00350%-----

12Other expenses1831.001904.504.01%------

13Net Profit carry forward to C/B-------------------------

TOTAL8421.1011557.5037.24%------

INTREPRETATION

Sugarcane purchased increased by 47.95% in the year 2006-2007 compared to 2005-2006 Reconstruction expenses decreased by 80.20% in the year 2006-2007 compared to 2005-2006. Auditor fees decreased by 33.33% in the year 2006-2007 compared to 2005-2006. Bank commission increased by 350% in the year 2006-2007 compared to 2005-2006.B)2007-2008 Receipts


At in Rs. In Lakhs2007-2008

At Rs. In LakhsIncrease

%Decrease

%

1Sugar Sales9487.507187.0--------24.24%

2Sale of By Products1053.501046.36--------0.68%

3Dividend7.557.55--------------

4Interest On Loans 1.442.0039.8%------

5Loss1007.51------------------

TOTAL11557.508243.41-------28.67%

INTREPRETATION

Sugar sales decreased by 32% in the year 2007-2008 compared to 2006-2007 Sales of by product decreased by 0.68% in the year 2007-2008 compared to 2006-2007

Interest on loans increased by 28% in the year 2007-2008 compared to 2006-2007PAYMENT:2007-2008



At Rs. In LakhsIncrease% Decrease

%

1Sugarcane purchased7250.005230.00------27.87%

2Reconstruction expenses2.003.0050%------

3Vehicles management8.008.00-------------

4Interest on loan1800.001800.00-------------

5Salary to staff264.00264.00------------

6Auditors fees2.002.5025%------

7 Rent and taxes8.0020.0060%-----

8Insurance10.0010.00------------

9Repairs and maintenance of machinery300.00300.00------------

10Telegram and telephone charges5.004.00-----20%

11Bank commission 4.004.00-----------

12Other expenses1904.00442.50-----77%

13Net Profit carry forward to C/B155.41-----------

TOTAL11557.508243.41------29%

INTREPRETATION Sugar purchased decrease by 27.87% in the year 2007-2008 compared to 2006-2007 Reconstruction expenses increase by 50% in the year 2007-2008 compared to 2006-2007

Rent and taxes increased by 60% in the year 2007-2008 compared to 2006-200

C)2008-2009 Receipts



At Rs. In LakhsIncrease%Decrease

%

1Sugar Sales7187.006440.00-----10.40%

2Sale of By Products1046.36909.36------13.10%

3Dividend7.553.60------52.32%

4Interest On Loans2.003.0233.78%-----

5Loss-----------

TOTAL8243.41735598000------10.77%

INTREPRETATION

Sugar sales decreased by 10.40% in the year 2008-2009 compared to 2007-2008 Sales of by product decrease by 13.10% in the 2008-2009 compared to 2007-2008 Interest on loan increased by 33.78% in the 2008-2009 compared to 2007-2008

PAYMENTS:-2008-2009



At Rs. In LakhsIncrease

%Decrease

In %

1Sugarcane purchased5230.004400.00-----16%

2Reconstruction expenses3.003.00----------

3Vehicles management8.0012.0050%------

4Interest on loan1800.001600.00------11.11%

5Salary to staff264.00338.0022%-----

6Auditors fees2.503.0017%-----

7 Rent and taxes20.5020.00------2.43%

8Insurance10.5010.50-----------

9Repairs and maintenance of machinery300.50300.00------0.16%

10Telegram and telephone charges4.503.00------33.33%

11Bank commission 4.001.50------63%

12Other expenses442.50418.50-----5.00%

13Net Profit carry forward to C/B155.41246.9858.92%----

TOTAL8243.417355.98------11%

INTREPRETATION Sugarecane consumption is decreased by 16%in the year 2008-2009 compared to 2007-2008 Vehicales management costs are increased by 50% in the year 2008-2009 compared to 20007-2008 Bank commission is decreased by 63% in the year 2008-2009 compared to 2007-2008 FINDINGS: In Ranna Sugars both monthly operation plan and annual operation plan are prepared ascertaining the budgeting performance with actual performance. Budgetary control system is adopted for checking the industrial performance Sugar sales increased by 54.00% in the year 2006-2007 compared to 2005-2006- Interest on loans decreased by 39.8% in the year 2007-2008 compared to 2006-2007 Sugarcane purchased increased by 47.95% in the year 2006-2007 compared to 20052006 Sugar purchased decrease by 27.87% in the year 2007-2008 compared to 2006-2007 Vehicles management costs are increased by 50% in the year 2008-2009 compared to 20007-2008SUGGESTIONS Accurate position of the business cannot be estimated:

It arises due to inflationary pressure and change in Government policies all these affect the budgeting performance.

Ranna Sugars can carry out some promotional activities, so as to increase its sales and beat the competition Use of quarter Budget it leads to chances of improvement or modification.

Quarter Budget helps industrial concerns to checks its actual performance. After ascertaining the actual performance if any modification requires that can be adjusted in next quarter. Ranna Sugars may appoint specialized and experienced finance manager to improve its finance performance. The company should have proper co-ordination between finance and marketing department. The company should have close watch on the market which helps to make new strategies. CONCLUSION: From the study it can be concluded that to know that budgetary control is treated as one of the better techniques for minimizing cost and maximizing profit in Ranna Sugars. Budgetary control technique Plays important role in the profit making or smooth running of the company

It co ordinates all the departments like Finance, Marketing, Production in the company. It makes the decentralization of authority in the organization which helps organization goal with in stipulated period of time. Budgetary control acts as safety for an organization because it helps to identify business risk and necessary steps can be taken to avoid the risk.

Budgetary control techniques help to know how the available monetary resources can be utilized effectively. This technique focus on efficiency in the allocation of resources in particular time. As the finance department is the soul of any organization. Budgetary control helps the organization by making finance department effectives BIBOLOGRAPHY Financial management by M.Y. Khan and P.K. Jain

Financial management by I.M. Pandey

ANNEXURE

SUGARCANE

BY PRODUCT

MAIN PRODUCTION

Investment

Member shares

10%

Government

30%

Financial

Institutions

60%

MANAGING DIRECTOR

ADMINISTRATION

BOARD OF DIRECTORS

PURCHASE

SALES

AGRICULTRAL

ACCOUNTS

ENGINEERING

MANUFACTURING

ELECTRICAL

INFROSTRUCTURE

CO-GENERATION

Time keeper

Assistant time

keeper genre

Bill clerk

Shift time keeper

Leave clerks

Attendee peon

Attendee

SECURITY OFFICER

ASSISTANT SECURITY

ZAMADAR

LEAVE CLERK

GATE CLERK

COMPUTER HEAD CLEARK

COMPUTER OPERATOR

PEON

PURCHASE OFFICER

CLARKS

ATTAINDERS

SALES OFFICER

SENIOR ASSISTANT

JUNIOR ASSISTANT

ATTAINDER

ACCOUNT OFFICER

CANE ACCOUNTANT

GENERAL ACCOUNTANT

CASHER

CANE MANAGER

OFFICE MANAGER CANE

CANE PROCUREMENT MANAGER

CANE DEV MANAGER

CANE OFFICERS

CANE OFFICERS

FIELD ASSISTANT

FIELD ASSISTANT

PRODUCTION DEPARTMENT

LABORATORY INCHARGE

LABORATORY CHEMIST

LABORATORY BOYS

DEPUTY CHIEF CHEMIST

MANUFACTURING CHEMIST

STAFF AND WORKERS

POWER GENERATION

BOILER SECTION

MILLING

CANE PREPARATION

CANE UNHOLDING URANGMENTS

CANE WEIGHMENT

STORE SECTION

WORKSHOP

ELECTRICAL SECTION

MECHANICAL SECTION

CHIEF ENGINEER

DAILY WAGE LABOURS

STORE KEEPER

CLARKS

TOOL ROOM CLARK

DIESEL ROOM CLARK

ATTAINDERS

ATTAINDERS

TOOL ROOM ATTAINDER

CLARKS

Chief chemist

Depute chief

Chemist

Manufacturing

Chemist

Lab in charge

Lab boy

Sample boy

Lab chemist

SUGAR

FINAL MOLASSES

STEAM OR SUPER HEATED WASH WATER

MASSCUITE

VAPOURS, CONDENSATE WATER

EXHAUST STEAM, VAPOURS

SULPHURDIOXIDE GAS

SYRUP

CONDENSATE WATER

VAPOURS

JUISE + MUD

EXHAUST STEAM

CLEAR JUICE

CONDENSATE WATER

EXHAUST STEAM

SULPHURED JUICE

SULPHURDIOXIDES + LIME

CONDENSATE WATER

EXHAUST STEAM

RAW JUICE

BAGASSE

MILLING

IMBITION WATER

CANE

Godown Keeper

Clerks

Attender

ASSISTANT ENGINEER

OFFICIAL

NON OFFICIAL

WORKER

HEAD CLARK

CIVIL ENGINEER

WORKER

a Project Report on Budgetary Control at Ranna Sugars

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Transcript of a Project Report on Budgetary Control at Ranna Sugars