---
title: "Budgetary control; objectives, advantages, conditions"
subject: "Project Engineering"
chapter: 6
key: "semester_7/project_engineering:budgetary-control-objectives-conditions"
source: https://www.bctengineer.com/q/semester_7/project_engineering/budgetary-control-objectives-conditions
site: BCT Engineering
---

# Budgetary control; objectives, advantages, conditions

Project Engineering · Chapter 6: Introduction to Project Financing

- Asked in: 2065 Shrawan (old course), 6 marks
- Video: [What is Budgeting? | Budgetary control | Advantages & Limitations of Budgeting](https://www.youtube.com/watch?v=INnPo0QPXf4) — Educationleaves
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/project_engineering/budgetary-control-objectives-conditions
- Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-6

## Question

Explain budgetary control, its objectives, advantages and essential conditions for applying a budget.

## Short answer

Budgetary control compares actual results with budgets, analyzes variances, and takes corrective action. Objectives: plan targets, coordinate, control income/expenditure, fix responsibility, measure performance, reduce waste. Advantages: early problem detection, cost reduction, performance evaluation basis. Essential conditions: clear objectives, top management support, budget committee, good accounting system, realistic targets, participation, defined period and manual, regular variance reports.

## Answer

#### Budgetary control

**Budgetary control** is a system in which budgets are prepared for each department or function, actual results are compared with the budgets, differences (variances) are analysed, and corrective action is taken so that the objectives are achieved.

```text
 Plan (budget) -> Operate -> Compare actual with budget
       ^                              |
       +---- Corrective action <-- Variance analysis
```

#### Objectives

1. To plan and set clear targets for each department.
2. To coordinate the activities of departments.
3. To control income and expenditure.
4. To fix responsibility for performance.
5. To measure performance and find weak areas.
6. To use resources efficiently and reduce waste.
7. To guide management in decisions and in cash planning.

#### Advantages

- Defines responsibility and promotes team work.
- Gives early warning through variances.
- Reduces cost and increases profit.
- Helps in planning cash and borrowing.
- Gives a basis for performance evaluation.

#### Essential conditions for applying a budget

1. A clear objective and strong support from top management.
2. A budget committee and budget officer with a clear authority.
3. A sound organisation structure with defined responsibility centres.
4. A good accounting and cost record system.
5. Realistic targets based on past data and forecasts.
6. Participation of the persons who will carry out the budget.
7. A budget period and a budget manual that are well defined.
8. Regular reports on variances and flexibility to revise.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. Budgetary control involves:
   A. Only preparing budgets
   B. Ignoring variances
   C. Preparing budgets, comparing actuals, analysing variances and taking corrective action
   D. Only recording sales
   Answer: C. It is a cycle of plan, operate, compare, analyse and correct. (Key point: Meaning)

2. An objective of budgetary control is:
   A. To avoid targets
   B. To increase waste
   C. To avoid coordination
   D. To fix responsibility for performance
   Answer: D. It fixes responsibility and measures performance. (Key point: Objective)

3. An essential condition is:
   A. Sound organisation with defined responsibility centres
   B. No cost records
   C. Unrealistic targets
   D. Excluding staff
   Answer: A. Defined centres, accounting records and top management support are required. (Key point: Essential condition)

4. After variance analysis comes:
   A. Stop budgeting
   B. Corrective action
   C. Ignore results
   D. Raise targets only
   Answer: B. Variances lead to corrective action in the control loop. (Key point: Variance step)

## Related in Project Engineering

- [Short note: Budgetary control](https://www.bctengineer.com/question.md?key=semester_7%2Fproject_engineering%3Abudgetary-control-note) — Project Engineering, chapter 6

## Related in other subjects

- [Essential and natural boundary conditions](https://www.bctengineer.com/question.md?key=semester_8%2Ffinite_element_method%3Aessential-natural-boundary-conditions) — Finite Element Method, chapter 2
- [Metrics for control objectives](https://www.bctengineer.com/question.md?key=semester_6%2Fembedded_system%3Acontrol-metrics-objectives) — Embedded System, chapter 7
- [Closed loop speed control design conditions](https://www.bctengineer.com/question.md?key=semester_6%2Fembedded_system%3Aclosed-loop-speed-control-conditions) — Embedded System, chapter 7
- [Current mirror conditions and Widlar output resistance](https://www.bctengineer.com/question.md?key=semester_4%2Fadvanced_electronics%3Awidlar-essential-conditions-output-resistance) — Advanced Electronics, chapter 1, asked 3×