Q. 2. Discuss the budgetary control limitations.


Limitations of Budgetary Control

While the advantages of a budgetary technique are unquestionably impressive and for reading, certain limitations and pitfalls of budgeting need to be mentioned.

1. Budgeting control based on estimates

Budgeting is not an exact science; a certain amount of estimate is present in all budgetary plans. A revision or modification of estimates should be made when variations from the estimates warrant a change of plans.

2. Needs co-operation and participation of all

The success of budgetary control depends on the active co-operation of all concerned members of the department.

3. Lack of flexibility

Budgets are prepared in advance and based on estimates, later on, some changes are desired but budget estimate remains the same. Thus, flexibility will be lacked.

4. Expensive tool

The use of budgetary control technique is expensive, a small organization cannot afford its cost.

5. Continuous check

The success of budgetary control depends upon the constant checks. It should be exercised on controlling various activities.

Also Check:  Methods of preparing cash budget

6. It needs the determination of responsibilities

The success of budgetary control depends upon a well defined organizational system. Here, the responsibilities are fixed which are needed for control.

7. Needs various accounting information

The success of Budgetary control depends upon accounting data thus, adequate accounting records should be maintained according to the need of budget centers.

8, Budgeting control consumes a lot of time

The installation of a budget takes a lot of time. Sometimes the management becomes impatient and loses interest because it expects too much too soon. The budgeted plan is explained to responsible persons, must be guided, trained and educated the fundamental steps, methods and purpose of budgetary control. All this requires too much time to know the system of budgetary control.

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