Give a brief contrast between Budgetary Control and Standard Costing

January 13th, 2012 Comments off
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There seems to be a big difference when we understand that standard costing system is concerned with the manufacturing of a product or providing of a service whilst budgetary control system is concerned with the overall policy of the company.But are there any similarities between these two systems.?

Yes, the following are the similarities of budgetary control and standard costing:

  • Both systems deploy predetermined figures
  • Both systems are useful accounting tools to management in controlling costs
  • Both systems require proper administration. The actual results must be compared with budgets or standards and any variances should be investigated. There should be a continuous study of the cost control problems and corrective actions taken where necessary. Where appropriate the budgets or standards need to be revised in order that they are realistic

It is interesting to note that it is possible for both systems to operate independently but since both systems involve the estimation of costs, most firms often operate both systems together. Budgets set can be used as guides to setting standard costs. Vice versa, the standard costs already determined can be used as aids in the preparation of budgets.

 

 

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Financial Accounting

 
 

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