The correct answer is Cash Flow Statement

Key Points

• Controlling helps the managers in eliminating the gap between organizations actual performance and goals.
• Controlling is the process in which actual performance is compared with the company standards.
• Comparing it gives the visibility that activities are performed according to strategy or not. If it is not performed then necessary corrective action should be taken.
   

Traditional Types of Control Techniques in Management
Budgetary Control 

• Budgeting simply means showcasing plans and expected results using numerical information.
• As a corollary to this, budgetary control means controlling regular operations of an organization for executing budgets.
• A budget basically helps in understanding and expressing expected results of projects and tasks in numerical form.

Standard Costing

• Standard costing is similar to budgeting in the way that it relies on numerical figures.
• The difference between the two, however, is that standard costing relies on standard and regular/recurring costs.
• Under this technique, managers record their costs and expenses for every activity and compare them with standard costs. This controlling technique basically helps in realizing which activity is profitable and which one is not.

Financial Ratio Analysis

• Every business organization has to depict its financial performances using reports like balance sheets and profit & loss statements.
• Financial ratio analysis basically compares these financial reports to show the financial performance of a business in numerical terms.
• Comparative studies of financial statements showcase standards like changes in assets, liabilities, capital, profits, etc. Financial ratio analysis also helps in understanding the liquidity and solvency status of a business.

Internal Audit

• Another popular traditional type of control technique is internal auditing.
• This process requires internal auditors to appraise themselves of the operations of an organization.
• Generally, the scope of an internal audit is narrow and it relates to financial and accounting activities.
• In modern times, however, managers use it to regulate several other tasks.

Break-Even Analysis

• Break-even analysis shows the point at which a business neither earns profits nor incurs losses.
• This can be in the form of sale output, production volume, the price of products, etc.
• Managers often use break-even analysis to determine the minimum level of results they must achieve for an activity.
• Any number that goes below the break-even point triggers corrective measures for control.

Statistical Control

• The use of statistical tools is a great way to understand an organization’s tasks effectively and efficiently.
• They help in showing averages, percentages, and ratios using comprehensible graphs and charts.
• Managers often use pie charts and graphs to depict their sales, production, profits, productivity, etc. Such tools have always been popular traditional control techniques.

The correct answer is Integrates employees efforts

Key Points

Controlling involves comparison of actual performance with the planned performance. If there is any difference or deviation, then finding the reasons for such difference and taking corrective measures or action to stop those reasons so that they don‘t re-occur in future and that organizational objectives are fulfilled efficiently.

Controlling Process

1. Setting Performance Standards: Standards are the criteria against which actual performance would be measured. Thus standards become basis for comparison and the manager insists on following of standards.
2. Measurement of Actual Performance: Performance should be measured in an objective and reliable manner which includes personal observation, sample checking. Performance should be measured in same terms in which standards have been established, this will facilitate comparison.
3. Comparing Actual Performance with Standard: This step involves comparison of actual performance with the standard. Such comparison will reveal the deviation between actual and desired performance. If the performance matches the standards it may be assumed that everything is under control.
4. Analysing Deviations: The deviations from the standards are assessed and analysed to identify the causes of deviations.
5. Taking Corrective Action: The final step in the controlling process is taking corrective action. No corrective action is required when the deviation are within the acceptable limits. But where significant deviations occur corrective action is taken.

Additional InformationLimitations of Controlling

Difficulty in setting quantitative standards:

• Control system loses its effectiveness when standards of performance cannot be defined in quantitative terms.
• This makes comparison with standards a difficult task.
• e.g areas like human behaviour, employee morale, job satisfaction cannot be measured quantitatively.

Little control on external factors:

• An enterprise cannot control external factors like government policies, technological changes, competition. etc.

Resistance from employees:

• Control is resisted by the employees as they feel that their freedom is restricted.
• E.g employees may resist and go against the use of cameras to observe them minutely.

Costly:

• Control involves a lot of expenditure, time and effort. A small enterprise cannot afford to install an expensive control system.
• Managers must ensure that the cost of installing and operating a control system should not exceed the benefits derived from it.

The correct answer is Planning function

Key Points

• Controlling means guaranteeing that activities in an organization are proceeding according to the plans.
• Controlling likewise guarantees that an association’s assets are being utilized adequately and productively for the accomplishment of desired objectives.
• The controlling function is viewed as a backward-looking capacity as it resembles the posthumous of the past activities to discover the deviations assuming any. It isn’t the last function of the executives as it takes the administration cycle back to the planning function.

The relationship between planning and controlling

Planning Originates Controlling:

• In planning the objectives or targets are set in order to achieve these targets control process is needed. So planning precedes control.

Controlling Sustains Planning

•  Controlling directs the course of planning. Controlling spots the areas where planning is required.

Controlling Provides Information for Planning:

• In controlling the actual performance is compared to the standards set and records the deviations, if any.
• The information collected for exercising control is used for planning also.

Planning and Controlling are Interrelated:

• Planning is the first function of management. The other functions like organizing, staffing, directing etc. are organized for implementing plans.
• Control records the actual performance and compares it with standards set.
• In case the performance is less than that of standards set then deviations are ascertained.
• Proper corrective measures are taken to improve the performance in future.
• Planning is the first function and control is the last one. Both are dependent upon each other.

Planning and Control are Forward Looking:

• Planning and control are concerned with the future activities of the business.
• Planning is always for future and control is also forward looking. No one can control the past, it is the future which can be controlled.
• Planning and controlling are concerned with the achievement of business goals.
• Their combined efforts are to reach maximum output with minimum of cost. Both systematic planning and organized controls are essential to achieve the organizational goals.

The correct answer is All of the Above

Key Points

• Controlling helps the managers in eliminating the gap between organizations actual performance and goals.
• Controlling is the process in which actual performance is compared with the company standards.
• Comparing it gives the visibility that activities are performed according to strategy or not.
• If it is not performed then necessary corrective action should be taken.

Traditional Types of Control Techniques in Management
Budgetary Control 

• Budgeting simply means showcasing plans and expected results using numerical information.
• As a corollary to this, budgetary control means controlling regular operations of an organization for executing budgets.
• A budget basically helps in understanding and expressing expected results of projects and tasks in numerical form.

Standard Costing

• Standard costing is similar to budgeting in the way that it relies on numerical figures.
• The difference between the two, however, is that standard costing relies on standard and regular/recurring costs.
• Under this technique, managers record their costs and expenses for every activity and compare them with standard costs. This controlling technique basically helps in realizing which activity is profitable and which one is not.

Financial Ratio Analysis

• Every business organization has to depict its financial performances using reports like balance sheets and profit & loss statements. Financial ratio analysis basically compares these financial reports to show the financial performance of a business in numerical terms.
• Comparative studies of financial statements showcase standards like changes in assets, liabilities, capital, profits, etc. Financial ratio analysis also helps in understanding the liquidity and solvency status of a business.

Internal Audit

• Another popular traditional type of control technique is internal auditing.
• This process requires internal auditors to appraise themselves of the operations of an organization.
• Generally, the scope of an internal audit is narrow and it relates to financial and accounting activities. In modern times, however, managers use it to regulate several other tasks.

Break-Even Analysis

• Break-even analysis shows the point at which a business neither earns profits nor incurs losses.
• This can be in the form of sale output, production volume, the price of products, etc.
• Managers often use break-even analysis to determine the minimum level of results they must achieve for an activity.
• Any number that goes below the break-even point triggers corrective measures for control.

Statistical Control

• The use of statistical tools is a great way to understand an organization’s tasks effectively and efficiently.
• They help in showing averages, percentages, and ratios using comprehensible graphs and charts.
• Managers often use pie charts and graphs to depict their sales, production, profits, productivity, etc. Such tools have always been popular traditional control techniques.

The correct answer is Controlling

Key Points

• Controlling can be defined as that function of management which helps to seek planned results from the subordinates, managers and at all levels of an organization.
• Controlling is the process of assessing the organization's progress toward accomplishing its goals.
• It includes monitoring the implementation of a plan and correcting deviations from that plan.
• Features of Controlling in management
• Controlling is a dynamic process: Controlling is a dynamic process. A manager is required to take a different course of actions when an employee fails to match the standards of performance. A manager should have the skills to decide how to react to a certain situation.
• Controlling is an end function: Controlling is an end function because it comes into action once the task is completed. The performance standards are decided before the work is assigned to the employees and once the work is complete the performance of employees is compared with the standard performance, and if the performance of the employees is same as that of the standard performance then no actions are required to be taken but in case the performance doesn’t match then the manager is required to take the corrective actions.
• Planning and controlling go hand in hand :It is not wrong to say that planning and controlling works together. A manager is required to plan so that he can control the actions of employees in order to achieve the desired outcome.
• Controlling is a pervasive function: Controlling is a pervasive function because it can’t be escaped at any level of the management. All management is required to control at all levels.
• Controlling is looking forward: A manager can control the performance of an employee by controlling the past actions. A manager keeps track of the performance of the employee, so that follow up can be made when the time comes to compare the performance.

The correct answer is Both (a) and (b)

Key Points

• Controlling is one of the important functions of a manager. In order to seek planned results from the subordinates, a manager needs to exercise effective control over the activities of the subordinates.
• Controlling is forward-looking because it does not end only by comparing past performance with standards.
• Controlling is backward-looking because it postmortems all past activities to set future standards.
• Thus, controlling is both forward as well as backward-looking.

Features of Controlling Function

• Following are the characteristics of the controlling function of management:-
• Controlling is an end function- A function that comes once the performances are made in confirmities with plans.
• Controlling is a pervasive function- which means it is performed by managers at all levels and in all types of concerns.
• Controlling is forward-looking- Controlling is Forward-looking because effective control is not possible without the past being controlled. Controlling always look to the future so that follow-up can be made whenever required.
• Controlling is a dynamic process- since controlling requires taking reviewal methods, changes have to be made wherever possible.
• Controlling is related to planning- Planning and Controlling are two inseparable functions of management. Without planning, controlling is a meaningless exercise and without controlling, planning is useless. Planning presupposes controlling and controlling succeeds planning.

The correct answer is It restricts co-ordination in action.

Key Points

• Controlling involves the comparison of actual performance with the planned performance.
• If there is any difference or deviation, then finding the reasons for such difference and taking corrective measures or action to stop those reasons so that they don‘t re-occur in the future and that organizational objectives are fulfilled efficiently.

Importance of Controlling

• Controlling helps in achieving organizational goals: The controlling function measures progress towards the organizational goals and brings to light/indicates corrective action.
• For Evaluating/Judging accuracy of standards: A good control system enables management to verify whether the standards set are accurate or not by careful check on the changes taking place in the organizational environment.
• Making efficient use of resources: By the process of control, a manager seeks to reduce the wastage of resources.
• Improves employee motivation: A good control system ensures that employees know well in advance what they are expected to do & also the standard of performance. It thus motivates & helps them to give better performance.
• Facilitating Coordination in action: In controlling each department and employee is governed by predetermined standards which are well coordinated with one another. Control provides unity of direction.
• Ensuring order and discipline: Controlling creates an atmosphere of order and discipline in the organization by keeping a close check on the activities of its employees.

The correct answer is All of the Above

Key Points

• Controlling involves comparison of actual performance with the planned performance.
• If there is any difference or deviation, then finding the reasons for such difference and taking corrective measures or action to stop those reasons so that they don‘t re-occur in future and that organizational objectives are fulfilled efficiently.

Measurement of Actual Performance

• Once the standards have been determined, the next step is to measure the actual performance.
• The various techniques for measuring are sample checking, performance reports, personal observation etc.
• However, in order to facilitate easy comparison, the performance should be measured on same basis that the standards have.

Following are some of the ways for measuring performance:

1. Superior prepares a report regarding the performance of an employee.
2. Various ratios like gross profit ratio, debtor turnover ratio, return on investment, current ratio etc. are calculated at periodic intervals to measure company’s performance.
3. Progress made in areas like marketing can be measured by considering the number of units, increase in market share etc.
4. In small organisations, each unit produced can be checked personally to ensure the quality standards.
5. In large organisation, the technique of sample checking is used. Under this technique, some pieces are checked at random for quality specifications.

The correct answer is Controlling

Key Points

• Controlling is one of the most basic functions of management, like planning, organizing, staffing, etc. Controlling is an important function, and without controlling management can’t ensure the desired results.
• Controlling can be defined as that function of management which helps to seek planned results from the subordinates, managers and at all levels of an organization.
• The controlling function helps in measuring the progress towards the organizational goals & brings any deviations, & indicates corrective action.
• Control is an indispensable function of management without which the controlling function in an organization cannot be accomplished and the best of plans which can be executed can go away.

A good control system helps an organization in the following ways:

Accomplishing Organizational Goals

• The controlling function is an accomplishment of measures that further makes progress towards the organizational goals & brings to light the deviations, & indicates corrective action.
• Therefore it helps in guiding the organizational goals which can be achieved by performing a controlling function.

Judging Accuracy of Standards

• A good control system enables management to verify whether the standards set are accurate & objective.
• The efficient control system also helps in keeping careful and progress check on the changes which help in taking the major place in the organization & in the environment and also helps to review & revise the standards in light of such changes.

Making Efficient use of Resources

• Another important function of controlling is that in this, each activity is performed in such manner so an in accordance with predetermined standards & norms so as to ensure that the resources are used in the most effective & efficient manner for the further availability of resources.

Improving Employee Motivation

• Another important function is that controlling help in accommodating a good control system which ensures that each employee knows well in advance what they expect & what are the standards of performance on the basis of which they will be appraised.
• Therefore it helps in motivating and increasing their potential so to make them & helps them to give better performance.

Ensuring Order & Discipline

• Controlling creates an atmosphere of order & discipline in the organization which helps to minimize dishonest behavior on the part of the employees.
• It keeps a close check on the activities of employees and the company can be able to track and find out the dishonest employees by using computer monitoring as a part of their control system.

Facilitating Coordination in Action

• The last important function of controlling is that each department & employee is governed by such pre-determined standards and goals which are well versed and coordinated with one another.
• This ensures that overall organizational objectives are accomplished in an overall manner.

The correct anwer is Measurement of actual performance

Key PointsControlling can be defined as that function of management which helps to seek planned results from the subordinates, managers and at all levels of an organization. The controlling function helps in measuring the progress towards the organizational goals & brings any deviations, & indicates corrective action.

Controlling as a management function involves the following steps:

Establishment of standards-

• Standards are the plans or the targets which have to be achieved in the course of business function. They can also be called as the criterions for judging the performance.
• Standards generally are classified into two-
• Measurable or tangible - Those standards which can be measured and expressed are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc.
• Non-measurable or intangible- There are standards which cannot be measured monetarily. For example- performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible standards.
• Controlling becomes easy through establishment of these standards because controlling is exercised on the basis of these standards.

Measurement of performance-

• The second major step in controlling is to measure the performance.
• Finding out deviations becomes easy through measuring the actual performance.
• Performance levels are sometimes easy to measure and sometimes difficult. Measurement of tangible standards is easy as it can be expressed in units, cost, money terms, etc.
• Quantitative measurement becomes difficult when performance of manager has to be measured. Performance of a manager cannot be measured in quantities.
• It can be measured only by-
• Attitude of the workers,
• Their morale to work,
• The development in the attitudes regarding the physical environment, and
• Their communication with the superiors.
• It is also sometimes done through various reports like weekly, monthly, quarterly, yearly reports.

Comparison of actual and standard performance-

• Comparison of actual performance with the planned targets is very important.
• Deviation can be defined as the gap between actual performance and the planned targets.
• The manager has to find out two things here- extent of deviation and cause of deviation.
• Extent of deviation means that the manager has to find out whether the deviation is positive or negative or whether the actual performance is in conformity with the planned performance.
• The managers have to exercise control by exception. He has to find out those deviations which are critical and important for business. Minor deviations have to be ignored.
• Major deviations like replacement of machinery, appointment of workers, quality of raw material, rate of profits, etc. should be looked upon consciously. Therefore it is said, “ If a manager controls everything, he ends up controlling nothing.”
• For example, if stationery charges increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand, if monthly production decreases continuously, it is called as major deviation.
• Once the deviation is identified, a manager has to think about various cause which has led to deviation. The causes can be-

1. Erroneous planning,
2. Co-ordination loosens,
3. Implementation of plans is defective, and
4. Supervision and communication is ineffective, etc.

Taking remedial actions-

• Once the causes and extent of deviations are known, the manager has to detect those errors and take remedial measures for it. There are two alternatives here-
• Taking corrective measures for deviations which have occurred; and
• After taking the corrective measures, if the actual performance is not in conformity with plans, the manager can revise the targets. It is here the controlling process comes to an end.
• Follow up is an important step because it is only through taking corrective measures, a manager can exercise controlling