Controlling Class 12

Controlling is an important chapter in the syllabus of Business Studies class 12. Learning this chapter and other commerce subjects, helps you understand the meaning, importance of controlling, the relationship between planning and controlling, processes and techniques on how a manager may effectively control adverse business situations intelligently through various strategies. Through this blog, we provide you with concise revision notes in business studies that will help you with your exam preparations controlling class 12.

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 Control

According to control class 12,  control is a management function which involves:

• Setting standards
• Measuring actual performance
• Taking corrective action
• Comparison of actual performance with the planned performance

Importance of Controlling

The chapter controlling class 12, elaborates the importance of controlling. They are mentioned below.

• Helps in achieving organizational goals and indicates deviations if any to take corrective action.
• Judges accuracy of standards by carefully checking the changes taking place in an organizational environment.
• Makes efficient use of resources and enables a manager to reduce wastage of resources.
• It improves employee motivation by letting them know well in advance what they are expected to do and the standards of performance.
• Ensures order and discipline by keeping a close check on the activities of its employees.
• Facilitates Coordination in action by setting predetermined actions for governing various departments.

Limitations in Controlling

Moving further in the chapter controlling class 12, we look at the various limitations of controlling. They are mentioned below.

• Difficulty in setting quantitative standards thus leading to loss in its effectiveness.
• Little control on external factors like  government policies, technological changes, competition etc.
• Resistance from employees when exerting control.
• Costly affair involving expenditure, time and effort.

Features of Controlling

According to controlling class 12, controlling as a process has various features to it. They are listed below.

• Goal oriented
• Pervasive
• Continuous
• looking back the performance achieved by employees
• Is a forward looking function
• Depends on planning
• Action oriented
• Primary Function of Management
• Brings back management cycle back to planning

Relationship between Planning and Controlling

Moving further in controlling class 12, we look at the relationship between planning and controlling. Planning and controlling are both interrelated and influence each other.

• Planning is necessary for controlling as the set standard for establishing control.
• Planning is only meaningful when control is exercised. It identifies deviations and initiates corrective measures.
• The effectiveness of planning can be measured by controlling.
• Planning is future-oriented and involves looking in advance and making policies to maximise resources in the future. Whereas controlling is looking back on the performance already achieved by the employees and comparing it with the set standards.
• Therefore they are connected as planning makes controlling effective whereas controlling improves future planning.

Controlling Processes

Moving further in controlling class 12, we identify the various process of controlling. It is a 5 stage process which includes the following:

• Setting performance standards
• Measurement of actual performance.
• Comparing the actual performance with standards.
• Analysing deviation – deviations are assessed to identify an acceptable range of deviation:
  • Critical Point Control – Control should focus on key result areas (KRAs) which are critical to the success of an organisation. These KRAs are set as the critical points.
  • Management by Exception – It is based on the belief that any attempt to control everything results in controlling nothing. In short, everything cannot be controlled at the same times.
• Taking Corrective Action

Techniques of Managerial Control

According to controlling class 12, the process of controlling has several techniques.  It can be classified into 2 broad types.

Traditional Techniques

The types of traditional techniques in controlling class 12 are mentioned below.

• Personal Observation – collection of first hand information but it is very time consuming and cannot be used in all kinds of jobs.
• Statistical Reports – Statistical analysis in the form of averages, percentages, ratios, correlation, etc
• Break Even analysis – a technique to study the relationship between costs, volume and profits.
• Budgetary Control – all activities are planned in advance in the form of budgets and actual results are compared with budgetary standards.

There are many kinds of budget, which form a part of the traditional techniques. They are mentioned below.

• Sales budget
• Production budget
• Material budget
• Cash budget
• Capital budget
• Research and development budget

Modern Techniques

The types of modern techniques are mentioned below.

• Return on Investment – technique which provides the basic tool for measuring whether or not invested capital has been used effectively for generating a reasonable amount of return.
• Ratio Analysis refers to the analysis of financial statements by computation of various ratios:
  • Solvency Ratios
  • Profitability Ratios
  • Liquidity Ratios
  • Turnover Ratios
• Responsibility accounting has certain procedures attached to it. They are mentioned below:
  • Cost centre: an arena of an organisation for which a manager is held responsible for its operations. For e.g. production department for manufacturing units.
  •  Revenue Centre: is an arena of an organisation which is responsible for the generation of revenue. For e.g. Marketing department.
  • Profit Centre: is an arena of an organisation where the manager is responsible for both revenues and costs. For e.g. repair and maintenance department.
  • Investment Centre: is responsible for profits and all investments made in the centre. e.g. assets
• Management unit: Management unit is the performance appraisal of the management of an organization.

PERT and CPM

According to controlling class 12, PERT (Programme Evaluation and Review Technique) and CPM (Critical Path Method) are important techniques that help plan and control complex projects. They are useful in the implementation of time-bound projects which comprises a complex, diverse and interrelated activities.

Management Information System

Next in controlling class 12, is the management information system. Management Information System (MIS) is a computer-based system. It is an important control technique and provides information and support for managerial decision-making. Some of the advantages of MIS are

• It helps with the collection, management and dissemination of information.
• It bolsters planning and controlling.
• It enhances the quality of information.
• It maintains cost effectiveness.
• It helps reduce information overload

Must Read: Business Studies Class 12 Project

This was all about the chapter Controlling class 12. We hope this blog about Controlling class 12 will help you with a quick revision while preparing for the exam. If you want to avail similar notes in other subjects, check out our blogs at Leverage Edu. Confused about what to do after class 12th? Get in touch with our experts who will guide you every step of the way! Sign up for a free session today!