CBSE Class 12 Business Studies (2026–27)
Chapter 8: Controlling
20 Important Questions & Answers
Controlling is the process of comparing actual performance with planned standards and taking corrective actions whenever necessary. Important topics include the meaning, importance, process, relationship with planning, management by exception, and techniques of controlling.
1. What is meant by Controlling?
Answer:
Controlling is the managerial function of ensuring that organizational activities are performed according to planned standards. It involves measuring actual performance, comparing it with predetermined standards, identifying deviations, and taking corrective actions whenever required. Controlling helps managers monitor progress and ensure that organizational objectives are achieved efficiently. It is a continuous process because performance must be checked regularly. Effective controlling reduces wastage, improves productivity, and helps maintain discipline in the organization. Thus, controlling acts as a guiding mechanism that keeps the organization on the right path toward achieving its goals and objectives.
2. State any two importance of Controlling.
Answer:
Controlling is important because it helps in accomplishing organizational goals by ensuring that actual performance matches planned standards. Whenever deviations occur, corrective actions are taken immediately. Another importance is the efficient use of resources. Through continuous monitoring, managers can identify wastage and inefficiencies and take steps to reduce them. This ensures optimum utilization of resources such as money, materials, and manpower. Controlling also improves coordination among departments and helps maintain discipline within the organization. Therefore, controlling plays a vital role in improving organizational effectiveness and performance.
3. How does Controlling help in achieving organizational goals?
Answer:
Controlling helps in achieving organizational goals by measuring actual performance against predetermined standards. Managers continuously monitor activities and identify deviations from plans. Whenever deviations are detected, corrective actions are taken to bring performance back on track. This process ensures that resources are used efficiently and organizational efforts remain focused on achieving objectives. Controlling also provides timely feedback to management regarding progress and performance. By minimizing errors and ensuring that work is performed according to plans, controlling helps organizations accomplish their goals effectively and efficiently.
4. Explain the first step in the controlling process.
Answer:
The first step in the controlling process is setting performance standards. Standards are predetermined criteria against which actual performance is measured. These standards may be quantitative, such as sales targets, production units, and costs, or qualitative, such as customer satisfaction and employee morale. Clearly defined standards provide a basis for evaluating performance and identifying deviations. Effective standards should be realistic, measurable, and achievable. Without setting standards, managers cannot determine whether organizational performance is satisfactory or not. Therefore, establishing standards is the foundation of the entire controlling process.
5. What is meant by deviation in controlling?
Answer:
Deviation refers to the difference between actual performance and the predetermined standards. It indicates whether performance is above, below, or equal to expectations. Deviations may be positive or negative. Positive deviations occur when performance exceeds standards, while negative deviations occur when performance falls short. Managers analyze deviations to identify their causes and determine whether corrective action is required. Studying deviations helps organizations improve efficiency and avoid recurring mistakes. Thus, deviation analysis is an essential part of the controlling process because it guides management in making informed decisions.
6. What is Management by Exception?
Answer:
Management by Exception (MBE) is a principle of controlling in which managers focus their attention only on significant deviations from standards. Minor deviations are ignored because they do not seriously affect organizational performance. This approach saves managerial time and effort and allows managers to concentrate on critical issues requiring immediate action. MBE improves efficiency because managers can devote their energy to solving major problems rather than monitoring every small activity. Therefore, Management by Exception is an effective technique for ensuring better control and decision-making in organizations.
7. Explain the relationship between Planning and Controlling.
Answer:
Planning and controlling are closely related and are often called the two sides of the same coin. Planning sets objectives and establishes standards, while controlling ensures that actual performance conforms to those plans. Without planning, controlling has no standards for comparison, and without controlling, planning becomes ineffective because there is no mechanism to check implementation. Planning is forward-looking as it determines future actions, whereas controlling evaluates performance and suggests corrective measures. Together, they help organizations achieve their goals efficiently and effectively by ensuring continuous improvement and better performance.
8. Why is Controlling considered a continuous process?
Answer:
Controlling is considered a continuous process because organizational activities take place continuously and require constant monitoring. Managers regularly compare actual performance with standards and take corrective actions whenever deviations occur. As business conditions change, performance standards may also need revision. Continuous control helps organizations identify problems at an early stage and prevent major losses. It also provides regular feedback for improving future performance. Therefore, controlling does not end after one evaluation; it continues throughout the life of the organization to ensure efficient achievement of objectives.
9. What is meant by critical point control?
Answer:
Critical Point Control refers to focusing managerial attention on key areas that have a significant impact on organizational performance. Managers identify critical points where deviations may cause serious problems and monitor them closely. Examples include production quality, sales targets, inventory levels, and customer satisfaction. By concentrating on these vital areas, managers can detect issues quickly and take corrective actions before they become major problems. This approach improves efficiency and ensures better utilization of managerial resources. Hence, critical point control is an important principle of effective controlling.
10. Explain the importance of judging the accuracy of standards.
Answer:
A good control system helps management verify whether the standards established during planning are realistic and objective. If actual performance consistently differs from standards, managers may review and revise those standards. Changes in the business environment, technology, or market conditions may require modifications in targets and benchmarks. Thus, controlling helps ensure that standards remain relevant and practical. By judging the accuracy of standards, organizations can improve planning quality and achieve better results. This makes controlling an essential tool for organizational effectiveness and continuous improvement.
11. What is Break-Even Analysis?
Answer:
Break-Even Analysis is a traditional technique of managerial control that studies the relationship between costs, sales volume, and profits. The break-even point is the level of sales at which total revenue equals total cost, resulting in neither profit nor loss. This technique helps managers estimate profits at different levels of activity and make informed decisions regarding pricing, production, and sales. It also assists in determining the minimum sales required to cover costs. Therefore, Break-Even Analysis is a useful tool for planning and controlling business operations.
12. What is Budgetary Control?
Answer:
Budgetary Control is a technique of controlling in which organizational activities are planned in advance through budgets, and actual performance is compared with budgeted figures. A budget is a quantitative statement prepared for a specific future period. Through budgetary control, managers can identify deviations between actual and planned performance and take corrective actions. It helps in controlling costs, improving efficiency, and ensuring proper utilization of resources. Budgetary control also facilitates coordination among departments and helps organizations achieve their financial and operational objectives effectively.
13. What is meant by measuring actual performance?
Answer:
Measuring actual performance is the second step in the controlling process. After setting standards, managers collect information about actual results and performance levels. Measurement may be done through personal observation, reports, audits, sample checking, or statistical data. Accurate and reliable measurement is necessary because decisions regarding corrective actions depend on it. If performance is measured incorrectly, managers may take wrong decisions. Therefore, measuring actual performance provides the factual basis for comparison with standards and helps in evaluating organizational effectiveness.
14. Explain corrective action in controlling.
Answer:
Corrective action is the final step in the controlling process. After identifying and analyzing deviations, managers take steps to eliminate the causes of poor performance. Corrective actions may include revising plans, improving employee training, modifying procedures, or reallocating resources. The objective is to prevent the recurrence of problems and ensure that future performance meets standards. Effective corrective action not only solves current issues but also improves organizational efficiency. Thus, corrective action converts control information into practical improvements and helps achieve organizational objectives successfully.
15. How does controlling improve employee motivation?
Answer:
Controlling improves employee motivation by clearly defining performance standards and expectations. Employees know what is expected of them and can evaluate their own progress. When performance is measured fairly and achievements are recognized, employees feel motivated to work harder. Controlling also provides feedback that helps employees improve their performance and skills. Moreover, a transparent control system creates a sense of responsibility and accountability among employees. As a result, employees become more committed to organizational goals and contribute effectively toward organizational success.
16. What is Return on Investment (ROI)?
Answer:
Return on Investment (ROI) is a modern technique of controlling used to evaluate the profitability of investments made by an organization. It measures the relationship between profits earned and the amount invested. A higher ROI indicates better utilization of resources and higher efficiency. Managers use ROI to compare different investment opportunities and assess organizational performance. It helps in decision-making regarding expansion, diversification, and resource allocation. Since ROI focuses on profitability and efficiency, it is widely used as an important tool for managerial control and performance evaluation.
17. What is Responsibility Accounting?
Answer:
Responsibility Accounting is a system in which different departments or divisions of an organization are treated as responsibility centers. Each center is headed by a manager who is accountable for achieving specific targets. Responsibility centers may be cost centers, revenue centers, profit centers, or investment centers. This system helps management evaluate the performance of different units separately and identify areas needing improvement. Responsibility accounting encourages accountability and better decision-making. It also promotes efficient use of resources and improves overall organizational performance by clearly defining responsibilities.
18. Differentiate between Cost Centre and Profit Centre.
Answer:
A Cost Centre is a segment of an organization where managers are responsible only for controlling costs incurred in that unit. Examples include production and maintenance departments. The focus is on minimizing expenses and improving efficiency. A Profit Centre, on the other hand, is responsible for both revenues and costs. Managers of profit centers are accountable for generating profits. Examples include individual business divisions or branches. While cost centers emphasize cost control, profit centers focus on maximizing profitability. Both play an important role in responsibility accounting and organizational control.
19. Why is controlling called a goal-oriented function?
Answer:
Controlling is called a goal-oriented function because its primary purpose is to ensure the achievement of organizational objectives. It continuously monitors activities, compares actual performance with standards, and takes corrective actions whenever required. All control efforts are directed toward ensuring that planned goals are achieved efficiently and effectively. Controlling helps managers identify problems, reduce deviations, and keep the organization on the right path. Since every control activity ultimately aims at achieving predetermined objectives, controlling is considered a goal-oriented managerial function.
20. Explain any two modern techniques of controlling.
Answer:
Two modern techniques of controlling are Ratio Analysis and Management Audit. Ratio Analysis evaluates financial performance through profitability, liquidity, solvency, and turnover ratios. It helps managers assess the financial health of the organization and make informed decisions. Management Audit is a systematic evaluation of managerial performance and organizational effectiveness. It examines policies, procedures, and management practices to identify strengths and weaknesses. Both techniques provide valuable information for improving efficiency, enhancing decision-making, and achieving organizational objectives. Therefore, modern controlling techniques contribute significantly to organizational growth and performance.