NCERT Solutions for Class 12 Business Studies Chapter 8: Controlling (NCERT 2026–27)

These Class 12 Business Studies Chapter 8 solutions cover Controlling, the final function of the management process. The chapter explains the meaning and importance of controlling, its limitations, the close relationship between planning and controlling, the five-step controlling process (setting standards, measuring performance, comparing, analysing deviations and taking corrective action), and key principles such as critical point control and management by exception. Below you get answers to every NCERT exercise question — Very Short, Short and Long Answer Type — reproduced verbatim, plus extra practice, MCQs, Assertion–Reason questions and FAQs for the 2026–27 session.

Class: 12 Subject: Business Studies Chapter: 8 Title: Controlling Part: Principles and Functions of Management Session: 2026–27
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Class 12 Business Studies Chapter 8 – Overview

Controlling is the management function of ensuring that actual activities and performance conform to the planned activities and standards, so that organisational goals are achieved. It is a goal-oriented, pervasive and continuous function performed by managers at all levels. The chapter brings out why controlling is indispensable — it helps accomplish goals, judges the accuracy of standards, ensures efficient use of resources, improves employee motivation, maintains order and discipline, and facilitates coordination. It also notes the limitations of control (difficulty in setting quantitative standards, little control over external factors, resistance from employees and its costly nature). Controlling and planning are described as the inseparable twins of management — planning is prescriptive and forward-looking, controlling is evaluative and largely backward-looking, yet both reinforce each other. Finally, the chapter details the five-step controlling process and the principles of critical point control and management by exception.

Key Concepts & Terms

Controlling: the process of ensuring that actual activities conform to planned activities; it measures deviations from standards and initiates corrective action so that organisational goals are achieved. As Koontz and O’Donnell put it, “Managerial control implies the measurement of accomplishment against the standard and the correction of deviations to assure attainment of objectives according to plans.”

Features of controlling: it is goal-oriented, a pervasive function (performed at top, middle and lower levels and in all kinds of organisations), continuous, and it brings the management cycle back to planning — it is not merely the “last” function.

Standards: the criteria or benchmarks against which actual performance is measured. They can be set in quantitative terms (cost, revenue, units produced, time) or qualitative terms (goodwill, employee motivation).

Deviation: the difference between actual performance and the standard performance, revealed when the two are compared.

Critical point control: focusing control on key result areas (KRAs) that are critical to the organisation’s success, instead of checking every minor activity.

Management by exception (control by exception): the principle that managers should attend only to significant deviations that go beyond the permissible limit, since “an attempt to control everything results in controlling nothing.”

Traditional techniques of control: personal observation, statistical reports, breakeven analysis and budgetary control.

Modern techniques of control: return on investment (ROI), ratio analysis, responsibility accounting, management audit, PERT and CPM, and Management Information System (MIS).

NCERT Exercise — Full Solutions

All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises section. Answers are original, written in CBSE exam-ready style.

Very Short Answer Type

1. State the meaning of controlling.

ANSWER Controlling means ensuring that the activities of an organisation are performed as per the plans. It is a goal-oriented function that compares actual performance with predetermined standards, finds out deviations, and takes corrective action so that the organisation’s resources are used effectively and efficiently and its goals are achieved.

2. Name the principle that a manager should consider while dealing with deviations effectively. State any one situation in which an organisation’s control system loses its effectiveness.

ANSWER The principle a manager should consider while dealing with deviations effectively is management by exception (control by exception), often used along with critical point control. A control system loses some of its effectiveness when standards cannot be defined in quantitative terms — for example, in areas like employee morale, job satisfaction and human behaviour — because measuring performance and comparing it with such qualitative standards becomes difficult.

3. State any one situation in which an organisation’s control system loses is effectiveness.

ANSWER An organisation’s control system loses its effectiveness in situations where standards cannot be set in quantitative terms — such as employee morale, job satisfaction and human behaviour. Since these areas are difficult to measure objectively, performance cannot be easily compared with standards, and the control exercise loses some of its effectiveness.

4. Give any two standards that can be used by a company to evaluate the performance of its Finance & Accounting department.

ANSWER Two standards that can be used to evaluate the performance of the Finance & Accounting department are: (i) Capital expenditures and (ii) Liquidity. (Other acceptable standards in this functional area include inventories and the flow of capital.)

5. Which term is used to indicate the difference between standard performance and actual performance?

ANSWER The term used to indicate the difference between standard performance and actual performance is deviation.

Short Answer Type

1. ‘Planning is looking ahead and controlling is looking back.’ Comment.

ANSWER This statement is only partially correct. Plans are prepared for the future on the basis of forecasts about future conditions, so planning is indeed a forward-looking function. Controlling, on the other hand, is like a postmortem of past activities to find out deviations from standards, so in that sense it is a backward-looking function. However, both are also the opposite of this. Planning is guided by past experiences, so it also looks back; and the corrective action taken under controlling aims to improve future performance, so it also looks ahead. Thus, planning and controlling are both backward-looking as well as forward-looking functions, and the statement that planning is only looking ahead while controlling is only looking back is incomplete.

2. ‘An effort to control everything may end up in controlling nothing.’ Explain.

ANSWER This statement refers to the principle of management by exception. It is neither economical nor possible for a manager to keep a check on each and every activity in an organisation. If a manager tries to control everything, time and effort get scattered over insignificant matters and the truly important deviations are missed — so effectively nothing is controlled well. Therefore, control should focus only on significant deviations that cross the permissible limit, while routine and minor matters are left to subordinates. This saves managerial time and effort, focuses attention on key areas, facilitates delegation of authority, and helps identify critical problems that need timely action. Hence, controlling everything ends up in controlling nothing, and management by exception is the wiser approach.

3. Explain how management audit serves as an effective technique of controlling.

ANSWER Management audit is a modern technique of controlling that involves a systematic and critical review of the overall performance of the management of an organisation. It evaluates the efficiency and effectiveness of the management team and the soundness of its policies, plans and procedures. It serves as an effective technique because: (i) it identifies the deficiencies in the performance of management functions; (ii) it helps in improving coordination among the functions of various departments; (iii) it ensures updating of policies and strategies in keeping with the changing environment; and (iv) it keeps the management alert and vigilant by continuously evaluating performance against goals, thereby improving the control system as a whole.

4. Mr.Arfaaz had been heading the production department of Writewell Products Ltd., a firm manufacturing stationary items. The firm secured an export order that had to be completed on a priority basis and production targets were defined for all the employees. One of the workers, Mr.Bhanu Prasad, fell short of his daily production target by 10 units for two days consecutively. Mr.Arfaaz approached MsVasundhara, the CEO of the Company, to file a complaint against MrBhanu Prasad and requested her to terminate his services. Explain the principle of management control that MsVasundhara should consider while taking her decision. (Hint: Management by exception).

ANSWER The principle Ms Vasundhara should consider is management by exception (control by exception). According to this principle, an attempt to control everything results in controlling nothing, so only significant deviations that go beyond the permissible limit should be brought to the notice of management and acted upon, while minor and routine deviations are ignored or left to lower levels. In this case, Mr. Bhanu Prasad fell short of his target by only 10 units for two days — a minor deviation that may have occurred for many reasons. It does not deserve the drastic action of termination. Ms Vasundhara should therefore not terminate his services; she should treat this as a minor, acceptable deviation, find out and remove its cause (such as fatigue or a small lapse), and take an appropriate corrective step rather than punitive action, in line with management by exception.

Long Answer Type

1. Explain the various steps involved in the process of control.

ANSWER Controlling is a systematic process involving the following five steps: 1. Setting performance standards: The first step is to set up the criteria (benchmarks) against which actual performance will be measured. Standards may be quantitative (cost, revenue, units to be produced, time to be taken) or qualitative (goodwill, motivation). They should be precise wherever possible and flexible enough to be modified when the environment changes. 2. Measurement of actual performance: Performance is measured in an objective and reliable manner using techniques such as personal observation, sample checking and performance reports. As far as possible, it should be measured in the same units in which standards are set, and during performance where possible. 3. Comparison of actual performance with standards: Actual performance is compared with the standard to reveal the deviation between actual and desired results. Comparison is easier when standards are set in quantitative terms. 4. Analysing deviations: Some deviation is expected in all activities, so the manager fixes an acceptable range of deviations and uses critical point control (focusing on key result areas) and management by exception (attending only to significant deviations). The exact causes of significant deviations are then identified. 5. Taking corrective action: No corrective action is needed when deviations are within acceptable limits. When they go beyond the acceptable range, especially in important areas, the manager takes corrective action — such as training employees or assigning extra workers — or, where the deviation cannot be corrected, the standards themselves may be revised.

2. Explain the techniques of managerial control.

ANSWER Techniques of managerial control are broadly classified into traditional and modern techniques. Traditional techniques: (i) Personal observation: the manager personally observes the work, getting first-hand information; it also creates psychological pressure on employees to perform well, though it is time-consuming. (ii) Statistical reports: analysis of data in the form of averages, percentages, ratios and charts that present useful information about performance in different areas. (iii) Breakeven analysis: a technique used to study the relationship between cost, volume and profit; it tells the level of activity at which there is no profit or loss (the breakeven point) and helps managers estimate profit at different levels of output. (iv) Budgetary control: control through preparing budgets (plans expressed in numbers) for various operations and comparing actual results with budgeted figures to take corrective action. Modern techniques: (i) Return on investment (ROI): measures whether the capital invested has been used efficiently to generate a reasonable return. (ii) Ratio analysis: use of accounting ratios (liquidity, solvency, profitability, turnover) to analyse the financial position and performance of the firm. (iii) Responsibility accounting: a system in which different responsibility centres (cost, revenue, profit and investment centres) are established and each head is held accountable for the performance of his centre. (iv) Management audit: a systematic appraisal of the overall performance and effectiveness of the management. (v) PERT and CPM: network techniques used for planning, scheduling and controlling time-bound projects. (vi) Management Information System (MIS): a computer-based system that provides timely and accurate information to managers for decision-making and control.

3. Explain the importance of controlling in an organisation. What are the problems faced by the organisation in implementing an effective control system?

ANSWER Importance of controlling: Control is an indispensable function of management. A good control system helps an organisation in the following ways: (i) Accomplishing organisational goals: it measures progress towards goals, brings deviations to light and indicates corrective action, keeping the organisation on the right track. (ii) Judging accuracy of standards: it enables management to verify whether the standards set are accurate and objective, and to revise them in the light of changes. (iii) Making efficient use of resources: by exercising control, a manager reduces wastage and spoilage, ensuring resources are used effectively and efficiently. (iv) Improving employee motivation: employees know in advance what is expected of them and the standards on which they will be appraised, which motivates them to perform better. (v) Ensuring order and discipline: a close check on activities creates an atmosphere of order and discipline and minimises dishonest behaviour. (vi) Facilitating coordination in action: it provides direction to all activities and ensures that each department and employee works towards common organisational goals. Problems (limitations) in implementing an effective control system: (i) Difficulty in setting quantitative standards: control loses effectiveness where standards cannot be defined in quantitative terms, as with employee morale and job satisfaction. (ii) Little control on external factors: an enterprise generally cannot control external factors such as government policy, technological change and competition. (iii) Resistance from employees: control is often resisted as employees see it as a restriction on their freedom (for example, objecting to CCTV monitoring). (iv) Costly affair: control involves a lot of expenditure, time and effort, and small enterprises may not be able to afford an expensive control system; its cost should not exceed its benefits.

4. Discuss the relationship between planning and controlling.

ANSWER Planning and controlling are the inseparable twins of management. A system of control presupposes the existence of standards, and these standards of performance are provided by planning. Once a plan becomes operational, controlling is necessary to monitor progress, measure it, discover deviations and initiate corrective measures so that events conform to plans. Planning without controlling is meaningless — once a plan is made, there must be control to ensure it is implemented. Controlling is blind without planning — if standards are not set in advance, managers have nothing to control. Thus planning is clearly a prerequisite for controlling. The two also differ: planning is prescriptive (it decides what should be done), whereas controlling is evaluative (it checks whether decisions have been translated into desired action). Planning is forward-looking while controlling is largely backward-looking — yet both are partly forward and partly backward-looking. Finally, they reinforce each other: (1) planning based on facts makes controlling easier and effective; and (2) controlling improves future planning by providing information derived from past experience. Hence planning and controlling are interrelated and interdependent.

5. A company ‘M’ limited is manufacturing mobile phones both for domestic Indian market as well as for export. It had enjoyed a substantial market share and also had a loyal customer following. But lately it has been experiencing problems because its targets have not been met with regard to sales and customer satisfaction. Also mobile market in India has grown tremendously and new players have come with better technology and pricing. This is causing problems for the company. It is planning to revamp its controlling system and take other steps necessary to rectify the problems it is facing.

a. Identify the benefits the company will derive from a good control system.

b. How can the company relate its planning with control in this line of business to ensure that its plans are actually implemented and targets attained.

c. Give the steps in the control process that the company should follow to remove the problems it is facing

ANSWER (a) Benefits from a good control system: A good control system will help ‘M’ Ltd. in (i) accomplishing organisational goals by measuring progress in sales and customer satisfaction and indicating corrective action; (ii) judging the accuracy of its standards and revising them in the light of the changed, more competitive market; (iii) making efficient use of resources by reducing wastage; (iv) improving employee motivation by clarifying targets; (v) ensuring order and discipline; and (vi) facilitating coordination among its departments so that all work towards regaining market share. (b) Relating planning with control: Since planning and controlling are inseparable twins, the company should first lay down clear, realistic plans and standards for sales, technology, pricing and customer satisfaction. These plans then become the basis of control. As the plans are implemented, the control system monitors actual performance, discovers deviations from the standards and initiates corrective action. The information gained from controlling (such as why targets were missed) should be fed back to improve future planning. In this way planning provides the standards for control, and control ensures the plans are actually implemented and targets attained. (c) Steps in the control process the company should follow: (1) Set performance standards for sales volume, market share, pricing and customer satisfaction; (2) measure actual performance objectively through reports and feedback; (3) compare actual performance with standards to find the gap; (4) analyse deviations using critical point control and management by exception to identify the real causes (better technology and pricing of rivals, falling satisfaction); and (5) take corrective action — upgrade technology, revise pricing, improve quality and service, and where needed revise the standards themselves.

6. Mr Shantanu is a chief manager of a reputed company that manufactures garments. He called the production manager and instructed him to keep a constant and continuous check on all the activities related to his department so that everything goes as per the set plan. He also suggested him to keep a track of the performance of all the employees in the organisation so that targets are achieved effectively and efficiently.

a. Describe any two features of Controlling highlighted in the above situation.(Goal Oriented, continuous and pervasive – any 2).

b. Explain any four points of importance of Controlling.

ANSWER (a) Two features of controlling highlighted: (i) Controlling is a continuous function: Mr Shantanu instructs the production manager to keep a “constant and continuous check” on all activities — control is an ongoing process, not a one-time activity. (ii) Controlling is a goal-oriented function: the check is to be kept “so that everything goes as per the set plan” and “targets are achieved effectively and efficiently” — control is directed towards the achievement of organisational goals. (Tracking the performance of all the employees in the organisation also reflects that controlling is a pervasive function.) (b) Four points of importance of controlling: (i) Accomplishing organisational goals: it measures progress towards goals, highlights deviations and guides corrective action. (ii) Judging accuracy of standards: it verifies whether the standards set are accurate and objective and helps revise them. (iii) Making efficient use of resources: it reduces wastage and spoilage by ensuring activities follow predetermined standards. (iv) Improving employee motivation: it lets employees know in advance what is expected of them and the standards of appraisal, motivating better performance. (Other valid points: ensuring order and discipline, facilitating coordination.)

Extra Practice Questions

Short Answer Type Questions

Q1. Why is controlling called a pervasive function of management?

ANSWERControlling is a pervasive function because it is performed by managers at all levels — top, middle and lower — to keep a check over the activities in their areas. Moreover, control is required not only in business organisations but also in educational institutions, the military, hospitals and clubs. Hence it is pervasive in nature.

Q2. What is meant by ‘critical point control’?

ANSWERCritical point control means that, since it is neither economical nor easy to check every activity, control should focus on the key result areas (KRAs) that are critical to the success of an organisation. These KRAs are treated as critical points, because if anything goes wrong at them, the entire organisation suffers.

Q3. Distinguish between traditional and modern techniques of control with one example each.

ANSWERTraditional techniques are the long-established methods of control such as personal observation, statistical reports, breakeven analysis and budgetary control (example: budgetary control). Modern techniques are the newer, more analytical methods such as return on investment, ratio analysis, responsibility accounting, management audit, PERT and CPM, and MIS (example: Management Information System).

Q4. State why controlling should not be misunderstood as the last function of management.

ANSWERControlling should not be seen as the last function because it brings the management cycle back to planning. It finds out how far actual performance deviates from standards, analyses the causes and takes corrective action, which helps in formulating better future plans. Thus control completes one cycle of management and improves planning in the next cycle.

Q5. What is meant by the ‘acceptable range of deviation’?

ANSWERSince some deviation is expected in all activities, the acceptable range of deviation is the limit within which deviations are considered tolerable and do not require corrective action. Only deviations that go beyond this permissible limit, especially in key areas, are brought to the notice of management for action — for instance, a labour-cost increase beyond a set 2 per cent.

Long Answer Type Questions

Q1. Explain any five points highlighting the importance of controlling in an organisation.

ANSWERControlling is indispensable to management for the following reasons. (i) Accomplishing organisational goals — it measures progress towards goals, exposes deviations and guides corrective action so the organisation stays on track. (ii) Judging accuracy of standards — it verifies whether standards are accurate and objective and helps review and revise them in light of internal and environmental changes. (iii) Making efficient use of resources — by ensuring activities conform to predetermined standards, it reduces wastage and spoilage. (iv) Improving employee motivation — employees know in advance the standards on which they will be appraised, which motivates them to perform better. (v) Ensuring order and discipline — a close check on activities creates an atmosphere of order and discipline and minimises dishonest behaviour. A sixth point, facilitating coordination in action, ensures that every department and employee works towards common goals.

Q2. ‘Planning and controlling are inseparable twins of management.’ Discuss.

ANSWERPlanning and controlling are inseparable because each depends on the other. Planning provides the standards of performance that form the very basis of control; without standards set in advance, managers have nothing to control, so controlling is blind without planning. Equally, once a plan is made it is meaningless unless controlling ensures it is implemented, deviations are discovered and corrective action is taken — so planning without controlling is meaningless. The two also reinforce each other: planning based on facts makes controlling easier and effective, while controlling improves future planning by feeding back information derived from past experience. Planning is forward-looking and prescriptive whereas controlling is evaluative and largely backward-looking, yet both look partly ahead and partly back. Hence they are interrelated, interdependent and rightly called inseparable twins.

Q3. Explain the limitations of controlling and how a manager can minimise their impact.

ANSWERControlling suffers from four main limitations. (i) Difficulty in setting quantitative standards — areas like morale, job satisfaction and human behaviour are hard to quantify; the manager can minimise this by defining qualitative standards as measurably as possible (for example, customer waiting time as a proxy for satisfaction). (ii) Little control on external factors — government policy, technology and competition lie outside the enterprise; the manager can only stay alert, forecast changes and adapt plans. (iii) Resistance from employees — workers may see control as a curb on freedom; this can be reduced by involving employees, clearly communicating standards and explaining benefits. (iv) Costly affair — control involves expenditure, time and effort that small firms may not afford; the manager should ensure that the cost of operating the control system does not exceed the benefits derived from it, applying control mainly at critical points.

MCQs & Assertion–Reason

1. Controlling is best described as:

(a) the first function of management    (b) ensuring that activities conform to plans    (c) deciding the future course of action    (d) grouping of activities

2. The difference between standard performance and actual performance is called:

(a) standard    (b) benchmark    (c) deviation    (d) budget

3. Which is the first step in the controlling process?

(a) Measurement of actual performance    (b) Setting performance standards    (c) Analysing deviations    (d) Taking corrective action

4. ‘An attempt to control everything results in controlling nothing’ is the basis of:

(a) critical point control    (b) budgetary control    (c) management by exception    (d) responsibility accounting

5. Which of the following is a traditional technique of managerial control?

(a) Return on investment    (b) Management audit    (c) Budgetary control    (d) PERT and CPM

6. Focusing control on key result areas (KRAs) that are critical to success is known as:

(a) management by exception    (b) critical point control    (c) ratio analysis    (d) responsibility accounting

7. Planning and controlling are described as the:

(a) opposites of management    (b) inseparable twins of management    (c) two least important functions    (d) only functions of management

8. A control system loses effectiveness mainly when standards:

(a) are quantitative    (b) cannot be defined in quantitative terms    (c) are written down    (d) are flexible

9. Which of these is a modern technique of control?

(a) Personal observation    (b) Statistical reports    (c) Breakeven analysis    (d) Management Information System (MIS)

10. ‘Capital expenditures’ and ‘liquidity’ are standards used to gauge performance in which functional area?

(a) Production    (b) Marketing    (c) Human Resource Management    (d) Finance and Accounting

Answer key: 1-(b), 2-(c), 3-(b), 4-(c), 5-(c), 6-(b), 7-(b), 8-(b), 9-(d), 10-(d).

For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.

A-R 1. Assertion: Controlling is a goal-oriented function.

Reason: Controlling ensures that an organisation’s resources are used effectively and efficiently for the achievement of predetermined goals.

A-R 2. Assertion: Controlling is blind without planning.

Reason: If standards are not set in advance through planning, managers have nothing to control.

A-R 3. Assertion: Setting performance standards is the last step of the controlling process.

Reason: Standards are the benchmarks against which actual performance is measured.

A-R 4. Assertion: Management by exception saves the time and effort of managers.

Reason: Under this principle managers deal only with significant deviations that cross the permissible limit.

A-R 5. Assertion: Control is a costless and effort-free activity for every enterprise.

Reason: A small enterprise can always afford to install an expensive control system without any concern for cost.

Answer key: 1-(A), 2-(A), 3-(D), 4-(A), 5-(D).

Exam Tips & Common Mistakes

How to score full marks in this chapter

Memorise the five steps of the controlling process in the correct order (set standards → measure performance → compare → analyse deviations → corrective action) and be able to explain each with an example. Learn the six points of importance and the four limitations with their headings, as case-study questions often ask you to identify them. Clearly distinguish critical point control (key result areas) from management by exception (significant deviations), and keep separate lists of traditional and modern techniques. For relationship questions, always show that planning provides standards for control and control improves future planning — the ‘inseparable twins’ idea.

Common mistakes to avoid

  • Calling controlling the “last” function — it actually brings the management cycle back to planning.
  • Confusing critical point control with management by exception; they are related but distinct.
  • Mixing up traditional techniques (personal observation, statistical reports, breakeven, budgetary control) with modern ones (ROI, ratio analysis, responsibility accounting, management audit, PERT/CPM, MIS).
  • Recommending termination for a minor deviation in case studies — apply management by exception instead.
  • Writing that planning is only forward-looking and controlling only backward-looking — both are partly forward and partly backward-looking.
  • Listing limitations without headings, or forgetting that control’s cost should not exceed its benefits.

Frequently Asked Questions

What is Chapter 8 of Class 12 Business Studies about?

Chapter 8, Controlling, explains the meaning and importance of controlling, its limitations, the relationship between planning and controlling, the five-step controlling process, and principles such as critical point control and management by exception, along with traditional and modern techniques of control.

What are the five steps in the controlling process?

The five steps are: (1) setting performance standards, (2) measurement of actual performance, (3) comparison of actual performance with standards, (4) analysing deviations, and (5) taking corrective action.

Why are planning and controlling called inseparable twins?

Because planning provides the standards that form the basis of control, while controlling ensures plans are implemented and feeds information back to improve future planning. Planning without controlling is meaningless, and controlling is blind without planning.

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