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Controlling: Meaning, Steps, Importance ISC Class 12

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CommerceISC Class 12 · Controlling

Meaning, Steps and Importance of Controlling (ISC Class 12 Commerce)

Updated 18 October 2026 · Fact-checked

Controlling ensures that actual performance conforms to planned standards and takes corrective action when it does not. It is goal-oriented, pervasive, continuous, backward-looking and forward-looking. Its steps are setting performance standards, measuring actual performance, comparing actual with standards, analysing deviations and taking corrective action.

Follow the arrows through the five steps, and notice that corrective action feeds back to planning, so controlling is continuous.

Illustration drawn for QuestionBuddy.

Understand Meaning, Steps and Importance of Controlling

1. Meaning. Controlling is the process of ensuring that actual activities conform to planned activities by setting standards, measuring performance, comparing it with the standards and taking corrective action.

2. Features

  • Goal-oriented: ensures objectives are achieved.
  • Pervasive: needed at all levels and in all organisations.
  • Continuous: a constant review, not a one-time act.
  • Backward-looking and forward-looking: it examines past performance and improves future performance.
  • It is the last function, but links back to planning.

3. Steps

1. Setting performance standards: the criteria against which performance is judged, in quantitative terms (units per day, cost per unit, sales revenue) or qualitative terms (customer satisfaction, goodwill). Standards should be clear and attainable.
2. Measuring actual performance: by personal observation, sample checks, reports and data; objective and timely.
3. Comparing actual performance with standards to find the deviation.
4. Analysing deviations: find the causes and their importance. Minor deviations within limits are ignored; significant ones are examined (critical point control, management by exception).
5. Taking corrective action: for example training for skill gaps, repairing machines, revising methods, or revising standards if they were unrealistic.

4. Importance

  • Accomplishing organisational goals: keeps activities on track.
  • Judging the accuracy of standards: reveals whether standards are realistic.
  • Efficient use of resources: reduces waste and spoilage.
  • Improving employee motivation: employees know what is expected and how they will be judged.
  • Ensuring order and discipline: reduces dishonesty and inefficiency.
  • Facilitating coordination in action: departments are guided by common standards.
  • Helps future planning through feedback.

5. Deviation sum (imaginary). Standard output 1,500 units a day; actual 1,380. Deviation = 1,500 - 1,380 = 120 units = 120 / 1,500 x 100 = 8%. If the acceptable range is 5%, the deviation is significant: analyse the causes and correct them.

6. Word care. Write 'setting performance standards' and 'analysing deviations' (finding causes), not just 'setting targets' and 'calculating the difference'.

Meaning, Steps and Importance of Controlling: key facts

Steps of controlling
  • Set standards
  • Measure performance
  • Compare
  • Analyse deviations
  • Corrective action
Five steps in order.
Deviation
  • Standard
  • Minus
  • Actual
  • Divided by standard times 100
Percentage of the standard.
Features
  • Goal-oriented
  • Pervasive
  • Continuous
  • Backward and forward looking
Last function, linked to planning.

How to answer Meaning, Steps and Importance of Controlling questions

Questions give figures or a situation and ask for the step, the deviation, or the importance of controlling.

  1. 1Calculate the deviation as standard minus actual; express it as a percentage of the standard.
  2. 2Compare it with the acceptable range to decide whether it is significant.
  3. 3Name the step shown: measuring, comparing, analysing or corrective action.
  4. 4State the action for a significant deviation.

Meaning, Steps and Importance of Controlling in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Corrective action

Suppose a bakery notices that its bread loaves are 30 g lighter than the standard weight and finds that a scale in the dough section is wrongly set, then it recalibrates the scale.

Name the steps shown after the weighing.

Try it first, then show the solutionSolution
  1. Finding that the scale was wrong is analysing the deviation.
  2. Recalibrating is taking corrective action.

Answer: Analysing deviations and taking corrective action.

Memory hook: Find the cause, then fix it.

Judging standards

Imagine a call centre finds that no agent has met a target of 80 calls a day for six months.

What does controlling reveal here?

Try it first, then show the solutionSolution
  1. Every agent misses the standard.
  2. The standard may be unrealistic.

Answer: It helps judge the accuracy of standards, which may need revising.

Memory hook: Controlling tests the plan too.

Tricks to remember Meaning, Steps and Importance of Controlling

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • S-M-C-A-C

    Standards, Measure, Compare, Analyse, Correct.

    Use it when: Five steps in order.

  • Analyse means why

    Analysing deviations means finding the cause, not just the difference.

    Use it when: Writing step four correctly.

Meaning, Steps and Importance of Controlling: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Identify the step · 1 mark · MCQBoard level

A manager finds that actual sales of Rs 9,20,000 are below the planned Rs 10,00,000 and calculates the gap. This is the step of:
(a) setting standards
(b) comparing actual performance with standards
(c) taking corrective action
(d) planning premises

Try it first, then show the solutionSolution
  1. Finding the gap between actual and planned is comparison.

Answer: (b)

Example 2: Features of controlling · 2 marks · Short answerBoard level

Explain why controlling is both a backward-looking and a forward-looking function.

Try it first, then show the solutionSolution
  1. It is backward-looking because it examines past performance against standards.
  2. It is forward-looking because the findings are used to correct and improve future performance and plans.

Answer: Reviews the past; improves the future.

Example 3: Deviation calculation · 4 marks · Short answerHarder board level

The standard output of a plant is 1,500 units a day and actual output is 1,380 units. The acceptable deviation is 5%. Calculate the deviation in units and per cent, say whether action is needed and which step follows.

Try it first, then show the solutionSolution
  1. Deviation = 1,500 - 1,380 = 120 units.
  2. Percentage = 120 / 1,500 x 100 = 8%.
  3. 8% exceeds 5%, so the deviation is significant.
  4. The next step is analysing the deviation to find its causes, then taking corrective action.

Answer: 120 units, 8%; significant; analyse causes and correct.

Example 4: Cost control · 4 marks · Short answerHarder board level

A firm's standard cost is Rs 64 per unit. Actual costs in four months are Rs 64.50, Rs 65, Rs 70 and Rs 63. The acceptable deviation is 5% of standard. Find the permitted maximum, identify which months need attention and say what step is shown.

Try it first, then show the solutionSolution
  1. 5% of 64 = 3.20, so the limit is 64 + 3.20 = Rs 67.20.
  2. Rs 64.50 and Rs 65 are within the limit, and Rs 63 is below standard.
  3. Rs 70 exceeds Rs 67.20: deviation 6, i.e. 6 / 64 x 100 = 9.4%.
  4. Only that month needs attention: analysing deviations, then corrective action.

Answer: Limit Rs 67.20; only the month at Rs 70 (9.4% over) needs attention.

Example 5: Apply the process · 8 marks · Long answerHOTS / competency

Suppose a courier company has a standard of delivering 95% of parcels within 48 hours, finds actual delivery at 84%, learns that a new sorting machine fails often, and the managers repair it and add extra staff in peak hours. Describe the steps of controlling shown, the deviation, and two points of importance of controlling that this illustrates.

Try it first, then show the solutionSolution
  1. Setting standards: 95% delivered within 48 hours.
  2. Measuring: actual delivery 84%.
  3. Comparing: deviation = 95 - 84 = 11 percentage points.
  4. Analysing deviations: the cause is the failing sorting machine and peak-hour load.
  5. Corrective action: repair the machine and add extra staff.
  6. Importance 1: accomplishing organisational goals, because delivery targets are met again.
  7. Importance 2: efficient use of resources, because delays and rework are reduced.
  8. Feedback also helps future planning, for example in buying a more reliable machine.

Answer: Five steps with an 11-point deviation and two importance points.

Where students lose marks in Meaning, Steps and Importance of Controlling

The slips examiners see most often, and what to write instead.

  • Mistake: Writing 'setting targets' for the first step

    The technical term is setting performance standards.

    Wrong working

    Step 1: setting targets.

    Right working

    Step 1: setting performance standards.

    Do this: Use the technical term.

    Usually costs: 1 mark.

  • Mistake: Analysing deviations as only calculating the gap

    Analysis means finding causes.

    Wrong working

    Analysing deviations means finding actual minus standard.

    Right working

    Calculating is comparing; analysing means finding the causes and their importance.

    Do this: Why, not how much.

    Usually costs: 1 mark.

  • Mistake: Percentage on the wrong base

    Deviation is a percentage of the standard.

    Wrong working

    120 / 1,380 x 100.

    Right working

    120 / 1,500 x 100 = 8%.

    Do this: Divide by the standard.

    Usually costs: 1-2 marks.

Exam tips

  • Use the exact step names.
  • In calculation questions state the acceptable range and compare.
  • Controlling is pervasive and continuous; mention both.
  • Link importance points to the case facts.

Practice questions on Meaning, Steps and Importance of Controlling

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · Very short answerBoard level

    Name the first step in the controlling process.

    Hint

    Criteria.

    Answer

    Setting performance standards.

  2. Q2 · 2 marks · Short answerBoard level

    State two points of importance of controlling.

    Hint

    Goals and resources.

    Answer

    It helps accomplish organisational goals and ensures efficient use of resources (also judges accuracy of standards, motivates employees, ensures order, helps future planning).

  3. Q3 · 2 marks · Short answerHarder board level

    Why should standards be expressed in measurable terms where possible?

    Hint

    Comparison.

    Answer

    Measurable standards, such as units per day or cost per unit, allow actual performance to be compared objectively and the deviation to be found precisely.

  4. Q4 · 4 marks · Short answerHarder board level

    A shop's standard monthly sales are Rs 6,00,000; actual sales are Rs 5,52,000; the acceptable deviation is 5%. Compute the deviation and per cent, and say whether corrective action is needed.

    Hint

    Compare with 5%.

    Answer

    Deviation = 6,00,000 - 5,52,000 = Rs 48,000. Percentage = 48,000 / 6,00,000 x 100 = 8%. It exceeds 5%, so it is significant and the causes should be analysed and corrected.

  5. Q5 · 4 marks · Short answerHOTS / competency

    Suppose every employee in a department fails to reach a monthly target, yet the manager disciplines each of them. Using controlling, explain a better response.

    Hint

    Is the standard right?

    Answer

    When every employee falls short, the standard may be unrealistic. Controlling should first analyse the deviation and judge the accuracy of the standard; corrective action may be to revise the standard or fix a common cause such as faulty equipment, instead of blaming individuals.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.What is controlling?Show answer

    Ensuring actual performance conforms to planned standards.

  2. 2.What is a deviation?Show answer

    The gap between actual performance and the standard.

  3. 3.What follows analysing deviations?Show answer

    Taking corrective action.

  4. 4.Is controlling a one-time act?Show answer

    No, it is continuous.

Meaning, Steps and Importance of Controlling: frequently asked questions

Is every deviation corrected?

No. Minor deviations within limits are ignored; significant ones are examined.

Can standards be changed?

Yes, if they were unrealistic.

Where is management by exception covered?

On the planning and controlling relationship topic page.