CHAPTER ONE

INTRODUCTION

1.1        Background of the Study

There are varied and diverse organisations that exist.  They include social, political and economic organization, such as business, churches, political parties, chambers of commerce, educational institutions and clubs.  They need effective management and accounting system to succeed.  Most of these organisations are complex in nature and this cause problem in their management and so needs proper and well articulated accounting system for them to survive.

Budgetary control is the process and the former provides the basis for the exercise of the later.  While budgetary focuses on planning, budgetary control is the act of executing those plans.

The Chartered Institute of Management Accountants (CIMA) London has defined budgetary control in the following words. “The establishment of departmental budgets relating the responsibilities of executive to the requirement of a policy and the continuous comparison of actual with budgeted result, the objectives of that policy or to form basis for its revision.

In a nut shell, while a budget may be described as a standard with which to measure the actual achievement of persons, department and organizations; budgeting control is the plan in advance of the various functions of an enterprise so that the business as a whole can be controlled.

According to Jim Riley (2012), A budget is a financial plan for the future concerning the revenues and cost of a business.  However, a budget is about much more than just financial numbers.  Budgetary Control is the process by which financial control is exercised within an organization; budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances.

Managers are responsible for controllable cost within their budget and are required to take remedial action if the adverse variance arises and they are considered excessive.  There are many use of budgets for example, budget are used to;

i.             control income and expenditure,

ii.            establish priorities and set targets in numerical term,

iii.          monitor performance,

iv.          improve efficiency, and

v.           motivate staff

1.2        Statement of the Problem

Over the years, business organisation have had deficiencies in effectively managing their budget.  This is as a result of inadequate effective budgetary control system.  The inability of the managers to control the organizational budget has created a major set back in the attainment of their goals.  The crucial problems this research will address therefore include:

i.             The inadequate budgeting and controlling by the various managers during budgeting process.

ii.            The means of knowing which management tool that is most effective in managing organizational resources by means of budgeting.

iii.          The ways of measuring efficiency and effectiveness of such management budget.

iv.          The relevant information required by management in making sound decision for the attainment of the business objectives through budgetary control.

1.3        Objectives of the Study

The objectives of the study include the following:

i.             To determine how budgetary control system plays a significant role in assisting various managers in achieving management objectives.

ii.            To analyse various types of budget, benefit and problems of budgeting in the business firm.

iii.          To advance useful recommendations (based on finding) to the company on how to improve on their system of budgeting as a tool for managerial planning and control.

1.4        Research Questions

The relevant research questions include:

i.             Is there a direct relationship between managerial efficiency and budgets?

ii.            What is the effect of budgeting control on organizational performance?

iii.          Is it necessary to compare actual results against pre-determined estimates?

iv.          Does budgetary control system assist the managers of a business firm in overcoming some difficulties encounter in managing its resources?

1.5        Significance of the Study

This research work will be of great help to accountant as well as administrators and managers within and outside Eternit Ltd, Sapele, Delta State of Nigeria.

In identifying the character and potentially of budgetary control system in business management to know the concepts and benefit of budgetary control and as a means of evaluating economic recourses and the development of the business organisation which depends on such economic resources.

It will also help the managers and administrator of the firms to utilize the availing opportunities that are endowed in budgeting.

It will be of great importance to students especially accounting students who may wish to write their project related to research work.

1.6        Scope of Study

The study is designed and carried out with the view that finding got could help in increasing the management potentialities in the business organisation and also sought for solutions to the problems associated with budgetary control system in the firm and data obtained from the exercise utilized in planning and directing the affairs of the company or business organization toward the attainment of the company’s goals.

The study revolved round a critical examination of budgetary control system in Eternit Ltd, Sapele.  The emphasis is to come out with better methods of tackling the problems associated with the preparation, uses, performance, evaluation and control and authorization of budgets in business organisation in a way to bring about an improved budgetary control system.

1.7        Limitation of the Study

The factor that limits the scope of this work can be grouped into two categories they are controlled and uncontrolled variables.  Some staff treat questionnaires that are retrieved while some vital information that would have added to the substance of the work was not given as it was claimed to be the management decision and they view such request as probing into their facilities.  In addition to this, time is also another thing that slows down the work and the issue of not on seat each time I went to the company to retrieved my questionnaire from them.

1.8        Definition of Terms

Some of the more frequently used terminology in the study are;

i.             Effect:- The impact of something or how it has changed a situation.

ii.            Budgetary:-  The actual statement containing annual budget.

iii.          Control:-  Monitoring of a particular project to see that all adhere to plans i.e. to avoid deviation.

iv.          Management:-  Is a social process of the activities of others to ensure a complete adherence to objectives of an organization.  In other words, it is getting things done by other people’s efforts.

v.           System:-  Is a group of things or parts working together in a regular relation or an ordered set of ideas, theories or principles.

You either get what you want or your money back. T&C Apply

Talk to us right now: (+234)906-451-7926 (Call/WhatsApp)

---