This research was conducted with special reference to the budgetary system of Emenite Nigeria Limited. The objectives of the study is to ascertain the major role budgets play in the achievement of profitability for an organization as a profit planning device sets standards of performance of manager, while budgetary control is a tool implored by management to keep track of actual performance to ensure budgeted standards are achieved. In the course of the population of the study consists of 40 managers. Data were obtained through personal interview and the administration of questionnaires as well as secondary data. Data collected were subjected to chi-square test in order to prove or disprove hypotheses therein. The analysis of findings indicates that Emenite Nigeria Limited has a formal system of budgeting and does attach incentives for the attainment of budgetary goals. The paper recommend that jobs should be thoroughly scheduled and duties precisely defined and described.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1 Background of the study
1.2 Statement of the problem
1.3 Objectives of the study
1.4 Research questions
1.5 Statement of the hypothesis
1.6 Scope of the study
1.7 Significant of the study
1.8 Limitations of the study
1.9 Operational definition of terms
CHAPTER TWO: LITERATURE REVIEW
2.2 The concept of budgeting
2.3 The concept of budgeting and budgetary control
2.4 Main types of budget
2.5 The budget period
2.6 Stages in the budgeting process
2.7 Summary of the review
CHAPTER THREE: RESEARCH METHOD
3.2 Research design
3.3 Population of the study
3.4 Sample and sampling techniques
3.6 Method of data collection
3.7 Method of data analysis
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND DISCUSSION
4.2 Data presentation and interpretation
4.3 Data analysis and hypothesis testing
4.4 Discussion of findings
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.2 Summary of findings
5.5 Suggested areas for further studies
1.1 BACKGROUND TO THE STUDY
A budget is a financial and a quantitative statement prepared prior to a defined period of time of the policy to be pursued for the purpose of attaining a given objective.
Nweze (2004) see Budget as a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and or expenditure to be incurred during that period and the capital to be employed to attain a given objective. A budget is an attempt made at the beginning of each financial year to plan the profit and loss account for the year and to aim for a definite balance sheet. This profit planning must be a well thought out operational plan with its financial implication expressed as both long and short range profit plans. Budgetary control is the establishment of policies and the periodic review or comparison of the actual result with the budgeted performance either to secure approval for individual action or to serve as a remedial course of action. Budgetary control whereby actual state of affairs can be compared with the planned for by the management, so that appropriate action may be taken to correct adverse situation that may occur before it is too late. It is also used to fix responsibility.
A budget systems serve the needs of management in respect of the judgments and decision it is fruited to make and to provide a basis for the management functions of planning and control. Developing a budget is a critical step in planning any economic activity. This includes business, governmental agencies and individuals.
Therefore businesses of all types and governmental units at every level must make financial plans to carry out routine operations, to plan for major expenditures and to help in making financial decisions.
On this background, every organization no matter nature has a plan for the future, simply because the success of any organization depends on the level of plan that is put into the organization.
1.2 STATEMENT OF THE PROBLEM
The main problem with budgeting is that it reflects data from the past and present, and will only enable predictions and forecasts to be made out the future. At the same time, numerous pressures in the job may impose constraints upon managers, which affect the quality of information they collect. The problem can be numerous; clearly, nothing can be forecasted with absolute certainty, no matter what financial and making researches take place every organization has to take risks.
Though accounting information may reduce the unpredictability of even in the future. It will never eliminate it.
All these can interrupt the system of budgetary control;
1) If the actual results are completely difference from the target the budget can loose its significances as a means of control. Whereas a fixed budget is not able to adapt to changes, a flexible budget will recognize changes in behaviour and can be an ended to fall into line with changing activities.
2) Following a budget to rigidly can restrict an organization’s activities. On the other hand, if a manager realizes towards the end of the year that his or her department has under spent, he or she might go on spending spree.
3) If budgets are imposed upon managers without sufficient consultation, they may be ignored.
An appropriations budget limits expenditures to the appropriations provided in the budget. Naturally, the amounts appropriated tend to be in line with the expected revenues for the period. Such a system provides little in the way of flexibility. It also has a serious defect because the control aspect is limited to an end of the period comparison of actual revenues and expenditure with those budgeted.
The fixed type of budget is criticized as being a restrictive budget, which establishes expose limits that cannot be exceeded. The future cannot be certain, therefore, it is extremely difficult to forecast what will happen in future. Hence, when circumstances that will alter the forecast materially occur, an inflexible plan propels a company into trouble. It is impossible to state the duration of a budget programme because the longer a budget period, the more difficult it becomes to anticipate bow general economic conditions will affect the business of the company.
1.3 OBJECTIVES OF THE STUDY
The objective of budgeting and budgetary control in a business organization includes:
Ø To find out whether budgets are an effective guide to human growth.
Ø To determine if budgets are a means to control and synchronize organizations personnel and functions.
Ø To examine whether budgets are more effective when reward penalty is based on goal attainment.
1.4 RESEARCH QUESTIONS
1. Are budgets effective guide to business growth?
2. To what extent does budgets act as a means to control and synchronize organizations personnel and functions?
3. Are budgets more effective when reward penalty is based on goal attainment?
1.5 STATEMENT OF HYPOTHESIS
Ho: Budgets are not an effective guide to business growth
Hi: Budgets are an effective guide to business growth
Ho: Budgets are not a means to control and synchronize organization’s personnel and functions.
Hi: Budgets are a means to control and synchronize organization’s personnel and functions.
Ho: Budgets are not more effective when reward penalty is based on goal attainment
Hi: Budgets are more effective when reward penalty is not based on goal attainment.
1.6 SCOPE OF THE STUDY
study of “budgetary control” in business organizations could have been extended
to cover the whole of the accounting and financial areas of the business
organization in all the states of
1.7 SIGNIFICANCE OF THE STUDY
This study of budgeting and budgetary control is of great importance to a business organization because, the preparation of budget helps in the delegation responsibilities to each executive and induces early consideration of basic policies. It also assists in the focusing of attention on the contribution which may be made by each product and market to the total profit and reveals any opportunity which may be made in maximizing profit.
Ø It provides a means of ensuring that capital invested in the business is kept to a minimum level justifiable with the level of activities. It also ensures that adequate liquid resources are made available at anytime.
Ø It defines goals and objectives that can serve as benchmarks for evaluating subsequent performance.
Ø Better control of current operations is helped by regular, systematic monitoring and reporting of activities.
Ø It regulates the spending of money and expose loss, waste and inefficiency and through this corrective action will be taken to improve the adverse situation.
Ø It encourages management to decentralize responsibilities without losing control, especially where a company has many branch offices or factories.
Ø It provides for the co-ordination of sales production and other activities of the business and forces all members of management team to plan in harmony and consider all relevant factors before a decision is taken
Ø Where budgetary control is in operation, cost consciousness is always increased and through this means, waste and inefficiency will be reduced. It also gives lower levels of management to also take part in the management of the business.
Ø It provides a means of communicating management’s plans through the organization.
Ø It uncovers potential bottle necks before they occur.
1.8 LIMITATIONS OF THE STUDY
Though budgeting and budgetary control has many impressive and far reaching advantages, but it also has certain limitations and pitfalls which the organization must consider
According to Terry Lucey in his costing sixth edition, (pg. 386) the principle factor limiting budget is customers demand, that is the company is unable to sell all the output it can produce.
Factors limiting the study are: the system requires the co-operation and participation of all members of management and not only that, the basis for success is executive managements absolute adherence and enthusiasm for the budget. This is really very important; but most often budgetary control has failed because some of the members of management have paid lip services to its execution.