CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This introductory aspect is to provide an insight to the frame upon which the study “Budgeting as a tool of Management Control” is based. Budget has been a vital tool of management control right from inception of organization study. This is as a result of the growing complexity of the business environment and the high level of competition in the market place, which has made budgeting an invaluable management tool. The management must know where it wants the organization to be at the end of a future period and how it intends to get there. Thus preparation of budget involves the development of set of estimates of future cost and revenue in a form ‘which will coordinate the activities in accordance with selected objectives and will serve as a standard for cost control.
1.2 STATEMENT OF PROBLEM
Some problems may be encountered in the process of carrying out research on this topic as budgeting in any company indicates re plans of how the company will be run. It might be difficult to be able to have access to some information which bank may feel it is unsafe to disclose such information. Budgeting control is the estimation of future -plans made for the purpose of making decision. Hence, this should be reviewed to ensure that they are the best in term adequate planning. Subsequently, the actual result should be compared with estimates to ascertain the difference in order to discover the cause of variance and form what section or department of the bank does it occur.
1.3 SIGNIFICANCE OF STUDY
Management short comings over the year in analyzing and ranking budget proposals have not gone unnoticed. Stating the company’s expectations (goals) in clear formal terms will help avoid confusion and facilitate their attainability. Also communicate expectation to all concerned with the management of the firm so that they are understood, supported and implemented. They also provide a detailed plan of action for reading uncertainty and for the proper direction of individual group effort to achieve goals. The study is also considered relevant in the following way: It is relevant to any business student and other related field since it covers almost what is required of them in budgeting. It can also serve as a guide to anybody preparing for any relevant professional examinations. Bankers will also benefit from this study as it will provide a guide in making decisions on budgeting because bad budgeting can disorganize a business since budgeting involves plan quantified in monetary It will be of immense importance to potential investors either individual, companies or government since it will it provides a feasible basis for the assessment of the viability of the proposed business.
This project work may in the final analysis generate new hypothesis, which will lead to a more detailed research work and provide other scholar who wish to go into this area in the nearest future the relevant information with which to set file stage. 1.4 RESEARCH HYPOTHESES
In accordance with objective of this study and the researcher’s interest in finding solutions to the problems at the inception of the study, two hypothesis have been formulated about the investment and financial decision in Nigeria economy and as it affect the operation of First Bank of Nigeria plc.
HYPOTHESIS ONE
Ho : Budgetary system does not give a standard by which the organization actual performance is ascertained
H1 : Budgetary system gives a standard by which the organization actual performance is ascertained
HYPOTHESIS TWO
Ho: Budget as a tool of management control is not necessary in an organization. H1 : Budget as a tool of management control is necessary in an organization.
1.5 RESEARCH QUESTIONS
Research questions are those interrogative statements that arise often from the course of study, such questions are meant to provide information to the study. In order to achieve the purpose of this research study, the study will attempt to provide answers to the following research questions.
1. Does budgetary system give a standard by which organization actual performance is ascertained?
2. Is budget as a tool of management control necessary in an organization?
3. What is the relationship between the necessary requisite features to be put in place and the efficiency and the effectiveness of budgeting and budgetary control in an organization like First Bank of Nigeria plc?
4. Is there any relationship between a good budgetary system and the efficiency of a manufacturing organization like First Bank of Nigeria plc?
5. Does a budgeting and budgetary control give standard by which the organization actual performance is ascertained?
6. What is the effect of the human element as it affects the implementation of budgeting and budgetary control in First Bank of Nigeria plc?
7. How much effect or impact does human element have on budgeting and budgetary control process?
1.6 METHOD OF DATA COLLECTION
Data collection will be through primary and secondary source, i.e data will collected through searches in libraries, relevant journals, magazines, newspapers, textbooks e.t.c and also by the use of structured questionnaire.
1.7 METHOD OF DATA ANALYSIS
In this study, descriptive method will be used to analyze data and also in resting hypothesis, chi-square (X2 ) will be employed. Findings from this research study will be discussed in the light of the research problem hypothesis, purpose research questions, literatures of the research and other relevant issues conclusions will be drawn and recommendations and suggestions also will be made.
1.8 SCOPE AND LIMITATION OF THE STUDY In recognition of various impending limitations of this budget/project work budgeting as a tool of management control does not vividly reflect all the fact behind the project title but effort had been made by the researcher to arrange this study in such a manner that it covers the following areas. The budget committee and its importance Responsibility of management in the preparation of the budget Preparation of cash budget Treatment of variances The importance of budget to the whole organization Branch office budget and management Approval. A review would be made on where the budgeting process of First Bank of Nigeria Plc. originates from the manager in charge of budget preparation, the extent to which budget estimates are achieved and the approaches disposal. The researcher at this section find it very important to highlight some of the difficulties which was encountered during the course of carrying out this study and, which had hindered the aspiration of the researcher in terms of information educative Hess and volume. It is pertinent to mention that time factor posed a considerable limitation to the study as the period between the commencement and the submission of the study is considerably short and most importantly the researcher has to combine other academic work with the writing of the project. Despite all the above mentioned constraints, this study will serve informative, educative and useful purpose to all intending and existing investors, including bankers,. Manufactures, scholars as an insight, for them to set their own stage and basis upon future researches can be based upon.
1.9 DEFINITION OF TERMS
1. Budget: According to CIMA, it is defined as a future plan of action or an approved estimate stated in both financial and quantitative term, prepared and approved prior to a definitive period of time of the policy to be pursued in order to achieve an objective during that period.
2. Budgeting: This is simply a process of preparing a detailed short term plan (budget). It is the process in which objectives policies and policy measure, finding requirement and source and allocation of funds stated in the budget are determined.
3. Budgetary Control: Simply put, it is the use of budget or budgets to control operations and activities of the organization. It refers to the continuous comparison of a level with targeted result so that corrective action could be taken in the adverse variances while actions taken to the advantage of favorably variance.
4. Budget Committee: This is a committee responsible for the preparation of the organization’s budget. It usually comprises of executive management, senior budget holders and accounting officers.
5. Budget Manual: This document describes the objectives and procedures involved in budgeting. It provides a useful reference source for managers responsible for budget preparation.
6. Budgetary System: This according to UMA represents an amalgamation of three major components parts of budgeting, budget and budgetary control.
7. Fiscal Policy: Refers to government budgeted measures to regulate the macro variables and economic activities through her expenditure and taxation.
8. Standard: This is a predetermined level of activity.
9. Rolling Budget: UMA defines it as the continuous updating of a short term budget by adding say a further month or quarter so that the budget can reflect current condition.
10. Zero Based Budgeting (ZBB): This requires a budget center to justify the entire budget from the scratch (Zero) in each year of budget formulation.
