CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
Expenditure control or cost control
is part of management control process, in every organisation. This process is
very important to any organisation be it profit making organisation or
non-profit making organisation. Thus, lack of this practice in any organisation
will cause misapplication of cash in cash disbursement process and this will
create a very big problem leading the organisation into deficit and at an
extreme case, the organisation might wind up. Many researches have been
conducted in the reason for winding up of companies and organisation in which
lack of expenditure control process had found responsible.
Expenditure control has been
defined as the process by which managers utilize effectively and efficiently,
the scarce resource in the achievement of the organisational goals. At this
juncture, let us look at expenditure and control from separate perspective.
Expenditure is the total amount
spent on the process of trying to achieve a particular organisational goal.
Control means to order, limit, instruct or rule something or someone’s actions.
It is used by either government officials or organisation managers to make
restrictions on wages increases, immigrate credit and so on (which are all
expenditure).
Hospital as a category of profit
making organisation. Non-profit making organisations are characterized by the
following:
a) There is neither a
conscious profit motive nor an expectation of earning net income.
b) No profit of any excess of
revenue over expenditure is distributed to those who contributed support
through taxes and voluntary donations.
In profit making organisations, the
reverse of these characteristics is the case in the sense that their major
objective is to maximize profit and excess of revenue over expenditure are
given to the owners of the organisation.
Government owned hospitals pay more
attention to services they render to the public, as their major objectives is
to provide services that fulfil a social needs for those who do not have the
purchasing power to acquire these services themselves. Irrespective of the fact
that privately owned hospitals try to render good and quality services to the
public, they pay more attention to maximize of profit which their major
objective.
Comparative study of expenditure
control in Government and privately owned Hospital which is major research
question in this research work has to with the different ways and methods by
which expenditure is being controlled in each of the hospitals so that they
will not run into deficit or liquidations.
According to Johnson (2006), the
management control concept which imbibes the expenditure control are the same
both in profit oriented and non-profit oriented organisations, but the
implication of these concepts differ in important respect. We will want
to find out if also the expenditure control methods are the same or differ in
the two hospitals under study, owning to the fact that one is profit oriented
and the other is non-profit oriented.
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