CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The
efficiency and effectiveness of the operations of a business depends on the
control available to management in almost every business organization, there
are a number of activities going on at the same time such as producing,
purchasing, distributing, selling and financing a product. These are
interrelated in such a way that they affect the attainment of the organization
goals.
The
institution of cost and management accountant (ICMA) defined budget as a
financial or quantitative statement prepared and approved prior to defined
period of time of the policy to be pursed during the period for the purpose of
attaining a given objectives. It may include income, expenditure and the
employment capital.
Therefore
in order to achieve these objectives or goals, the organization must economize
resources and discover the means of achieving these goals. These goals can only
be realized when the property planned use of available resource are controlled
and co-ordinated effectively. Thus a system of managing a business by making
forecast of the different activities and applying a financial to each forecast
becomes imperative. These forecast are guided by the information and adoption
of planned system such as techniques in budgeting, variance analysis. Etc.
Pandy
(2008) defines budgeting control as the establishment of departmental budget
relating the responsibilities of the executive to the requirement of a policy,
and the continuous comparison of actual budgeted result either to secure by
individual actions. The objective of that policy is to provide a firm basis for
its revision.
Osisoma,
(2000) opined that budgeting is a systematic and formalized approach for
accomplishing the planning, co-ordination and control responsibilities of
management. It is a process of preparing in advance of the period to which it
relates a summary statement of plans expressed in quantitative terms, which if
utilized with sophistication and good judgment, would enhance the attainment of
an organization’s objectives. A budget therefore, is 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
objectives.
A
budgetary control is described by Lucey, (2002) as a quantitative expression of
a plan of action prepared in advance of the period to which it relates. Budget
may be prepared for the business as a whole, for departments, for functions
such as sales and production, or for financial and resources items such as
cash, capital expenditure, manpower, purchase. Etc. the process of preparing
and agreeing budgets is a means of translating the overall objectives of the
organization into detailed, feasible plans of action. It is therefore, germane
to say that the level of importance that is attached in this plan and effort
made in controlling the finance differ in organizations. Once the goals are
set, which must be based on the detailed analysis of feasibility within the
content of the political and social value the plans will enable it to strive
towards its attachment.
Often
than not when these plans are put into operation, conditions prevail which
trends to cause deviation from the plan and corrective measures are always
taken to steer the business back on the right track. The process already
mentioned as it is applied entailed budget and its control. And to lend
credence to goal congruence suitable techniques should be applied to specific
areas that need special attention hence measurement of budgeted with actual to
arrive at the finance cannot be over emphasized. A business is said to be on
the right track if the outcome of the budgeted estimate is favorable as against
the actual. The little that is said concerning this project has encompassed all
avenues in which the subject can aid management decision, rather it should be
seen as a guide for people business.
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