235635297 acc-project-3
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DEDICATIONThis project work is dedicated to god Almighty for his guidance, love, mercy and protection throughout my academic programme
ACKNOWLEDGEMENTThe dream of completing this project would not have been easy without the encouragement and support I received from the following persons. Mr. Atole edosa, Mr. Sunny Aigbomian, Mr. Amawu, Mr. Oriakhi, Mr.
Imade, Mr. Ohonba, Mr. Sadik. My friends bro. Alozie, Mr. Osawaru, Rev. F.t. Onofekokwo, Pst. Best Ehinomen, Mr. Daniel omage, Mr. S.o. Osegbe, Mr. Dennis Uzoka, I also wish to appreciate my lovely Siblings; brother & sisters, my course mate.
My gratitude also goes to my supervisor Mr. Amedu Michael whose patience and tolerance in reading through the manuscript and guiding me has made this project what it is today.
And to all my friends and others that stood by me through the struggle, I appreciate you all.
RELEVANCE OF BUDGET AND BUDGETORY CONTROL IN AN ORGANISATION
By
ESHIKWE BLESSINGESITM/PT/SBS/ACC/10/01272
EDO STATE INSTITUTE OF TECHNOLOGY AND MANAGEMENT, USEN.
DECEMBER, 2013.
BUDGETING AND BUDGETARY CONTROL IN A MANUFACTURING COMPANY
By
ITIMAH SPLENDOUR FAITH ESITM/SBS/ACC/11/5243
BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY, SCHOOL OF BUSINESS STUDIES, IN PARTIAL FULFILLMENT
OF THE AWARD OF NATIONAL DIPLOMA IN ACCOUNTANCY
DECEMBER, 2013
CERTIFICATIONI certify that this project work tilted Budgeting And Budgetary Control in a Manufacturing Company; was carried out by Itimah Splendour Faith with Mat No ESITM/SBS/ACC/5243 of the Department of Accountancy in Edo State Institute of Technology. Usen in partial fulfillment of the Award of National Diploma in Accountancy.
----------------------- -----------------Amedu .J. M. DateProject Supervisor
_______________ ____________Ohonba E.O Date Head of Department
DEDICATION
My dedication goes to Almighty God for his Mercy an protection towards my late an angels especially St Michael the Archangel who has been my safeguarded and St. Monica My patron and to the Mother of God. An to my one an Loving Father especially my daddy who has been so faithful to me my mother my brothers aunt. Consumes and to all Owoloko family. Lastly to all Catholic priest and seminars
ACKNOWLEDGEMENT My utmost gratitude goes to God who has been my strength for the wisdom and enablement he has granted me in all spheres of life. Also my profound gratitude goes to my project supervisor Mr. Amedu Michael who ensured that this work came out as a master peace and not just another project.
All thanks goes to my mentor Rev. Father Adolphus Umechukwa for his prayers and care and to Rev. Father. Michacl Oyenafoh who assist me financially and to pastor Nanfip Thomas Goselle for his prayers.
I will say those I did not include their names, may God bless you. My appreciation goes to my lecturers and my course adviser Mr. Sadiq for his advice and to my lovely family who has been there for me. Firstly my Daddy Mr. Alex Itimah for his prayer and kindness and to my Late Mother who died for my sake and to my lovely brothers, Mr. Eromosele Itimah for his time and support and Plus Itimah and Linus Itimah and to my loving sister Mrs. Gloria Aghedo Mrs. Rosemary Dano Eruse and Lastly Miss Isimary itimah and to all my relations an friends.
TABLE OF CONTEXTTitle page - - - - - - - iApproval - - - - - - - iiDedication - - - - - - -
iiiAcknowledgment - - - - - - -
ivTable of Content - - - - - - -
vAbstract - - - - - - - vii
CHAPTER ONE: INTRODUCTION1.1 Background of the Study1.2 Statement of Problem1.3 Objective of the Study1.4 Scope of the Study1.5 Significant of the Study1.6 Hypothesis Statement 1.7 Limitation of the Study1.8 Definition of Term
ABSTRACTThis research work is defined to obtain empirical data on budgeting and budgeting control in a manufacturing company with reference to Nigeria Breweries Plc. The objective is to examine the techniques of budgeting as t relates to management efficiency for evaluating budgeting processes and procedures. It is also aimed at establishing and promoting goals congruence. However one of the overriding consideration in any manufacturing company is survival, this is particularly the cause of the Nigeria Breweries Plc. A well prepared and implemented budget will facilitate the realization of the objective of the organization which in this case is Nigerian Brewery.Budget provides measures of performance which can be compared with later budgeted result, failure to achieve target may result in corrective action to bring actual performance back into or a revision of budget. The study revealed among others that budgeting has helped the company in achieving its objectives as in improving managerial decision making processes.
CHAPTER ONEINTRODUCTION
1.1 BACKGROUND OF THE STUDYEvery business oriented organization is aimed
among others at making profits as high as possible. All effort therefore are diversified at effective planning process with minimum lost involvement in other words, it means that all specific aims and objectives of the organization can be achieved through proper planning, controlling and coordinating activities.
In pursuit of the organizations aims and objectives, resources of the business will be employed therefore a quantitative document is needed for setting out objectives, targets and resources with which to achieve the target. This is known as a budget.
The managerial function of an organization is so important that the continued existence of the organization is tied to how efficiently these functions are executed in ordinary cause of business. An appraisal of its strength and weakness would give a meaningful direction to the organization if well planned, prepared and implemented to achieve the organizational goals.
An organization desirable level of growth and profitability can be achieved by early implementation of plan and strategies, this requirement show more in manufacturing industries to be precise where there is a keen competition. A budget therefore is a means of achieving organizational goals. It could be seen that budget is the most important decision making process and policy in an organization. Thus budget is seen as an important reference document at every level.
There are different types of budget for different organizations and entities. It should be observed that whatever the kind of structure of budget, they are use for purpose of maximizing managerial efficiency to ensure that activities of that organization are not left out to chances.
In a manufacturing organization, the introduction of budgetary control system encourages members of that organization from top officials to button official to plan ahead.
A budget is focused upon a specific time, which is called the budget year. It is at the end of the year that actual results are compared with budget performance. Any kind of variance are analyzed for purpose of
showing the causes of such and informed decision to prevent re-occurrence, hence in a system of budgeting, standard setting and analysis of budget variance are integral parts.
It is important to note that most organization targets are profit maximization with the use of budgets the company would have a greater control of the activities of the companies and that serves as a check and balance.
Although, the use of budgets as a managerial tool can be applied to both individuals and business organization alike, the researchers in this research study is concerned with the effectiveness of budgeting and budgetary control in a manufacturing industry and Nigerian Brewery Plc, in particular.
The above name company is chosen for study because it is a manufacturing organization that has various compartments Vi2: marketing, production and a budget to be able to correlate the inflows and outflows. The revenue and expenses that were accrued helps to know the profitability range when actual estimate would have been compared with estimated values.
There is therefore a need for organization that does not want a disintegrated organization to embrace the use of budgets since it helps to co-ordinate the activities of different departments or subunits of the industry, and it also helps to motivate and authorize actions, so as to fully realize its sole purpose of the establishment as a manufacturing organization.
It is therefore seen that budgeting and budgetary control is an economic instrument which can direct a nation’s state or organizations growth and development. Conclusively budgeting can be seen as a weapon or instrument, which holds organizational heads accountable. 1.2 STATEMENT OF RESEARCH PROBLEM
There is nothing as bad as not planning in a business circle. Many business operators will not want to go out of business, the mistakes still remains that some of them do not take pains to work according to their own budget.
Young industries see budgeting as a mere formality while the actual performance will be far away from the estimates which are supposed to be a guide in
their drive towards revenue generation and expenditures.
The questions that really come to mind therefore are as follows:
1. Does budgeting actually guide against resource wasting? If so, how does it reduce cost and increase profit earning.
2. Will proper budgeting actually help achieve the financial objective of an organization?
3. Does budgeting not look like a waster of time and effort? If not how does it assist the organization.
1.3 OBJECTIVES OF THE STUDY Having fully analyzed the problems relating to
budgeting and its control, the study intends to throw more light on budgeting and budgetary control with particular reference to Nigerian Brewery Plc with; a. A view to determine their effectiveness in the managerial process of t the company b. Another reason for this study is for one to be able
to integrate the various units so that the over all goal of the organization could be seen if actually achieved.
c. To advance useful recommendation based on the findings to the company on how to improve on their systems of budgeting as a tool to management planning and control.
d. It is also meant at broadening the knowledge and understanding of all students, especially accounting students, lecturers and a layman alike on the concept of budgeting an budgetary control, since its forms an important aspect of the life [growth] of individuals, organizations etc.
1.4 SCOPE OF THE STUDY The scopes of the study are set below’
i. This research work intends to focus on budgeting and budgetary control system in Nigerian Brewery Plc.
ii. A detailed study of the type of budget being prepared by the Nigerian Brewery and how these budgets are being controlled so as not to allow for deviation.
iii. Also an in-depth study will be carried out on the advantages and limitations of the budgets of the Brewery [i.e those factors or constraints not
allowing the organization to carry out its budget planned].
1.5 SIGNIFICANCE OF STUDY In recent times, there have been many cases of
corporate failure as a result of little or no planning of business activities is organizations.
There is no doubt that budgeting plays a vital role in the planning process. However, this has been given adequate attention as stake holder sees it as a waster of limited resource and time.
Hence the importance of this study at completion includes;
The critical analysis of the role of budgeting to corporate performance especially in the manufacturing sector.
It will show how budgeting can actually help achieve the financial objective of an organization.
Finally, it will improve on the various research works which have been performed in this field.
1.6 RESEARCH HYPOTHESIS. A hypothesis is a tentative answer to a research
question. Often stated in form of a relationship between a dependent and an independent variable. Normally,
hypothesis is divided in null hypothesis [H0] and alternative hypothesis [H1]
Null hypothesis of any assumption is that hypothesis that states an assumption not to be true, while the alternative hypothesis is the opposite of null hypothesis.
Hence in the light of the introductory observation which culminate in the problem statement, stated objectives and within the scope of the study. a. H0 organizational activities cannot be effectively
controlled through the use of budgeting.H1 organizational activities can be effectively control through the use of budgeting
b. H0 budgeting and budgeting control is not a good control device by management to avoid wastage of resources, time and efficiency.H1 budgeting and budgeting control is a good device by management to avoid wastage of resources, time and efficiency
c. H0 comparison of actual results against predetermine estimates are not necessary. H1 comparison of actual results against predetermined estimates is necessary.
d. H0 there is no direct relationship between managerial efficiency and budgeting. H1 there is direct relationship between managerial efficiency and budgeting.
1.7 LIMITATIONS OF THE STUDY In this course of study the researcher were faced
with lots of problems. These problems did not only disturb physically but they hindered the possibility of carrying out a proper and comprehensive research
These various circumstance militated i.e hindered the extent of work and the limitations among others are:1. The frame work of this study centers on only one
organization Nigerian Brewery Plc. There is no intention of looking into the budgeting and budgetary control system employed by other successful organization i.e the study is restricted to the capital budget employed by Nigerian Brewery Plc, manufacturing industry.
2. The reluctance on the part of the company personnel in making raw data amiable for the purpose of the study.
3. There were also constrained by the company’s rules and regulations. These constrains were related to the release of vital information about the company to outsiders.
4. Due to poor record keeping situation in the company, past information and recorded information were not made available to compare past budgetary with the present budget being made.
5. Time and finance was another major constraint in carrying out this research work
1.8 DEFINITION OF TERMS Budget: A budget is a quantitative expression of a planned action prepared in advance of the period to which it relates.Budgetary Control: These could be defined as the establishment of budget, relating the responsibility of the executives to requirement of the policy and the continuous comparison of actual performance with budgeted level so as to secure either by individual or collective action the objective of such policies or a revision thereof.
Control: This is the process of ensuring that a firm’s activities conform to its plans and that its objective are achieved. Distinguishes between control and controls; controls are measurements and information where as control means direction. In other words controls are purely a means to an end; the end is control. Control is the function which makes sure that activities work is done to fulfill the original intention. Control deals with expectations, that is with the future control is normative and concerned with what ought to be.Objective: It can be seen as the end towards which activity is aimed. It represents not only end point of planning but the end towards which management function aimed. Objectives are often attributes that denotes the future state of event. Goal: Goals is a close ended attributed which are precise and expressed in specific terms. Goals provide basis for organization design and gives incentives for action. Goals begin the objects time dimension for attainment. Strategy: It can be defined as the process, which consists of stages. i.e is the formulation, implementation and evaluation of action that will
enable an organization achieve its objective. It specific ‘how’ the goals will be achieved Adeniji [2004:300]Planning: Planning is a means to arrange before hand the activities of the future. Planning means a properly coordinated and comprehensive plan for the whole industry. Flexible Budget: Flexible budget is a budget, which is designed to adjust the permitted cost levels to suit the level of activity actually attained. A flexible budget is designed to change as the volume of output changes. Flexed Budget: Is a budget, which is designed to remain unchanged irrespective of the volume of output or turnover attained i.e. it is a single budget with one analysis of cost. Budget Manual: Is an instruction of information manual. This embodies the set of instructions and pertinent information regarding the budget and its preparation. It serves as a rule book for the implementation of budget programme as it specifies what to do, where, why, by whom and how to do it. It is a useful document, which enables members of the committee especially new budget office to have rapid
grasp of all that budget preparation and implementation in the organization entail. Period of Time: Planning and budgeting must be related to a specific period of time. The general process of budgeting breaks down long range plans and short range plans. Budgets can be prepared for any length of time and longer periods may be appropriate for particular types of budgets.
CHAPTER TWOLITERATURE REVIEW
2,1 AN OVERVIEW OF BUDGETING The concept of budget was derived from the
French word “bongette” which means a leather beg or large-size purse which travelers many centuries ago hung on the saddle of their horse. It symbolized a bag containing financial proposal of the finance minister of government.
As for the budgetary system, it evolves out of controversy in Britain. It began first to be applied by governmental institutions.
For centuries, the British government was only interested in restricting the amount that the sovereign levied on subjects. But when it came to spending, these was no restriction he spent the money as he pleased. Later owing to power struggle between the legislative and executive branches of the government, it became the prative that expenditure must flow from appropriations and appropriations were to be made for specific purpose.
In France also, the budgetary system emerged out of the controversy. That was during the Napoleon wars
when a man called Pitt attempted to ensure that parliament should review simultaneously the total income and expenditure of the national government.
Hence Pitt [2002] is regarded as the “ father of budget”
In the business enterprise, however, the use of budgets as a financial control tool of management is historically rather young phenomenon. For instance in the united state, that seems to date around 1920, early budgetary principles for business enterprise are believed to have derived from two source. Firstly from the specific movement and secondly from the government budgetary techniques.
Budgetary control system is regarded as a logical extension of Taylor’s scientific movement. Large scale application of the system is adduced to have started in the depression years after 1930. thus today, besides governments, progressive business and enterprise use budget and budgetary control system in one way or the other. Budget has given accountants and budgetary control system in one way or the other. budget has given accountants and business managers alike a concern as to how best this concept of budget can be
applied in executing their managerial function of planning and controlling the activities of their organization.
The emphasis on budgeting has seen on its effect on planning and controlling of the entire operations of the business. The techniques of budgeting and budgetary control are far more than an accounting exercise. They involve all level of management, for example, the appraisal of the whole organizational plans, strategies, and objectives and how to impact these plans strategies etc. on the organizations profitability and growth.
Budgetary control embraces efficient allocation of scare organizational resources in a manner that will help realize corporate objectives. The aim of budget is to provide orderly administration of the company’s resource in such a way that the maximum return on them will be achieved.
Budgeting may be defined as “financial and qualitative statement, prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of attaining a given objective, they may include income, expenditure etc.
A budget is a comprehensive and coordinated plan expressed in financial terms, for the operations and resources of an enterprise for some specific period in the future.
Lucey [2000:270] defined A budget as a plan expressed in money. It is prepared and approved prior to the budget period and may show income, expenditure and capital to be employed.
Okoye [1997:342] described budget as financial statement prepared and approved prior to a defined period of time, of the policy to be pursued during that period for the purpose of achieving a given objective. Budget could be prepared for particular department or sections within the organization or for the entire organization.
From the above definition it can be said that budget is a statement which is prepared even before the commencement of the operations of the organization, and the statement expresses not only the monetary terms of the business plans, but also other policies, programme strategies that the business intends to achieve within the given period covered in the budget such policies programme and strategies
include profitability, growth, policies, expansion strategies and the totality of programme aimed at systematically achieving the corporate objectives.
Hongren [1999:194] sees budget as a qualitative statement that translates the intentions of the business organization. This means that budget are used to integrate and co-ordinate plans to various sub-unit of the organization for the effective achievement of the desirable objectives of the organization. Therefore various departments of the budgets are incorporated into a mean master budget.
In view of Brown and Howard [1995], budget was described as a predetermined statement of the management policy during a give period, which provides a standard for comparison with the result actually achieved. This means that, a budget is a standard which is used to measure the actual achievement of people department and firms. It can be said that this is a measure of performance of the various units and costs center of the organization, and hence management is informed as to the efficiency of the personnel and cost centre’s in the organization.
With such information, decision making is also facilitated.
In divided managers by preparing budget provide a bench mark with which performance can be objectively assessed. This will necessitate the acceptance of the budget as reasonably by those responsible for carrying it out.
It is very important that management should be made aware as soon as possible of any new trend whether in relation to production or marketing. The budget by providing specific expectation with which actual performance is continuously compared, supplies a mechanism for early detection of any unexpected trend.
The budget communications in the business are of two levels. Firstly during its preparation, it involves a two way communication process which is between top management and the managers about objectives and methods of achieving them. Secondly, it communicates from management downwards the objectives of the firm after the budget is prepared.
Having set goals for the organization management uses the budgeting system to control the running of the
business to see that the goals of the organization are achieved.
Budget has been defined in slightly varying way by different authorities. Hongreen defines budget as a qualitative expression of a plan of action and an aid to coordination and implementation. Brown et al [1999] stated that budget is a predetermined statement of management policy during a given period, which provides a standard for comparism with the results actually achieved. In another definition the author defines budget as a financial or qualitative plan of operations for a forth coming accounting period. Looking at the various definitions, the following conclusions can be drawn that, budget can be applied in any organization where there are objective to be pursued, be it a profit or non-profit oriented organization.
Budgets are themselves not an end but a means to an end, for instance while Hongren sees it as useful coordination function. Brown et al looks at it as among other things a standard for performance evaluation. In the whole, however, there is a consensus that budget is a plan.
It has been generally recognized that budgeting and budgetary control forms the bed rock for achieving most of the objectives of any organization.
Before a budgetary control system can be introduced, it is essential that key executives are committed to the proposed system and to ensure that long term objectives of the organization must have been defined. The organization can be logically divided into budget centers, such that each manager has a budget for and is control information about areas he can control.
Budget provides measure of performance, which can be compared with the later budget result. Individual manager may be monitored by budget, failure to achieve target may result in loss of confidence in the budgeting system.
Budgeting control can be define as a process whereby financial control makes use of budget. It is a process of comparing the actual performance on regular basis with budgeted targets and taking the corrective action on budget variance in order to meet the corporate objectives. Thus budget act as an instrument of control. Aigbokaevobolo [2002:98]
budgetary control is therefore a vital management tool for performing basic management functions.
Brown et al assert that budgeting is essentially concerned with planning while budgetary control is a system of controlling cost which incudes: the preparation of budget, coordinating the department and establishing responsibilities. Company actual performance is compared with that budgeted and cating upon result to achieve maximum result Owler et al attempted to give some mark distinction between budget and budgetary control.
A budget is a standard with which to measure the actual achievement of peoples department, firm’s etc. budgetary control is the planning in advance of the various functions of a business so that the business as a whole can be controlled.
Budgetary control is seen as a control mechanism, which is used through out the period the budget plan is carried out. The main aspect with which budgetary is concerned is in comparing actual results with what was planned to happen in the budget. Budgetary control is therefore a vital management tool for performing basic management function.
The list of definition of budgetary control is not exhaustive. However these numerous definitions do not fail to emphasize or highlight an important point that the whole idea about budgetary control is the process of effectively implementing the budgets to achieve its defined objective. Budgetary control are essentially forward looking, they provide yardstick for purpose of comparism. The success of a budget depends on the effectiveness of its budgetary control.
The diagram below shows the main features of a budgetary control system.
For effective management there is need for a good organizational chart in an organization which carries out responsibility centres. Each responsibility center must have its own budget and cost controllable by the manger of the section. The organizational chart of budgetary control system helps the flow of budget information and implementation as illustrated in fig1. Main features of procedures of a budgetary control
Fig 1. Budget Procedure
Established objectives
Source: Okoye [1997: 344] cost accountancy management operational applications.
Budgetary control could be seen as a control cycle. Here the management, accountants have the task of providing a feedback of control information with this budgetary control cycle. Through the control cycle, information can be transmitted to the people who are responsible for comparing them against a budget and initially control action. 2.2 ESSENTIALS OF BUDGETARY 1. Budgetary control is the preparation of targets or
budget for agreed areas of business. An area may be functional management area such as sales, purchase or production etc.
2. Budgetary control helps to define the objectives of the organization as a whole, and within this overall frame work, defines the result, which each department and its personnel should achieve.
3. Budgetary control has a control yard stick and when actual results are compared with budget figure, management should be prompted into action.
4. To reveal the extent at which actual results have exceeded or fallen short of the budget plan.
5. It provides a basis for the revision of the current budget or for the preparation of future budgets.
6. It assists to develop a system of planning and control around area of responsibility, where by individuals and managers are encouraged to plan and control their own performance.
2.3 BEHAVIOURAL ASPECT BUDGETING The budget is a planning instrument, which highly
impacts all the resources input into operation including human. The human, unlike other resource, is not mechanistic but has emotions that can be stimulated for positive or negative or negative results. If the budget motivates the staff especially operators, it is expected that they will endeavor to achieve the budget objective thus ensuring its success. If demodulated however, the operators would not accept the budget this leading to its failure.
The budget can provide motivation if it harnesses people’s aspiration levels such that there is congruence between individual aspiration level and the budget
drawn up. One of the ways for achieving such congruence is to allow people i.e operator to participate in the setting of their own budget. When operators fully participate in the budgeting process, they will regard targets as their own and would do everything possible to have them achieved. When, however, the operators do not participate in the budget preparation, they can easily justify deviation on impossible targets, Drury [1992] holds the view that participative style of management will not necessarily be more effective than other styles and that participate methods should be used with care. Amos, [2002:34].GOAL CONGRUENCE
The need to create situation in which each individual on attempting to satisfy his own needs will be making the greatest possible contribution to the accomplishment of the goal of the organization.
Lucey defined goal engruence as the goals of individuals and groups, which should coincide with the goals and objectives the organization as a whole. Lucey [2002:399].Motivation
Lucey [2002:399] defined motivation as the need to achieve selected objectives and resulting drive that influence action towards the selected objectives.
Budgets are used to motivate mangers and members rather than create resentment and adverse reaction. It can assist an operator to monitor his performance. Performance is the best reward and recognition factor in any organization. The knowledge that budge is a performance evaluation device. Manager’s attitudinal change to the entire badgering process as it motivate them to strive to achieve budget goals and hence excel. Motivation requires the full involvement and continuous participation by all levels of managers in planning and control process, their acceptance of the budgets and attainable levels of performance being set.DYSFUNCTIONAL BEHAVIOUR
Caplan, suggest that there is ample evidence to support the premise that behaviorally naïve management accounting techniques, such as budgeting can serve as deterrent to goal congruence, under certain circumstance can be a source of such
undesirable behaviour responses as frustration, conflict, rigidity if the budget results in dysfunctional behavior.2.4 PREPARATION OF BUDGET
The way the budget is prepared varies from one organization to another based on the size of the firm, product, and degree of uncertainty, which the organization faces. All firms are unique, each produce budget in a particular manner. Inspite of all this certain procedures must apply in almost all budget situations.
The following details sequences of steps are adopted in the budgeting process. 1. The budgeting preparation usually originates from
the budget officer who writes for he convention of the budget committee. He produces data on the organization as well as the external environment, which are likely to affect the future that the budget covers. He sends relevant forms to the budget holders specifying the periods for submission.
2. The committee meets to consider the time table for the budget and sets the guide lines for its preparations having regard to the budget manual.
3. Keys forecast of activities, costs and sales are made with suboptimal participation of all budget holders using appropriate forecasting techniques.
4. Sectional or sub-unit draft budgets often called estimates are prepare by the budget officer from information received from the budget holders.
5. The draft budgets are reviewed by the budget committee for flexibility and relevance to the policies and of objectives of the organization and the necessary amendments are made. At this stage each budget holder, is as much as possible required to defend his budget claim thus reducing the incidence of budget bias.
6. The budget committee complies the amended draft budgets into the operating and financial budget to form the master budget.
7. The chief executive with his top executive’s officers or the board of directors’ review the budgets for approval after any modification as may be deemed fit.
8. The approved budget is then published and distributed i.e. communication to all budget
holders for their information and implementation, Abohi [2002:294]
The diagram illustrates the budgetary process
Source: an insight into management accounting by Adensi A. Adeniji [2004:305] natural. Period of budgets can be prepared for any length of time and longer period may be appropriate for particular types of budget.1. The control aspect 2. The type of business 1. The control aspect: Budgetary control implies control, and its obvious that long budget periods cannot be effective means of controlling a business, particularly in respect of expenditure, which must be rigidly scrutinized at short intervals. It is therefore usually arranged that the budget should be for a short period, so that actual results can be compare with those budgeted. 2. The type of business: Industries in which capital expenditures is high and long-term planning is
Derive key forecast
necessary, budget period of up to twenty years may be required, examples are shipping trade and electrical supply industry. One the other hand, many firms experience seasonal fluctuations in demand for their products, so must adopt a short period.2.5 THE PRINCIPAL BUDGET FACTOR
Principle budget is the factor which at any time effective limits the activates of an organization. A principle budget factor is also known as limiting factors or key factors. Examples of PBF i.e principal budget are market demand, shortage of labour, space finance, production capacity, inadequate supply of material etc. because such a constraint will have a pervasive effect on all budget committee must have identified the limiting factors and its effect on each of the budgets carefully considered during the budget preparation process.
Okoye [1997:348] is of review that the limiting factor that creators the greatest problem is referred to as the principal budget factor PBF. It is necessary that the principal budget factor be identified early enough as it will form the starting point for the preparation of other budgets.
2.6 BUDGET CENTRES AND COST CENTRES A budget center is defined as a section or entity
for which control may be exercised and budget prepared.
A cost center is an identifiable function or part of the organization for which cost can be identified. It is defined as apart of a business unit “Lucey [2002:391] each area selected as a budget center should be early definable and should be the natural responsibility of one particular manager. A budget that relates to the centre is referred to as departmental budget. 2.7 THE MASTER BUDGET
When the functional budgets have been prepared, the budget office will prepare the master budget. The master budget is a summary of the objectives of all sub-units of an organization during the period. It embraces the impact of operating decisions [those concerning the acquisition and utilization of resource such a sales production, distribution] and financing decisions [concerning the sourcing and utilization of funds usually including the sourcing and utilization of funds including cash budget and capital budgets].
2.8 BUDGET REPORT AND VARIANCE ANALYSIS
After the budget has been prepared and approved a continues flow of report is required each mouth or quarter, depending on organization to show comparison of actual performance with the budget.
Reports will be issued to head budget centre showing favorable or adverse variations from budget. Reports should show percentage of variation, where percentage of vacation is significant, and investigation must be instructed so that the report would be able to explain the definite causes. This will enable remedial action to be taken before it is too late. 2.9 BUDGET ADMINISTRATION
Budget administration is the process of planning, organizing, coordinating, directing and controlling of budget activities. Is the development and utilization of a budget. The success of budget depends on its administration. thus, the budget administration must involve every department or sector of the firm. 2.10BUDGET COMMITTEE
This usually comprises the budget officer and permanent members who are drawn from top
management division in the organization as well as those co-opted to advice on particular aspects of the budget where their expertise may be necessary.
The main functions of a budget committee are as follows:1. Establisher or creates realitic idea valuable to the organization.2. Act as a coordinating device that brings the effort
of those engaged in the preparation of the budget and clear any conflict.
3. Receiving and examining the fictional budget to ensure that they conform to the corporate objective.
4. Identifying the limiting factors and suggesting revisions where necessary.
5. Specifying the dates fro preparing budget and procedures for submitting budgets
6. Advise the management by issuing budget guidelines
7. Recommend budgetary control system 8. Draft final budget. Aigbokaevobolo [2002:8]2.11TYPES OF BUDGET
Basically budgets can be categorized into which are:
a. Operating budget and b. Financial budget Operating budget
Some times referred to as functional budget, Relate to distinct operations or functions within the organization. Examples of operational budget are sales budget, production budget, material cost budget, labour cost budget, overhead budget and low cost of goods sold budget. Sale budget
The sales budget is the most important and also the most different to prepare among the operational budgets. The sales budget is concerned with estimating the quantity of good/service that could behold in a given period of time and the price consumers are willing to pay as to purchase the estimated quantity.
The sales manager is responsible for the preparation of the preparation of the sales budget. This sales budget will be based on the sales forecast. Example of sales forecasting are market survey, buyer
intention, market testing etc. sales budget is very critical to the success of failure of a business. i. Objectives of sales budget The objectives of sales budget are a. To provide a sales target, this can be achieved by
different management areas. b. To provide a revenue budget, this can be
incorporated into the mater budget so that the business can determine the budgeted gross profit net profit.
ii. Production budget Production budget is the initial step in budgeting
manufacturing operations. It shows the anticipated production in terms of units. Production budget are usually prepared as soon as sales budget are concluded. iii. Material cost budget
This shows the anticipated direct materials to use in terms of money in the oncoming period for production. iv. Labour cost budget
this shows the anticipated direct labour to use in terms of money in the oncoming period for production. It is usually specified in terms of time and rate per hour. v. Overhead budget
This shows the anticipated indirect labour us in the period of production.vi. Cost of good sold budget
This is a statement showing the expected cost to used directly in production of finished goods available for sales. Aigboaevobolo [2002:88-89].B. Financial Budget
These budgets are concerned with the expected receipts and payment within the period of the budgets. Examples of financial budget include cash budget, performance budget, profit and loss budget and performance balance sheet. i. Cash Budget: The cash budget is used to
determine the inflow and outflow in an organization. Cash budget is very important for the survival of a firm. It is used to predict the effect on cash position of the levels of operations.
The purpose of cash budgets are;
a. It identifies excess or shortage of cash by time periods b. It establishes the need for financing c. It establishes a sound basis for continuous
monitoring of cash position d. It ensures that sufficient cash is available when requirede. Establishes the availability of idle cash
investment. Adeniji [2004:318] II. Master Budget: This budget combines or
summaries both the operating and financial budgets.
III. Performance Statement Budget: Is used to analyze results of revenue, cost and variance. Variance analysis involves a mathematical analysis of two sets of data in order to gain insight into the underlying causes of performance. Other kinds of budgets are:
Fixed budget and flexible budget. Fixed budgets
Fixed budget are budgets prepared to suit a particular level of activity no provision is made for any variation in actual performance i.e. it is designed to
remain unchanged irrespective of the volume of the output, turnover attained. Flexible budget
Flexible budget is a budget, which is designed to adjust the permitted cost level of activity attained. Advantages 1. It is usually of realistic target as to take the
advantages of all opportunities that arise form time to time.
2. It is used to determine the level of activity that yields the highest profit
3. It is used in planning. Controlling and decision making under uncertain business conditions.
4. It is used to ascertain relevant cost, differential incremental cost and incremental revenue. Aigbokaevobolo [2002:96]
2.12BUDGET TECHNIQUES There are three main techniques or approaches to
budgeting; they are zero-based, programme planning and incremental budgeting system.A. ZERO BASED BUDGETING [ZBB]
This technique is defined by the chartered institute of management accountants [CIMA] as a
method of budgeting whereby all activities are re-evaluated each time a budget is formulated. Each functional budget starts with the assumption that the function never existed and so it has a zero cost.
Increments of cost are compared with increments to benefit so as have maximum benefit for a given budgeted cost. This definition shows that the technique attempts to ensure that projected expenditure for exiting programmers’ start from the base zero with each year budget being complied as if the programme were being lauched for the first time. It is indeed a ground. Up approach as the budgets are initiated with no consideration being give to previous budgets.
The techniques required budget holders to justify all spending limits or budget claims on their own merit without reference to previous levels. It is therefore a cost benefit approach, which questions long-standing assumptions and serves as a tool for systematically examining and perhaps abandoning any unproductive projects. Abohi [2001:54]
Peter Pyhor in 1969 who was the first to introduce zero budgeting [ZBB] identified the following structure
systematic approach to budgeting based on zero-based budgeting. a. Organization are divided into sections known as
decision units b. Each decision units are clearly defined. c. For each activity a decision package is define for
the minimum level of spending and this sets out the cost, the purpose of activity, possible measure of performance etc.
d. Similar decision package are defined for incremental allocations to activities.
e. The decision packages is ranked f. Allocation of resource. Adeniji [2004:331]ADVANTAGES OF ZERO BASED BUDGETING [ZBB]1. It broadens mangers knowledge and
understanding of resource input and outputs as well as operations this enhancing motivation
2. Management attention if focused on activities, which warrant action
3. Efficient allocation of scarce resource4. Items are reviewed periodically 5. Management and staff cooperation and
investment is stimulated
6. It enables all aspect of the enterprises to be touched.
DISADVANTAGES OF ZERO BASED BUDGETING 1. It is a time consuming of budget 2. it does not re-organize past budget 3. It is an expensive type of budget 4. It may be ignore the benefits of strategic
planning. B. PROGRAMME PLANNING AND BUDGETING SYSTEM [PPBS]
The planning programming budgeting system is a system in which planning process is made forward by the budgeting process, which is the final step. It provides regular procedures for reviewing goals and objectives for selecting and planning programs over a period of year.
The programming concepts is the crucial name relating planning to budgeting, converting planning from paper exercise to a significant part of the decision.
The aim of planning programming budgeting system is to enable the management of non-profit organization to make more informed decision about the
allocation of resources to meet the over all objectives of the organization.\
The first stage is to review the organization objectives for the activities which it performs. The second stage is to review involves in identifying and evaluating alternative methods of achieving the objectives for each specific programme. Such comparison and evaluation will show the cost of each alternative course of action and the benefit result. The last and final stage is to select the appropriate programme on the basis of cost/benefits principles.
Planning programming budgeting system involves the preparation of a long term corporate plan, which clearly established the objectives, which the organization aims to achieve
Planning programming budgeting system [PPBS] was first introduced in the USA, when its success was noticeable in the budget of defense department. The system is favorable for USA but not appropriate of Nigeria. With acute skill shortage, planning programming and budgeting system generates for Nigeria. With acute skill shortage, planning programming and budgeting system generates a lot of
paper work as objectives and goal attainments measure are described and alternatives examined. Advantages
1. It creates room for co-ordinate pursuit of overall corporate objective.
2. It enables the thorough evaluation of the best means for attaining the various programs
3. It exposes overlapping inefficient program’s 4. It emphasizes concentration on corporate
objectives5. Helps to assist management national decision
making in allocation of resource among competing alternatives.
Disadvantages 1. Inadequate turn for decision making 2. The absence of an organization for designing
and implementing planning programming budgetary system.
3. It cannot apply when the objective or goal is vague
4. The philosophy and theory of the technique are difficult to understand by the lower level of management.
C. INCREMENTAL BUDGETING This is the oldest and most widely used technique.
It is based on the premise that the past is a good guide to the future. In its application initial budget estimates are arrived at by negotiation subsequent are set having regard to current budget allowance while some additional amounts are added or deducted as the case may be for expected future increases or decreases in volumes of activities and prices. Advantages
1. This technique is easy to understand 2. it is fast
disadvantages 1. It encourages waste, as each budget holder
would want to exceed budget. Limit is order to have higher budget allowance in future. This creates room for budget slacks
2. it is past oriented and so carries with it, inefficiencies of past operations into the future.
2.13CONCLUSION The introduction of budgets and budgeting control
in a typical business organization like the Nigerian Breweries Plc has help to motivate or compel members
of that organization from top management to bottom to plan ahead.
The need for a budget and budgetary control necessary owing in the high level of uncertainties facing present day managers
It has help in the production industry in general and Nigerian Breweries Plc, in particular. a. Encouraging the management of the organization
to look ahead and plan ahead. b. Can give early warning of implementing problems,
e.g shortage of cash or give early signals of business opportunities e.g surplus of cash for a special purchase of machinery or raw materials.
c. Assist the control of cost by providing a budget yard stick by which actual cost can be measured.
d. Assist the control of performance, e.g management of actual sales against budgeted sales, actual production against budgeted production.
e. Assist in decision making e.g identifying the budgeted cost and budgeted revenues of a capital expenditure proposal
f. Assist in coordination of functions and business area, e.g purchasing and stock, production and sales finance.
g. To decentralize responsibilitiesIt should be noted that budget techniques and
budgetary control are not a substitute for good management. They can assist management but do not replace management.
1. The forecast must be realistic otherwise the budgetary system can fall into disrepute.
2. It is better to develop the system gradually so the management has time to understand and use the system effectively.
3. The system, must be supportive and effective, i.e the actual result must be capable of being measured and compared with budget at regular time intervals.
4. There must be co-operation between managers so that the system is for the overall good of the business rather than creating “I’m alright jack attitude”
5. The budgeting system should operate should have the active and full support of the small business owner or managing director.
6. The system should operate to assist motivation and not simple be used a big struck or pressure device.
7. Budgets should be capable of change when circumstance change so that the yardstick is a realistic attainable one.
CHAPTER THREERESEARCH METHODOLOGY
3.1 RESEARCH DESIGNResearch means to search again, to find out more,
to take another more careful look. Research is the scientific study of a problem by way of investigation undertaken in offer to find solution and to increase knowledge frontier. Aigbokaevobolo and Ofanson, [2002:30]
According to Aigbokaevobolo and Ofanson [2002:30] research design is defined as the strategy, which indicates how data relating to the research work should be collected and analyzed. It is a plan structure of investigation conceived so as to obtain answers to research questions. A research design is the “blue print” that addresses the problems of scientific. Nachmias & Nacmias [1986:76]
The research design shows that hypothesis postulated in this research work, the commonly used design are:a. Exploratory research b. Descriptive research. 3.2 POPULATION OF THE STUDY
The target population of this study is Nigeria Breweries Plc. The population study carried out is amongst the management of the company [senior staff and junior staff inclusive].3.3 SAMPLING TECHNIQUES
The sampling technique used by the researcher for the purpose of this study is the simple random sampling technique. This entails the distribution of questionnaires to the management i.e senior and junior staff indiscriminately without bias. This method of sampling gives every staff an equal opportunity to participate in the exercise 3.4 METHOD OF DATA COLLECTION INSTRUMENTS
Data collection procedure is to ensure that the collection of relevant reliable and adequate information to enable the researchers to know the root of the problem under study. The aim of collecting data is to solve any given research problem.
The following are the source of data for this study:a. Primary source of data b. Secondary source of data
Primary data
There are data’s collected specifically through the use of questionnaires and personal interview conducted. The questionnaire design is divided into parts, section A and section B Section ‘A’ gives an insight of personal background of the respondent such as name, age, length of service in the company, educational qualification etc. This section is important because it assisted in accessing the relevance of the information given by respondents.
Section B of the questionnaire is structure to draw out general information in respect of the system of budgeting in the organization. Secondary data
The secondary source of data are collected from already published materials such as textbooks, journals and company reports e.t.c. Theses were all materials relating to budgeting.
The primary source of data should supplement data collected from secondary source in drawing generalizations and in searching conclusions based on the hypothesis. 3.5 METHOD OF DATA ANALYSIS
The data prostration is in tabular form, and analysis of data techniques employed includes;
Percentage analysis Chi-square hypothesis testing The technique used for each analysis was based on
the applicability of such techniques on the data collected.
The percentage analysis will be used to measure what ratio of sample exhibits particular features for example
The percentage of sex distribution The percentage of marital status distribution
Finally, the use of Chi-square (x2) will adopted, the x2 test is an important extension of hypothesis testing and is used to measure the discrepancy existing between observed and expected frequency.
The formula for calculating of Chi-square (x2) is as follows; X2 = (01-e1) 2 + (02-e2) 2 + …+(0n-en)2
e e eWhere 0 = The observed frequency E = The expected frequency X = Calculated value of chi-square
And the formula used in the determination of the degree of freedom is:- V = (r – 1) (c – 1) Where R = Rows C = Columns
In the research study, the hypothesis is stated in both null [H0] and alternative form [H1]. The hypothesis using chi-square (x2) will be tested at 1% 0.01 level of significance.
If the calculated value is greater then the critical value, the alternative hypothesis H1 will be rejected ad the null H0 will be accepted. However, if calculated value is les than the critical value, the null hypothesis will be rejected while alternative [H1] will be accepted.
CHAPTER FOURDATA PRESENTATION AND ANALYSIS 4.1 INTRODUCTIONS
This chapter focuses on data presentation and analysis using bother descriptive and statistical analysis
Descriptive analysis involves the use of percentage tables taken in the presentation and analysis of data which comes up in this chapter, the researcher will look at certain questions in the questionnaires which are meant to provide relevant personal data.
Results on outcome of oral interview conducted among the staff of Nigerian Breweries Plc were also adopted. 4.2 DISTRIBUTION OF QUESTIONNAIRES DESIGN
The analysis and interpretation was solely based on the useable retrieved questionnaires. A total of twenty-five questionnaires were administered on the staff and personal manger of Nigerian breweries Plc, the researcher was only able to collect twenty questionnaires from the respondents which represent 80% of collections attained and some not recovered
which represents 20% of the questionnaires administered.
The data below shows the responses of the respondents to the question asked in the questionnaires. Analysis of questionnaires administered and retrieved
QUESTIONNAIRES RESPONSE PERCENTAGENo of questionnaire received
20 80
No of questionnaires not received
5 20
Total questionnaires administered
25 100
From the above analysis, it is understood that a total of twenty-five [25] questionnaires were administered and twenty [20] received. These represents 80% of total administered and where all useable while five [5] represents 205 which were not received. ANALYSIS OF QUESTION ONE This table shows the sex
RESPONSES RESPONSE PERCENTAGEMale 12 60Female 8 40Total 20 100
From the above table, 60% of the respondents are male while 40% are female. This shows that majority of the staffs of Nigerian Breweries Plc are male. ANALYSIS OF QUESTION TWO
This table shows the age classification of the respondents
RESPONSES RESPONSE PERCENTAGE20-30 4 2030-40 5 2540-50 6 3050 and above 5 25Total 20 100
From the above data, it is explained that out of twenty [20] respondents. Only four [4] comes from between the age of 20-30 years, five [5] between the ages of 30-40 years, six [6] falls between the ages of 40-50 years while five [5] comes from between the ages of 50 and above. This implies that between the
ages of 40-50 years brackets form a better part of the respondent. ANALYSIS OF QUESTION THREE
What is your marital status?
RESPONSES RESPONSE PERCENTAGESingle 4 20Married 9 45Divorced 3 15Widowed 4 20Total 20 100
From the above tale, it is observed that out of the total respondents, four [4] representing 20% were single and nine [9] representing 45% were married, three [3] representing 15% of the total respondents were divorced and four[4] representing 20% were widowed. The greatest percentages of the respondent were married personnel. ANALYSIS OF QUESTION FOUR What is you educational qualification
RESPONSES RESPONSE PERCENTAGEWASCE/SSCE 4 20
ND/NCE 3 15HND/BSC 10 50PHD and above 3 15Total 20 100
From the above data, it revealed that four [4] representing 20% of the total respondents have WASCE/SSCE. Three [3] representing 15% were from ND/NCE, ten [10] representing 50% of the total respondent have HND/B.Sc while three[3] representing 15% of the respondents have PHD and above. ANALYSIS OF QUESTION FIVE How long have you been working in Nigeria Brewery?
RESPONSES RESPONSE PERCENTAGE1-4 years 7 355-10 years 8 4010 years and above 5 25Total 20 100
From the above, it is observe that out of twenty
[20] numbers of the respondents, seven [7] representing 35% have the working experience 1-3 years, and 5-10 years of the respondents have eight [8]
representing 25% have to years and above working experience. ANALYSIS FOR QUESTION SIXDoes Nigeria Brewery prepare budget?
RESPONSES RESPONSE PERCENTAGEYes 19 95No Nil -Don’t know 1 5Total 20 100
The information above shows that 19 respondents representing 80% said yes with the postulation that Nigerian Brewery prepares budget, while one [1] respondent representing 5% said they don’t know.
RESPONSES RESPONSE PERCENTAGEYes 20 20No Nil -Don’t know Nil -Total 20 100
The data shows that 20 respondent representing 100% said yes, that they like the idea of budgeting. ANALYSIS OF QUESTION EIGHT
RESPONSES RESPONSE PERCENTAGEStrongly agree 12 60Agree 4 20Strongly disagree Nil -Disagree 2 10Undecided 2 10Total 20 100
The above data shows that twelve [12] of the respondents representing 60% strongly agree that budgeting is a motivational factor, and four [4] representing 20% are of the opinion that budgeting is a motivational factor, while two [2] representing 10% disagree with the postulation and two [2] representing 10% are uncertain whether budgeting and budgetary control is a motivational factor for employees in the organization. ANALYSIS OF QUESTION NINE Budgets are properly implemented in the company
RESPONSES RESPONSE PERCENTAGEStrongly agree 14 70Agree 5 25
Strongly Disagree Nil -Disagree Nil -Undecided 1 5Total 20 100
The information above shows that fourteen [14] respondent representing 70% strongly agree that budgeting is properly implemented, and five [5] respondent representing 25% agree with the postulation while one [1] respondent representing 5% are uncertain whether the company implement budget or not.ANALYSIS OF QUESTION TENThe budgets of Nigerian Brewery are prepared annually
RESPONSES RESPONSE PERCENTAGEStrongly agree 12 60Agree 6 30Strongly disagree Nil -Disagree Nil -Undecided 2 10Total 20 100
The above data shows that twelve [12] respondent representing 60% strongly agree that Nigerian Brewery prepare budgets annually while six [6] respondent representing 10% agree with the postulation and two [2] representing 10% are uncertain whether the company prepares budget annually or not. ANALYSIS OF QUESTION ELEVEN Budgeted estimates are compared with actual performance
RESPONSES RESPONSE PERCENTAGEStrongly agree 13 65Agree 4 15Strongly disagree Nil -Disagree 4 20Undecided Nil 1Total 20 100
From the above data. Thirteen [13] respondent represent 65% strongly agree that budgeted estimates are compared with actual performance, while three [3] respondent representing 15% agree with the postulation and four [4] respondent representing 20% disagree that budget estimate are not compared with actual performance.
ANALYSIS OF QUESTION TWELVE Do you have a budget implementation committee in your company?
RESPONSES RESPONSE PERCENTAGEYes 13 65No 3 15Don’t know 4 20Total 20 100
The above data shows that 13 respondents representing 65% said yes, that Nigerian Brewery has a budget implementation committee, while [3] respondent representing 15% said no to the postulation and [4] representing 20% said they don’t know if Nigerian Brewery has a budget implementation committee.ANALYSIS OF QUESTION THIRTEEN Budgeting is an instrument of control in the organization
RESPONSES RESPONSE PERCENTAGEStrongly agree 14 70Agree 5 25Strongly disagree Nil -Disagree Nil -
Undecided 1 5Total 20 100
From the above table, fourteen [14] of the respondents representing 70% strongly agree with the postulation that budgeting and budgetary control is an instrument of control in an organization. And five [5] respondent representing 25% agree with it, while I respondent representing 5% are uncertain. ANALYSIS OF QUESTION FOURTEEN Does budgeting play any significant role in allocation of resource?
RESPONSES RESPONSE PERCENTAGEYes 19 95No Nil -Don’t know 1 5Total 20 100
The above data shows that 19 representing 95% said yes, that budgeting plays a significant role in allocation of resource, while I respondent representing 5% is indifferent. ANALYSIS OF QUESTION FIFTEEN
Budgeting helps to communicate management intention to employees
RESPONSES RESPONSE PERCENTAGEStrongly agree 13 65Agree 5 25Strongly disagree Nil -Disagree Nil 10Undecided 2 5Total 20 100
From the information above, 13 respondent representing 65% strongly agree that budgeting helps to communicate management intentions to employees; while 13 representing 65% agree with the postulation and 2 representing 10% are uncertain whether budgeting helps to communication management intention to employees or not. ANALYSIS OF QUESTION SIXTEEN Does the previous year budget affect the current year budget?
RESPONSES RESPONSE PERCENTAGEYes 3 15No 2 10Don’t know 15 75Total 20 100
From the information above, it shows that 3 respondents representing 15% said yes that previous year budget affected the current year budget while 2 representing 10% said to the postulation and 15 representing 75% are indifferent. ANALYSIS OF QUESTION SEVENTEEN Are different branches allowed to prepare their own budget?
RESPONSES RESPONSE PERCENTAGEYes 8 40No 2 15Don’t know 9 45Total 20 100
The information above shows that 8 respondents representing 40% said yes that different branches are allowed to prepare their own budget. And 3 representing 15% said no to the postulation, while 9 representing 45% are indifferent. ANALYSIS OF QUESTION EIGHTEENBudgeting and budgetary control are effective guides which aids an organization in achieving its desire objective.
RESPONSES RESPONSE PERCENTAGEStrongly agree 13 65Agree 3 15Strongly disagree Nil -Disagree 2 10Undecided 2 10Total 20 100
The information above shows that 13 representing 15% agree that budgeting and budgeting control are effective guide, which aid an organization in achieving it desired objectives. 13 representing 65% strongly agree with the postulation and 2 representing 10% disagree with the postulation that budgeting and budgetary control is not an effective guide which aids an organization in achieving its desired objective while 2 representing 10% are uncertain about the postulation. Analysis of question nineteen
Organizational activities cannot be effectively run through the use of
budgeting.
RESPONSES RESPONSE PERCENTAGEStrongly agree - -
Agree 16 80Strongly disagree - -Disagree 4 20Undecided - 10Total 20 100
From the information above 16 respondent representing 80% strongly agree that organizational activities cannot be effectively run through the use of budgeting while 4 representing 20% strongly disagree with the postulation. 4.3 HYPOTHESIS TESTING AND ANALYSIS
Having enumerated the hypothesis postulated in the earlier chapters of this research study, it is the researchers aim at this point to test for the hypothesis so as to accept or reject those postulated and outline the implications of the results. The hypothesis will be tested collectively.
Using the chi-square (x 2) formular X2 = (01-e1) 2
e1 Where x 2 = chi-square
0 = observed frequency e = expected frequency v = k-1=degree of freedom
The decision rule is accepting H1 [null hypothesis] if calculated chi-square is use than the table value of chi-square. Hypothesis one
Question no eleven states that, budgeted estimate are compared with actual performance.
The chi-square [x] will b used in the test of the hypothesis. H0: Comparison of actual result against predetermined
estimates is not necessary. H1: Comparison of actual result against predetermined
estimate in necessary. TESTING WITH CHI –SQUARE
X2 = (01-e1) 2
e1 X2 = (01-e1)2 + (01-e1) 2
e1 e1 X2 = (13-25) 2 + (4 +25) 2
25 25 = (-12) 2 + (-21) 2
25 25 = 144 144
25 25 = 5.76 + 17.64= 23.4 Decision Since the computed statistics of 23.4 is greater than 0.0061, the null hypothesis [H0] is rejected while the alternative hypothesis is accepted.
HYPOTHESIS TWO Question no eighteen states that budgeting and budgetary control are effective guide which aid an organization in achieving it desired objectives. The chi-square [x2] will be used in the test of the hypothesis H0: Budgeting and budgetary control are not effective guides which
aids organization in achieving its desired objectives. H1: Budgeting and budgetary control are effective guides which
aids organizations in achieving its desired objectives.
The null hypothesis was designed to establish the fact that budgeting and budgetary control is not an effective guide, which aids an organization in achieving it desired objective. The alternative hypothesis was to counter the null hypothesis seeks to establish. budgeting and budgetary control is an effective guide which helps an organization in achieving its desired objectives. To test it statistically chi-square [x2] will have the following;
X2 = (01-e1) 2 + (01-e1) 2
e1 e1
where 01 = 202 = 16e1 = e2 = 20
X2 = (2 – 20) 2 + (16 - 20) 2
20 20 X2 = (-18) 2 + (-4) 2
20 20 = 324 + 16
20 20
= 16.2 + 0.8= 17The hypothesis is tested at 5% level of significance. This means that we will assume 95% correct and 5% erroneous Degree of freedom = (r – 1) (2 – 1)Where r =
c=5Degree of freedom = (2 – 1) * (5 – 1) = 1 * 4= 42 degrees of freedom at 5% level of significance x2 = 5.9991 (table value] The decision rule Since the completed value of x2 = 17 and is more than the table value of 5.99, we will reject the null hypothesis [H0] and accept the alternative hypothesis [H1]
Consequently, it has been proved from the results of the hypothesis that budgeting and budgetary control are effective guide which aid an organization in
achieving its desired objectives. This is true because budgeting involves features financial plans of the businesses as well as checking deviation from the target and taking corrective measures as appropriate against advanced variance. HYPOTHESIS THREE Question number nineteen states that organizational activities cannot be effectively run through the use of budgeting. The chi-square [x2] will be used in the test of the hypothesis. H0: Organizational activities cannot be effectively run
through the use of budgets H1: Organizational activities can be effectively run
through the use of budgets. Here, the chi-square statistic will be used at 5% level of significance and ‘1’ as degree freedom. Using data from table we have Strongly agreed = 16Disagreed = 4Total = 20Degree of freedom (r - 1) (e – 1)
(2 – 1) (2 – 1)d. f = (1) (1)
= 1TESTING WITH CHI-SQUARE
X2 = (0 – e) 2
= (0 - e) 2 + (0 - e) 2
25 25 = (16 – 25) 2 + (4 - 25) 2
25 25 = ( –9) 2 + (- 21) 2
25 25 26
= 81 + 441 25 25
=3.24 + 17.64= 20.88Degree of freedom is I under 5% level of significance X2 = 0.0096Decision Since the computed of 20.88 is greater than 0.0096, the null hypothesis [H0] is rejected. While the alternative hypothesis [H1] is accepted.
CHAPTER FIVESUMMARY OF FINDING, RECOMMENDATIONS AND CONCLUSIONS 5.1 SUMMARY OF MAJOR FINDINGS
This study reveals quiet a number of interesting facts about the operational mode of budgeting and budgetary control system in a manufacturing company. The management of the brewery appreciates the unique importance of budgeting. This is attested to the fact that the company allows each department heads to prepare budgets which is harmonized by the chief accountant in the company. The major empirical findings of the study are succinctly described as follows:
1. Budgeting is a motivational factor for employees in an organization.
2. Budgeting is a good communication tool for communicating management intension to employees.
3. Control in the brewery is achieved through constant monitoring of operations in cost budget centres with variances analyzed and reported to management for prompt actions.
4. Budget administration in the company is run by the department head, various departmental heads, and their junior managers organize, discuss and plan the budgets.
5. It was also revealed that the budgetary committees review the budget. Apart from planning, every detailed of the company’s operation actual performance are constantly monitored through budget committee and cost centers by the use of budget reports where significant variations exist, investigations are also carried out to find the causes so that corrective actions would be taken.
6. The implementation of budgeting and budgetary control has attributed to the company attaining its objectives.
5.2 RECOMMENDATION The following recommendations will assist the
company in achieving effective application of budgeting in terms of attaining a good profit performance.
1. The management of the company should have a permanent budget committee in departments.
Which should also involve the various department heads of the company.
2. Past performance should carefully be analyzed with a view to knowing the reason targets were not achieved before and whether such threats still exist.
3. There should be an apparent link between managerial efficiency and budgets.
4. The committee should review the approaches it uses in arriving at forecast, estimates in order to avoid setting unattainable standards by presuming undue favorable conditions.
5. Favorable variance should be identified while measures should be taken to ensure that such variances are not as a result of lower than realistic targets.
6. To enhance motivation, managers/head of departments should be involved in both the planning and implementation of the budgetary systems as the extent of success recorded will depend on how well the personnel are convinced of the propriety of the set goals.
7. lastly, the introduction of computer system will also enhance good quality information and adequate record at the appropriate time.
5.3 CONCLUSION Budgeting and budgetary control system can
assist management in their day to day decision making and it will also consequently, increase productivity which of cost will be beneficiary to the organization and the society at large.
Budgeting and budgetary control helps manufacturing company to keep focus its profit and non profit goals.
It is worth while drawing the attention of management to the importance of setting reliable and up to date information about operations of the company. Also information about customers markets, competitors and the economy are relevant for budget formulation.
A closer look at budgeting and budgetary control system of Nigerian Breweries Plc reveals that the primary objective of the budgeting is to carefully
estimate expenses and income of the organization so that wastages and inefficiencies will be reduced to the lowest minimum.
No researcher is a compendium of knowledge and because of the dynamic nature of the business society, future research work on the topic will be highly appreciated by the researcher.
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QUESTIONNAIRE
Questionnaire on the budgeting and budgetary control in a ma1. Sex: Male [ ]2. Age:20- 30 [ ] 30-40 [ ] 40-50 [ ] 50 and above [ ]3. Marital status: Single [ ] Married [ ] Divorced [ ]
Widowed [ ] 4. What is your educational qualification? WASCE/SSCE [ ]
ND/NCE [ ] HND/B.Sc [ ]5. How long have you been working with Nigerian
Brewery? 1-4 years [ ] 5-10 [ ] 10 years and above [ ]
PART B6. Does Nigerian Brewery prepare budget? Yes [ ]
No [ ] Don’t Know [ ]
7. D o you like the idea of budgeting? Yes [ ] No [ ] Don’t Know [ ]
8. Budgeting is a motivational factor for employee in the organization Yes [ ] No [ ] Don’t know [ ]
9. Budgets are properly implemented in the company. Strongly Agree [ ] Agree [ ] Strongly disagree [ ] Disagree [ ]Undecided [ ]
10. The budgets of Nigerian brewery are prepared annually. Strongly Agree [ ] Agree [ ] Strongly disagree [ ] Disagree [ ] Undecided [ ]
11. Budgeted estimate are compare with actual performance. Strongly Agree [ ] Agree [ ] Strongly disagree [ ] Disagree [ ] Undecided [ ]
12. Do you have a budget implementation committee in your company? Yes [ ] No [ ] Don’t know [ ]
13. Budgeting is an instrument of control in the organization. Strongly Agree [ ] Agree [ ] Strongly disagree [ ] Disagree [ ] Undecided [ ]
14. Does budgeting play any significant role in allocation of resources? Yes [ ] No [ ] Don’t know [ ]
15. Does the previous year budget affect the current year budget? Yes [ ] No [ ] Don’t know [ ]
16. Does the previous year budget affect the current year budget? Yes [ ] No [ ] Don’t know [ ]
17. Are different branches allo wed to prepare their budget? Yes [ ] No [ ] Don’t know [ ]
18. Budgeting and budgetary control are effective guide which aid organizations in achieving its desired objectives. Strongly Agree [ ] Agree [ ] Strongly disagree [ ] Disagree [ ]Undecided [ ]
19. Organizational activities cannot be effectively run through the use of budgeting. Strongly Agree [ ] Agree [ ] Strongly disagree [ ] Disagree [ ] Undecided [ ]
Edo State of Technology And Management, Usen. Benin City, Edo Sate.
Dear Sir/MadamResearch questionnaires on budgeting and
budgetary control in a manufacturing company. I am a student of the above named department
and school. This questionnaires is designed to facilitate the gathering of Information in the preparation of a project which services as requirement for the Award of National Diploma in Accountancy.
The research project is aimed at analyzing and educating brewery industries on the usefulness of budgeting and budgetary control in a manufacturing company. Any information supplied will be printed in confidence and for academic purpose only.
You anticipation cooperation in completing the questionnaire will be highly appreciated.
Thanks for your co-operation.
Yours faithfully,ITIMAH SPLENDOUR FAITH