BUDGETING AND BUDGETARY CONTROL IN BUSINESS ORGANISATION.

(A CASE STUDY OF EMENITE NIGERIA LIMITIED EMENE ENUGU BRANCH)

BY AGU CHIKA E. ACC/2006/244

A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCY, FACULTY OF MANAGEMENT AND SOCIAL SCIENCES, CARITAS UNIVERSITY.

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE (B.SC.) DEGREE IN ACCOUNTING

JULY, 2010.

APPROVAL PACE This is to certify that this research work has been carefully assessed and approved as having met the partial requirements of a Bachelor of Science (B.SC.). DEGREE IN accounting, from the department of Accountancy Caritas University, Enugu State.

--------------------------------------MR. C.C UGWU SUPERVISOR ---------------------------------------------MR. C.C UGWU HOD --------------------------------------------ETERNAL EXAMINER

DATE

DATE

DATE

DEDICATION This work is dedicated to the Almighty God, for his grace and loving kindness. I also dedicate this work to my dearest parents; Mr. and Mrs. F.U AGU for their immeasurable support and my beloved siblings; Collins, Ogo, Ify, Oluchi, Esomchi and Chinazom.

ACKNOWLEDGEMENT When kindness cannot be returned, it should be appreciated. A number of people have helped to make this project research and writing a successful one. So their kind genure ought to be appreciated. My most sincere gratitude goes to my supervisor Mr. Collins Ugwu who took his time in the in depth supervision of this work and who made sure that this project came to a successful and smooth completion. And also for his utmost contribution towards the fulfillment of my dreams of

becoming a certified accountant. My profound gratitude also goes to my lecturers who have taught me over the years; Mr. P Nsoke, Mr. Frank Ovute, Mr. Chinedu Enekwe, Mrs. Eyisi, Mr. Ezeamaama and so many others whom I did not mention, I am very grateful to you all. I cannot forget the, the immense contribution of my dear parents and siblings both financially and otherwise, you will live to eat the fruit of my labour. Then to my most wonderful friends who were always there with encouragements and advice Adaobi Muoghalu, Loveth Ugwu, lorita Anike, Anya Uduma, Oguejiofor Ani, Ikechukwu Agu, and others. You will never be forgotten.

Above all I thank the Almighty God for keeping his words in life. Thank you and God bless you all. ABSTRACT This research work conducted with special reference to the budgetary system of Emenite Nigeria Limited with the view to ascertain the major role budgets play in the achievement of profitability for an organization. Budget as a profit planning device sets standards of performance of manager, while budgetary control is a tool implored by management to keep track of actual performance to ensure budgeted standards are achieved. In the course of this research work 40 managers were taken as sample population. Data is obtained through personal interview and the administration of questionnaires secondary data source is also implored. Data collected in subject to chi-square test in order to prove or disprove hypothesis therein. The analysis of the finding indicates that Emenite Nigeria Limited has a formal system of budgeting and does attach incentives for the attainment of budgetary goals.

AGU CHIKA .E.

TABLE OF CONTENTS Title page: ii iii iv v vi i

Approval page:Dedication: -

Acknowledgement: Abstract: -

Table of contents: CHAPTER ONE:

INTRODUCTION 1 -

1.1 Background of the Study:1.2 Statement of the Problem: 2 1.3 Objectives of the Study: 1.4 Significance of the Study:1.5 Formulation of Hypothesis: 1.6 Scope of the Study: -

4 5 7 8 8 10

1.7 Limitations of the Study: 1.8 Definition of Terms: -

CHAPTER TWO: 2.1 Literature Review: 11

2.2 The Concept of Budgeting and Budgetary Control: 12 2.3 Main Types of Budget: 2.3.1Other Types of Budget: 2.4 The Budget Period: 17 18 30 31 32 32 38 -

2.4.1The Budget Committee: 2.4.2The Budget Manual: -

2.5 Stages in the Budgeting Process: 2.6 Zero Base Budgeting (ZBB): 2.6.1Administration of Budget: 41 2.6.2Human Factors in Budgeting: -

42 44 45 46 48 49 51

2.6.3 The Principal Budget Factors/Forecasting: 2.6.4 Budget Education: -

2.6.5Budgeting in the purchasing Department of Small and Large Companies: -

2.6.6 Relationship Between Budgetary Control and Standard Costing: 2.6.7 Participative Budget and Imposed Budget: 2.6.8 Principal Budget/Forecasting: CHAPTER TREE: -

RESEARCH DESIGN AND METHODOLOGY

3.1 Research Design: 3.2 Source of Data: 56 3.3 Population Size:

54 -

57 58 61 -

3.4 Sample Size and Sample Techniques: 3.5 Research Instrument: -

3.6 Methods of Data Analysis: 61

CHAPTER FOUR: PRESENTATION AND ANALYSIS OF DATA 4.1 Data Analysis (Questionnaires): 4.2 Test of Hypothesis: 63 68

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary of Findings: 5.2 Conclusion: -

77 77 78 80 81 83

5.3 Recommendation: Bibliography: Appendix:-

Questionnaire: -

CHAPTER ONE INTRODUCTION 1.1BACK GROUND OF THE STUDY A budget is a financial and a quantitative statement prepared prior to a defined period of time of the policy to be pursued for the purpose of attaining a given objective. Also according to A.U. Nweze (2004) in his profit planning. Budget 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 objective. Furthermore a budget is an attempt made at the beginning of each financial year to plan the profit and loss account for the year and to aim for a definite balance sheet. This profit planning must be a well thought- out

operational plan with its financial implication expressed as both long and short range profit plans. In any organization where budget is used as a means of profit planning many alternative plans have to be considered and the most profitable one will be adopted, because where the plan chosen in great expectations, then the best use has been made of the available resources. On the other hand budgetary control is the establishment of policies and the periodic review or comparison of the actual result with the budgeted performances either to secure approval for individual action or to serve as a remedial course of action. Budgetary control whereby actual state of affairs can be compared with that planned for by the management, so that appropriate action may be taken to correct adverse situation that may occur before it is too late. It is also used to fix responsibility. A budget systems serve the needs of management in respect of the Judgments and decisions it is fruited to make and to provide a basis for the management functions of planning and control. Developing a budget is a critical step in planning any economic activity. This includes business, governmental agencies and individuals. Therefore businesses of all types and governmental units at every level must make financial plans to carry out routine operations, to plan for major expenditures and to help in making financial decisions.

On this back ground, every organization no matter nature has a plan for the future, simply because the success of any organization depends on the level of plan that is put into the organization.

1.1.1 STATEMENT OF THE PROBLEM The main problem with budgeting is that it reflects data from the past and present, and will only enable predictions and forecasts to be made out the future. At the same time, numerous pressures in the job may impose constraints upon managers, which affect the quality of information they collect. The problem can be numerous; clearly, nothing can be forecasted with absolute certainty. No matter what financial and marking researches take place every organization has to take risks. Though accounting information may reduce the unpredictability of event in the future. It will never eliminate it. All these can interrupt the system of budgetary control: (1) If the actual results are completely difference from the target the budget can loose its significance as a means of control. Whereas a fixed budget is not able to adapt to changes, a flexible budget will recognize changes in behaviour and can be amended to fall into line with changing activities.

(2)

Following a budget to rigidly can restrict an organizations activities. On the other hand, if a manager realizes towards the end of the year that his or her department has under spent, he or she might go on spending spree.

(3)

If budgets are imposed upon managers without sufficient consultation, they may be ignored. An appropriations budget limits expenditures to the appropriations provided in the budget. Naturally, the amounts appropriated tend to be in line with the expected revenues for the period. Such a system provides little in the way of flexibility. It also has a serious defect because the control aspect is limited to an end-of-the period comparison of actual revenues and expenditure with those budgeted. The fixed or fore type of budget is criticized as being a restrictive budget, which establishes expose limits that cannot be exceeded. The future cannot be certain, therefore, it is extremely difficult to forecast what will happen in future. Hence, when circumstances that will alter the forecast materially occur, an inflexible plan propels a company into trouble. It is impossible to state the duration of a budget programme because the longer a budget period, the more difficult it because to anticipate how general economic conditions will affect the business of the company.

1.1.2 OBJECTIVES OF THE STUDY

The objective of budgeting and budgetary control in a business organization includes;

PLANNING - To produce detailed operational plan for the different sectors and facets of the organization.

CO-ORDINATION-To bring together and reconcile into a common plan the actions of the different parts of the organization.

COMMUNIATION- To provide a definite line of communication so that all the parts will be kept fully informed of the plans that the policies, and constraints to which the organization is expected to conform.

MOTIVATION- To influence managerial behaviour and motivate managers to perform in line with the organizational objectives.

CONTROLLING- To assist managers in managing and controlling the activities for which they are responsible.

PERFORMANCE EVALUATION- To evaluate performance by providing a useful means of informing managers of how well they are performing in meeting targets that they have previously helped to set out.

CLARIFICATION OF AUTHORITY AND RESPONSIBILITYTo make it necessary to clarity the responsibilities of each manager who has a budget. Also to authorize the plans contained in the budget so that management by exception can be practiced (ability to give a subordinate a clearly defined role with the authority to carry out the tasks assigned to him). To MATERIAL pg 7-9

1.4

SIGNIFICANCE OF THE STUDY This study is Budgeting and budgetary control is of great importance to

a business organization because; The preparation of budget helps in the delegation of responsibilities to each executive and induces early consideration of basic policies. It also assists in the focusing of attention on the contribution which may be made by each product and market to the total profit and reveals any opportunity which may be made by each product and market to the total profit and reveals any opportunity which may be made in maximizing profit. It provides a means of ensuring that capital invested in the business is kept to a minimum level justifiable with the level of activities. It also ensures that adequate liquid resources are made available at anytime. It defines goals and objectives that can serve as benchmarks for evaluating subsequent performance. Better control of current operations is helped by regular, systematic monitoring and reporting of activities. It regulates the spending of money and expose loss, waste and inefficiency and through this corrective action will be taken to improve the adverse situation.

It encourages management to decentralize responsibilities without losing control, especially where a company has many branch offices or factories.

It provides for the co-ordination of sales production and other activities of the business and forces all members of management team to plan in harmony and consider all relevant factors before a decision is taken.

Where budgetary control is in operation, cost consciousness is always increased and through this means, waste and inefficiency will be reduced. It also gives lower levels of management to also take part in the management of the business.

It provides a means of communicating managements plans through the organization.

It uncovers potential bottle necks before they occur.

1.5

FORMULATION OF HYPOTHESIS STATEMENT OF HYPOTHESIS

H0: H1: H0:

Budgets are not an effective guide to business growth. Budgets are an effective guide to business Growth. Budgets are not a means to control and synchronize organizations personnel and functions.

H1

Budgets are a means to control and synchronize organizations personnel and functions.

H0:

Budgets are not more effective when reward penalty is based on goal attainment.

H1

Budgets are more effective when reward penalty is not based on goal attainment.

1.6

SCOPE OF THE STUDY. The study of budgeting and budgetary control in business

organizations could have been extended to cover the whole of the accounting and financial areas of the business organization in all the states of Nigeria and abroad. But because of some limiting factors, the scope of the study will be limited to only the facts on the budgeting and budgetary control in business organizations in general and with special reference to Emenite Nigeria Limited budgeting system.

1.7 LIMITATIONS OF THE STUDY Though budgeting and budgetary control has many impressive and far reaching advantages, but it also has certain limitations and pitfalls which the organization must consider.

According to Terry Lucey in his costing sixth edition, (pg 386) the principal factor limiting budget is customers demand, that is the company is unable to sell all the output it can produce. Other factors limiting the study are; the system requires the cooperation and participation of all members of management and not only that, the basis for success is executive managements absolute adherence and enthusiasm for the budget. This is really very important; but most often budgetary control has failed because some of the members of management have paid lip services to its execution. To install budgetary control takes time, times without number management has become impatient and lost interest because it expects too much within a short time, whereas the system must be explained to the responsible officials, guided them where necessary, train and educate them in the fundamental steps, methods and purposes of a budgetary control system. Budgetary control system does not eliminate nor take over the role of administration hence the executives should not feel confined to a particular area, rather, it should be designed to provide detailed information which will guide them to operate with strength and vision towards the achievement of the organizations.

 Looking at planning, budgeting or forecasting, one will simply agree that there is none of these terms that can be regarded as a science, but there is a certain amount of judgment involved. Budget ignores responsibility centers in performance evaluation. It represents on ordinary tool which may not be effective without closer supervision. The need for superior executive ability in preparation and presentation. Budget may encourage interdepartmental conflicts among divisional heads. Establishment of unattainable targets or standard for workers. Lack of realistic data in budget preparation. Persistent increase in the level of inflation. Frequent changes in the level of technology. Political instability. Negative attitudinal trait of the operating managers against the budget.

1.8

DEFINITION OF TERMS

BUDGETARY CONTROL: According to the Chartered Institute of Management Accountants (CIMA). Budgetary control is the establishment of budgets relating to responsibilities of executive to the requirements of a policy and the continuous comparison of actual with budgeted results, either to secure by individual action the objectives of that policy or to provide a basis for its revision.

RESPONSIBILIT CENTRE- According to Colin Drury in his management and cost accounting sixth edition (pg653). Responsibility centre is a unit of a firm where an individual manager is held responsible for the units performance. BUDGEYING- According to Ugwu Chukwuma Collins in his understanding cost accounting (2009) page 234. Budgeting is the act of preparing a budget. BUDGET- According to Terry Lucey in his costing sixth edition. A budget is a quantitative statement, for a defined period of time, which may include planned revenue, expenses, assets, liabilities, and cash flows, which provides a focus for the organization, aids the co-ordination of activities and facilitates control. CHAPTER TWO 2.1 LITERATURE REVIEW In the purchasing handbook by Georges Aljian, Aljian (1976) defined budgeting as a formalized financial plan for balancing expenditures against incomes. Budgeting periods are very common but the most commonest period of time is usually one year within this year, there may be monthly or quarterly budget reviews made this term budget is popularly applied to that portion of money allocated for a specific purpose i.e. the manufacturing budget, the labor budget or the procurement budget. There can be as many as those individual budgets as the complexity of the organization regures usually,

these individual budgets are parts of an overall budget which is commonly referred to as the master budgets. The preparation of the master budget and the presentation of it to the officers of the company is usually the responsibility of the budget director who reports to the controller. In a small company, the budget director may be one of the officers of the company who acts only as a budget director in addition to other managerial responsibility to co-ordinate the efforts of the individual departments or management groups who will be asked to submit their cash requests in the form of a budget for their projected operations. There are three main parts to the budgets; The review of the previous year. The estimate of income and expenditure for the current year. The finance bill to make such alternations in the taxation system as may be requested. A feature of the budget that is now sometimes criticized is that there is no continuity from one budget to another; each financial year is completely self contained. Budgeting is a familiar and very important type of short range plan, a plan that expresses in numerical terms (usually dollars) how the resources of a company can be distributed to attain a desired profit.

Since working out a budget force a company to determine how much money will be coming in what cost will be entailed, it simultaneously becomes a controlling as well as a planning operation. Since the budget in a guideline to what will take place over a lengthy period of time, a great deal of careful thought must go into its planning. Consequently, the master (or operating) budget, which is an overall estimate of revenue, cost and expenses, is based on several sub-budgets, including the sales budget, the production budget and the cost of goods sold budget.

2.2 THE CONCEPT OF BUDGETING AND BUDGETARY CONTROL There is a consensus among authors that, in-order to avert business failure, an enterprise must have a vision of where it wants to be in near feature and accordingly draws up a strategic business plan. These long term plan are further broken down into detailed step by step procedures by which to attain the business objectives. The end result of planning is profit maximization, which is also a yardstick for judging management performance-profit planning especially in the short term, it is generally agreed, is carved out by the use of budget. A.W wills more is of the view that budgeting is a service functions and that budgets do not replace management. Wills more also observes that planning goes from top down whereas budget formulation flows from bottom to up.

Isaac Reynolds agree with wills more but noted that budget planning is the key to survival in today highly technical and competitive environment and that failure to plan results, for many firms in a business failure that might have been avoided by profit planning. Reynolds also listed the outcome of the reliability to establish and use a formal budget structure as follows; 1. 2. 3. 4. Lost sales due to under production. Excessive inventory costs due to over production. Excessive personnel turnover. General lack of control over the outcome of business operations in terms of profit. J.F Weston (1978) and E.F Brigham are in agreement with Reynolds. But are guides so submit that the budget is not a means of limiting expenditure. Rather, it is a method to improve operations, a tool for obtaining the most productive and profitable use of the companies resources through careful planning and controlling. Hingren and foster (1988) agreed that the budget not a penny-pinching device. They also concurs are agreed with the view expressed by other authors that budget is an aid to co-ordination and implantation. They went further, to say that well managed organization usually have the following budget cycle;

1.

Planning the performance of the organization as a whole as well as its units. The entire management term agrees as to what is expected.

2.

Providing a frame of reference a set of specific expectation against which actual result can be compared.

3.

Investigating investigation.

variance

form

plans,

corrective

action

follows

4.

Planning again, considering feed back and charged conditions. All authors examined agreed that budgeting have some benefit and as follows;

1.

Budget induce managers to plan ahead. Interns is the key to business success. The budgeting process also provides for the co-ordination of the activities and departments of the organization so that each fact of the operation contributes towards the overall plan.

2.

Budget set a control framework, which helps expenditure to be kept within the agreed limits and points out deviation so that corrective action can be taken.

3.

Budget clarifies the responsibilities of each manager who has a budget and thus enables management by objectives.

4.

Budget enables communication between top and middle management regarding the firms objectives and the practical problems of implementing these objectives.

5.

Budget especially participate budgeting have been proved to motivate middle and lower management by the establishment of clear targets against which performance can be judged. T. Lucy (1989), while disputing the earlier submissions, has listed some of the typical problems of budgeting.

1.

Variance is just often due to changing circumstance and poor forecasting as due to changing circumstance and poor forecasting as due to managerial performance.

2.

Budget tends to hide inefficiencies by basing estimate on past performance which may not be appropriate for current conditions.

3.

The existence of well documented plans may cause inertia and level of flexibility in adopting a change hence over budgeting can be unduly cumbersome and expensive.

4.

Badly handled budgeting system with undue sure or lack of regard to human factors may cause antagonism and may lower morale.

5.

Budgetary goals may come to supersede enterprise goals. Budgetary control, Walter Scott asserts, is the use of the budget as an instrument for the guidance of business operations. In that case, budgets serve as a yardstick for executive control of operation, to determine the extent to which planned goals and objectives are being attained and to arrest off-line drifts on time. While agreeing that budgetary control follows budget preparation, lucky opined that budgets require not only top managerial

support but that control is assisted as well by participation of budget holders into the investigation of solution to the problems which arise. B.C Osisioma, concurs with the above views but stated that budgets fulfill two basic requirements in the overall control process.

Feed forward- To provide a basis for control at the point of action that is at the decision point.

Feedback- To provide a basis for measurement of the effectiveness of central after the point of action. Control they say promotes efficiency and reduces waste. It can do according to S. Modetola Odeleye, ensuring that corrective actions taken where necessary and possibly, to bridge the gap between the budget and actual performance and to review unrealistic budgets. There is no opposing view to the assertion made by brown and Howard thats budgetary control enables management by exception because management attention is concentrated only on those areas of the operations that do not work according to plan. The above assertions are self-evident truths and the author cannot help but agree with them all.

2.3 MAIN TYPES OF BUDGET FIXED & FLEXIBLE BUDGET

A fixed budget is a budget which is designed to remain unchanged irrespective of the volume of output or turnover attained. That is, it is a single budget with no analysis of cost. The major purpose of a fixed budget is at the planning stage when it serves to define the broad objectives of the organization where there is no analysis of cost into fixed and variable. The fixed budget is unlikely to be of any real value for control purpose except if the level of activity turned out to be exactly as planned. Flexible budget is a budget which by recognizing different cost behavior patterns, is designed to change as the volume of activity changes for control purpose, it is vital that flexible budgeting is used only by comparing what the cost should have been with the expenditure incurred at the actual activity level can any control be exercised. A flexible budget often reflects, increases or decreases in business activity throughout an organization In some organizations, changes may be greater in some departments and smaller in others. In some departments ability to produce more units are there without incurring high additional costs. While in anther cost increase or decrease in direct proportion to production increase or decrease. The flexible budget attempts to deal with this situation with a fair degree of accuracy. It keeps the expense to the level of activity possible and so facilitates the control of expenditure and comparison of expense with revenue or volume of production.

In order to be able to prepare flexible budgets with some degree of accuracy, it is necessary to classify overhead cost into fixed, variable and semi-variable. With variable cost, a specific sum per unit of output or standard hour is set and so total variable cost is obtained by multiplying the unit cost by units or hours.

2.3.1

OTHER TYPES OF BUDGET The specific types of budget to be prepared by the management of an

organization will depend on so many factors such as the nature, size, complexity, operation, etc. of the organization. But in practice, the following types of budget are common;

CASH BUDGET-A cash budget involves detailed estimate of anticipated cash receipts and payments for the fourth coming year or period. This is because while it may be possible for an organization to exist and continue to survive without profit, the existence of an organization is doubtful without liquidity. A cash budget identities potential period of cash deficit or cash surplus to the organization. This organization will therefore assist the adverse effect of cash squeeze(lack of cash) by arranging for an overdraft facility or to maximize the benefit associated with surplus fund through short-term investment.

MASTER BUDGET-The master budget also known as profit plan is a comprehensive set of budgets covering all phases of an organizations

operations for a specified period of time. The master budget is the principal output of a budgeting system.. It is a comprehensive profit plan, that ties together all phases of an organizations operations. It is comprised of many separate budgets, that are interdependent. They are Operational budget Financial budget.
OPERATIONAL BUDGET: Shows how operations

will be carried out to produce an organizations goods and services. The essence of operational budget is for the organization to be able to

meet the demand of its goods and services.

FINANCIAL

BUDGET:

This

shows

how

an

organization will acquire financial resources during the budget period.

SALES BUDGET: Sales budget shows the quantities

of each product that the company plans to sale and the intended selling price. This budget is very important because it is an estimate of the revenue to be generated by the organization from its operations. It provides the prediction of the total revenue from which cash receipts from customers will be estimated and it also supplies the basic data for constructing budgets for production cost and for selling, distribution

and administrative expenses. The sales budget is the foundation of all other budgets since all expenditure is ultimately dependent on the volume of sales. This budgets also serves as a tool for inventory management.

PREPERATION OF SALES BUDGET The preparation of sales budget is one of the most important aspect in budgetary control system. The sales forecast in this respect must be sound and accurate. In most of the businesses, the sales forecast is based on the past sales, market and sales analysis. The preparation of sales budget is approached in two different ways, 1. 2. Judging and evaluating external influenceConsidering internal influence. The two influences have to be considered when forecasting sales. The external influences are made up of general trend of Industrial activity, government policies, cyclical phase of the nation economy, purchasing

power of the population, population shift and changes in the buying habits. In the case of internal influences, sales trends, factory capacity, new products, plant expansion, seasonal products, sales force estimates, and the establishment of sales quotas for salesmen and sales territories must be given adequate consideration with the companys profit desired.

FORECASTING SALES The responsibility for preparing sales estimates is that of the sales manager and he is assisted by salesmen and market research personnel in many companies, different method are used in forecasting sales and marketing products. One of the methods employed by some companies is to allow individual sales to prepare their sales estimates. In this case, each salesman will supply his district sales manager with estimates of what he thinks he can sell in his territory during the forthcoming year, these estimates are consolidated and perhaps adjusted by the district manager before he can forward them to the general sales manager for further adjustments. In making the adjustments, allowances must be made for expected economic conditions and competitive situation which the salesmen are not aware of. In some firms, the above methods are being supplemented by the establishment of market research or market analysis division which assists the marketing manager and sales manager and salesmen in arriving at more accurate estimates. In large organizations, many factors have to be considered when forecasting sales, they are1.

Sales of past years: some companies past sales figures often require re-assessment to disclose changes in products, profit margins, competitions, sales areas, distribution method or changes within the

industry. This should be done in an analytical form to bring out fluctuations due to the above events.
2.

Forecast of business conditions in ones own industry or trade association: This is necessary especially where similar products are produced by another manufacturer e.g. paper and paper board manufacturing and converting.

3.

Other unusual factors that may influence past sales are inventory conditions, public economic settlement, competition and customer reaction. The basis for determining future sales forecasts are

1. 2.

General business conditions. The industrys prospects and the companys potential share of the total industry market.

3.

The plans of other companies and particularly competitive companies. Most of the manufacturing organizations place their sales budget on a

monthly basis for each product. In the case of Nigeria, the country is divided into thirty states. This can be regarded as territories or areas. The customer classification may show wholesalers retailers, government agencies, institutions, schools and colleges and foreign countries. Such a break down will indicate the contribution each class of trade makes to total sales and profit. By adopting on the analysis of this type, it will be easy to know the classes of customers or trade that the sales managers as well as salesmen do

not give adequate attention to. Through the analysis of this nature, it may be possible to discover new trade outlets, to locate reasons for a drop in sales to various customers and pave way for instituting investigations quickly so that remedial action can be taken without delay.

PROCUREMENT BUDGET: The production planning department determines quantity and type of material the required for the various products manufactured by a company. Most companies have standard parts lists and bills of materials which details all the materials requirements The requirements are given to the purchasing department which sets up a buying schedule making certain that sufficient materials are always available without overstocking or creating a shortage. In preparing the schedules, the purchasing department must consider1. 2.

Changes in possible delivery promises by the supplier. Changes in the rate of materials consumption. DIRECT LABOUR BUDGET: The preparation of direct labour budget is usually the responsibility of the production planning department which is often based upon specification drawn up by product engineers. It is much more preferable to prepare a separate direct labour budget and to include the indirect labour in the factory overhead budget. The indirect labor consists of those workers engaged in production departments to assist direct production workers and the remaining

indirect workers are employed in the maintenance department and stores section. The labor budget for direct and indirect labor guides the personnel officer in the recruitment and training of workers. From this, he will determine the number and types of workers that will be suitable for the production schedule. Sometimes, it may be necessary to increase or decrease the labor force; this then requires the attention of the personnel department to make plans in advance to ensure availability of workers and to retrain them when necessary. When workers are no longer needed, the personnel department must prepare a list of the workers that are affected. It is very necessary to consider the skills and the seniority rights of the workers. In many industries the schedule is prepared in collaboration with the union representatives whose function is to protect the interest of the employees from injustice and hardship. The number of men as well as the hours needed to achieve the production budget must be expressed in terms of money. When arriving at labor cost, the established labor rates agreed upon in the union contracts should be used. Any changes in the worker rates of pay should reflect in the financial budget.

ADMINISTRATION BUDGET: One of the difficulties that can be experienced under budgeting control system is the classification of certain experiences into either production or administrative expenses.

There are some expenses such as purchasing, personnel, engineering, and research which can be classified as one of the two functions or in some cases, allocated between the two as well as marketing costs, It is the duty of the management to decide on the best possible method of classifying them for control purposes. The administrative expenses involve general management, personnel management, legal branch and the general office. All of them gives rise to traveling, expenses, salaries, telephones, stationery, depreciation of office equipment, audit fees, directors fees, rent and rates and insurance. As with other budgets, it is necessary to analyze the budget so that responsibility for financial control can be delegated to all affected cost centre.

CAPITAL EXPENDITURE BUDGET: Capital expenditure may be incurred in different directions. In the first instance, old plants and replacements while obsolescent equipment must also be replaced with a more efficient one for effective and continuous production. In some cases, the need for new products and processes may require the commitment of resources to the acquisition of suitable machinery. On the other hand, the desire of management to expand the existing business or to set up new branches at home, or in another country, entails capital expenditure. The size of funds involved and the length of time required to recover the investment call for adequate analysis and judgment. Any managerial errors could be quite costly for many years.

In other to minimize a number of capital expenditure errors, management has to establish definite procedure and methods for evaluating the merits of a project before funds are released. It is very necessary for the management to use the available funds, for the improvement of production facilities and plant expansion. One of the means in which capital expenditure is being controlled is by submitting the capital expenditure proposals through the controller, the board or a capital expenditure. Committee for consideration- The management control, in this case, requires facts in production costs. The management must usually have a believe that the project is not only consistent with the long range objective of the business, but also to contribute to the earning position of the company.

RESEACH AND DEVELOPMENT BUDGET

The research

involves critical investigation aimed at the discovery of new knowledge with the hope that such knowledge or idea will be useful in developing a new product or process. The development itself is the translation of research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process, whether intended for sale or use-basing the needs of research and development on the above estimate will be prepared to balance the research and development program, to co-ordinate the program with the firms other plans and projects and to

check certain phases which are not of financial planning. The budget forces the hands of the management to think in advance and to consider the total amount that will be involved. The budget presents an overall picture of proposed research and development activities and gives opportunity for other operating managers to criticize and review the research and development progress through exchange of ideas and information in budget committee meetings management will be able to exercise control over the program. The cost accountant is in the best position to deal with the costs and they include payment to outside research organizations, staff salaries, provision of accommodation and equipment, test-runs and pilot schemes. The budget can also indicate the jobs or steps within each project, the necessary man-hours and service department time required. The budget will give the cost accountant an opportunity to compare the actual results achieved with the panned projects and any adverse situation revealed will have to be improved immediately.

FACTORY OVERHEAD BUDGET: The factory overhead is divided into two distinctive parts, Fixed overhead and Variable overhead. The fixed overhead consist of rent, rate, and managerial services. It is not affected by changes in the volume of sales and production unlike variable overhead which varies more or less in proportion to output, such as cleaning, fuel, power and maintenance. The preparation of the budget requires the co-

operation of the cost accountant, the engineering staff and heads of departments for accurate estimate of the cost involved.

BUDGETED INCOME STATEMENT This is an estimated income statement for a coming period of time that shows the expected revenue and expensive for the budget period assuming that planed operations are carried out.

PRODUCTION BUDGET: Usually the production budget is stated in physical unit and frequently it is a sales budget which is adjusted for any changes inventories. The seasonal fluctuations of sales are usually leveled out in production planning in other to stabilize employment without causing a shortage of finished products and inefficient service to customers. The production budget like any other budget will have to show in details the quantity to be produced by months or quarters, along with a tentative annual budget. Some companies do not manufacture a standard product but produce only on orders. In this case, plans can not be too detailed. The program here is to prepare for production when others are received. However if they standard parts, production can often be budgeted in a manner similar to that used by a company producing a standard products. In special order work, routing and scheduling of work through the factory is great important to prevent delays and to utilize production facilities fully. The production

budget deals with the scheduling of operations, the determination of volume and the establishment of maximum quantities of raw material and finished goods inventories. Its summaries and details provide the basis for preparing the budgets of materials, labor and factory overheads. The production budget lists the number of units that must be produced during each budget period to meet sales needs and to provide for the desired ending inventory. This budget is expressed in quantities only and it is the responsibility of the production manager. In production budget, production requirements for a certain period are influenced by the desired level of the ending inventory.

DIRECT MATERIAL BUDGET: This shows the number of units and the cost of material to be purchased and used during the budget period. The direct material budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories. The objective here is to ensure that the right materials are on-hand, in the right quantities and at the right time to support the production budget.

2.4 THE BUDGET PERIOD The conventional approach is that once per year the manager of each budget centre prepares a detailed budget for one year. The budget is divided into either twelve monthly or thirteen four weekly periods for control purposes. The preparation of budget on an annual basis has been strongly

criticized on the grounds that it is too rigid and ties a company to a twelve months commitment. This can be risky because the budget is based on uncertain forecast. An alternative approach is for the annual budget to be broken down by months for the first three months, and by quarters for the remaining nine month. The quarterly budget are then develop on a monthly basis as the year proceeds, Example , during the first quarters the monthly budget for the second quarters will be prepared and during the second quarters, the monthly budget for the third quarter will be prepared. The quarterly budget may be received (I.e. change as new information comes) as the year unfolds. This process is known as continuous or rolling budget and ensures that a twelve month budget is always available by adding a quarter in the future as the quarter just ended is dropped. Rolling budget also ensures that planning is not something that takes place once a year when the budget is being formulated. The main disadvantage of a rolling budget is that it can create ascertaining for managers because the budget is constantly being changed. Irrespective of whether the budget is prepared on an annual or a continues basis, It is important that monthly or four weekly budgets be used for control purposes.

2.4.1 THE BUDGET COMMMITEE

The budget committee consists of high-level executives who represents the major segments of the business its major task is to ensure that budgets are realistically established and that they are co-ordinated satisfactorily. The normal procedure is for the functional heads to present their budget to the committee for approval. If the budget does not reflect a reasonable level of performance, it will not be approved and the functional head will be required to adjust the budget and re-submit it for approval. It important that the person whose performance is being measured should agree that the revised budget can be achieved. Otherwise if it is considered to be impossible to achieve, it will not act as a motivational device. The budget committee should appoint a budget officer, who will normally be the accountant. The role of the budget officer is to co-ordinate the individual budget into a budget for the whole organization, so that the budget committee and the budgetee can see the impact of an individual budget on the organization as a whole.

2.4.2 THE BUDGET MANUAL A budget manual is prepared by the accountant- it will describe the objectives and procedures involved in the budgeting process and will provide a useful reference source for managers responsible for budget preparation. In addition, the manual may include a timetable specifying the order in which the budget should be prepared and the dates when they should be presented to

the budget committee. The manual should be circulated to all individuals who are responsible for preparing budgets.

2.5

STAGES IN THE BUDGETING PROCESS. The important stages in the budgeting process are as follows,

1.

Communicating details of budget policy and guide lines to those people responsible for the preparation of budgets.

2. 3. 4. 5. 6. 7. 8.

Determining the factor that restricts outputs Preparation of the sales budget. Initial preparation of various budgets. Negotiation of budgets with superiors. Co-ordination and review of budgets. Final acceptance of budget. Ongoing review of budgets.

COMMUNICATING DETAILS OF THE BUDGET POLICY: The top management must communicate the policy effects of the long term plan to those responsible for preparing the current years budgets. Policy effects might include planned changes in sales mix or the expansion or contraction of certain activities. In addition, other important guidelines that are to govern the preparation of the budgets should be specified. E.g. the allowances that are to be made for price and wage increase, and the expected

changes in productivity. Also any expected changes in industry demand and output should be communicated by top management to the managers responsible for budget preparation. It is essential that all managers be made aware of the policy of top management for implementing the long term plan in the current years budget so that common guide liens can be established.

DETERMINING PERFORMANCE

THE

FACTORS

THAT

RESTRICTS

The main factors that restricts performance in the majority of organization is sales demand, production capacity can also do so, when sales demand is in excess of available capacity. so before the preparation of the budgets, it is necessary for top management to determine the factors that restricts performance, since this factor determines the point at which the annual budgeting process should begin.

PREPARATION OF THE SALES BUDGET. The volume of sales and the sales mix determines the level of a companys operations, when sales demand is the factor that restricts output. For this reason the sales budget is the most important plan in the annual budgeting process. This budget is also the most difficult plan to produce, because total sales revenue depends on the action of customers. In addition,

sales demand maybe influenced by the state of economy or the action of competitors.

INITIAL PREPARATION OF BUDGETS. The mangers who are responsible for meeting the budgeted

performance should prepare the budget for those areas for which they are responsible. The preparation of the budget should originate at the lowest levels of management and be refined and co-ordinated at higher levels. This approach enables managers to participate in the preparation of their budget and increase the probability that they will accept the budget and strive to achieve the budget targets. NEGOTIATION OF BUDGETS To implements a participative approach to budgeting, the budget should be originated at the lowest level of management. The managers at this level should submit their budget to their superiors for approval. The superior should then incorporate this budget with other budget for which he or her superior. The manager who is the superior then becomes the budge tee at the next higher level. At each stage of the budget, the budget will be negotiated between the budge tees and their superiors, and eventually they will be agreed by both parties. So the figures in the budget are the result of a bargaining process between a manager and his or her superior. It is important that the budgeters should participate in arriving at the final budget and that

the superior does not revise the budget without giving full consideration to the subordinates arguments for including any of the budgeted items.

CO-ORDINATION AND REVIEW OF BUDGETS As the individual budget move up the organizational hierarchy in the negotiation process, they must be examined in examination may indicate that some budgets are out of balance with other budgets and need modifying so tat they will be compatible with other conditions, constraints and plans that are beyond a manager knowledge. Example, a plant manager may include equipment replacement in his budget when funds are simply not available. The accountant must identify such inconsistencies and brig them to the attention of the appropriate manager. Any changes in the budgets should be made by the responsible manager, and this may require that the budgets be recycled from the bottom to the top for a second or even a third time until all the budgets are co-ordinated and are acceptable to all the parties involved. During the coordination process, a budgeted profit and loss account, a balance sheet and a cash flow statement should be prepared to ensure that all the parts combined to produce an acceptable whole, otherwise, further adjustments and budget recycling will be necessary until the budgeted profit and loss account, the balance sheet and the cash flow statement prove to be acceptable.

FINAL ACCEPTANCE OF THE BUDGETS When all the budgets are in harmony with each other, they are summarized into a master budget consisting of a budgeted profit and loss s account, a balance sheet and a cash flow statement. After the master budget has been approved, the budgets are then passed down through the organization to the appropriate responsibility centre. The approval of the master budget is the authority for the manager of each responsibility center to carry out the plans contained in each budget.

BUDGET REVIEW. The budget process should not stop when the budget have been agreed. Periodically, the actual result should be compared with the budgeted results. These comparison should normally be made on a monthly basis and a report sent to the appropriate budgetees in the first week of the following month, so that it has the maximum motivational impact. This will enable management to identify the items that are not proceeding according to plan and to investigate the reasons for the differences. If these differences are within the control of management, corrective action can be taken to avoid similar inefficiencies occurring again in the future. However, the differences may be due to the fact that the budget was unrealistic to begin with, or that the actual

conditions during the budget year were different from those anticipated. The budget for the remainder of the year would then be invalid.

BUDGETING AND PLANNING, PROGRAMMING AND BUDGETING SYSTEM IN NON- PROFIT ORGANISATION.

In non profit organization the annual budgeting process compares budgeted and actual inputs, but does not provide information on efficiency with which activities have been performed, or the effectiveness in achieving objectives. The aim of planning, programming and budgeting systems is to enable the management of a non- profit organization to make more informed decisions about the allocation of resources to meet the objectives of the organization. The planning, programming and budgeting system involves the following stages, Establishing the overall objectives. Identifying the programmes to achieve these objectives. Determining the costs and benefits of the programmes so that budget allocation can be made on the basis of cost- benefits of the different programmes.

2.6

ZERO BASE BUDGETING (ZBB). Zero base budgeting is a method of budgeting that is mainly used in

non- profit organizations but it can also be applied to discretionary costs and

support activities in profit organizations. It seeks to overcome the deficiencies of incremental budgeting. 2BB works from the premise that projected expenditure for existing programmes should start from base zero, with each years budget being compiled as if the programme were being

launched for the first time. The budgetees should present their requirements for appropriations in such a fashion that all of cost benefits or some similar kind of evaluative analysis. The cost benefit approach is an attempt to ensure value for money. It questions long- standing assumptions and service as a tool for systematically examining and perhaps abandoning any unproductive projects. 2BB involves the following three stages. A description of each organizational activity in a decision package. The evaluation and ranking of decision packages in order of priority. Allocation of resources based on order of priority up to the spending cut-off level. Some of the benefits of 2bb can be capture by using priority- based incremental budgets. Priority incremental budgets requires managers to specify what incremental activities or changes would occur if their budgets were increased or decreased by a specified percentage (say 20%). Budget allocating are made by comparing the change in cost with the change in benefits, priority incremental budgets thus represents an economical compromise between zbb and incremental budgeting.

ADVANTAGES OF ZERO BASED BUDGETING. 1. Zero based budgeting tends to extrapolate the past by adding a percentage increase to the current year. It avoids the deficiencies of resources by need or benefit, and not taking the level of funding for granted. 2. Zero based budgeting creates a questioning attitude rather than one that assumes that currents practice represents value for money. 3. 4. ZBB focuses attention on outputs in relation to value for money. It requires a close and realistic re-evaluation of an organization programmes. 5. It tends to prevent errors which might have characterized the basing of the preparation of budget on the past figures. 6. The system of zbb requires each manager to justify any proposed expenditure for his cost centre before authority can be obtained for spending the amount request. 7. The zbb requires a re examination and thorough analysis of cost. Alternative courses of action, measures of performance and other benefits that may occur to the users of the system 8. It helps in the communication of present activities to management for effective appraisal of performance . 9. It allows managers to set priorities over he activities of the business.

DISADVANTAGES OF ZERO BASED BUDGRTING 1. It diverts managers attentions from their primary areas of responsibility. 2. 3. It is time consuming exercise. It could lose the benefits of long term companions of trends in efficiency control. 4. It requires management to apply higher skills in planning.

2.6.1 ADMINISTRATION OF BUDGET. A flow up on the budget is at least as important as budget preparation. Horngren most Apathy captures the need for budget administration in the quotation below: Budget helps managers/ but budget need help, mange your budget, dont let your budget manage you . Budgets should not be prepared in the first place if they are ignored, buried in the files, or improperly interpreted. In other word, there must be enthusiastic top management support for the budget, Hence, the appointment of the budget committee and the writing of the budget manual. The committee seems to supervise and direct the budget and to ensure that the budgeting system is participating. Again the

manual serves to educate staff personnel, which is very vital to good administration of the budget. The achievement of budgeting goals takes plenty of intelligent administration to achieve in practice. This will call for a precise and clear organization structure with definite and district lines of responsibility. In addition to budget preparation, the budget director ensures that agreed budgets are published and distributed to all responsible managers. Any revisions made in the departments budget should be discussed with the manager. In this way, budget services as a means of communicating plans and objective downwards. Budget administration leads to responsibility accounting, that is a system the measures the performance of responsible managers. A responsibility report, budget, any control statement, is speedily prepared usually monthly to furnish the manger with figures which the varies. Variance are immediately investigated so that operations may be signed with the plan in this way, the budget provides feed back on the progress made towards meeting plans. Budget administration should not be rigid, manager should be allowed some decision making described in plan. These changes in plan coupled with the experience of generations and other observed difficulties are fed to the budget committee so that budgetary planning is continually refined.

2.6.2

HUMAN FACTORS IN BUDGETING: Budget preparation and administration cannot be done insulation of the

mangers for whom it is meant. The extent to which these human aspect are taken into account, is the extent to which budget will succeed. Budget can be imposed by top management by such a budget will stifle commitment, initiative and responsibility. This is because an imposed budget underlying objectives may be imperfectly understood by budget holders. If budget holders are genuinely involved in the budgetary process, they became more highly motivated because the objectives are better understood and budgetary goals are more like accepted. The budget should not be used to fix blames in case of unfavorable variance. It used in that way, mangers will view it as a pressure device and as club over their heads instead of a tool in their hands. Variance are not man to pinpoint misconducts but to indicate to the person in the organization who is best placed to provide management with timely information for effective cost control. However, motivation is increased when the reward/penalty system of the organization is built into the attainment of budgetary targets. Studies have shown that people work effectively when targets and objectives are clearly defined so that they are understood by everyone, in

addition , and as for as possible, individual foals and aspirations should be integrated into the organization goals as a basis for budget. If individuals and organization goals are not congruent the budget may be accepted, and sabotage and frustration may be the result. Information flow may be blocked which might eat management capacity. Speedy and accurate and concise information flow up, down and bottom up is vitally important for effective budget administration. But even as budgetary success depends on the good will on cooperations of staff budgetary goals may still be missed, operations may lack direction and progress. If any, will be haphazard, even staff, good will and co-operation are secured. This according to Horngern, is because budget is not cure all. They are not remedies for organization or a poor accounting system.

2.6.3

THE PRINCIPAL BUDGET FACTORS/FORECASTING:

The first step in budgeting is the determination of the principal budget factor. The principal budget factor is that factor which at any given time, effectively limits the activities of an organization usually , it is customers demand but NOVOKO argues that of companies in developing countries like Nigeria , production devices but the effectiveness depends on the accurate prediction of cost behaviour patterns.

Reynold (1984) noted that many well managed companies prefer flexible budget because it provides management with a basic for variance between budgeted and actual costs, which is accomplished by comparing actual expenditure with previously set amounts adjusted for valuing levels of production. Continuous or rolling budget is a type of flexible budget but is more regularly updated. Owler and brown defines the rolling budget by adding say a further month or quarters so that the budget can reflect current conditions. At every point in time a twelve month budget is available and as the month or quarter expires a month or quarter in the future is added. The desirability of the continuous budget owes to the fact that it constantly forces management to look to the future and to keep tract of changes into the operating environment. Ifeoma Okeye (1991) noted that if might be possible for an enterprise to use both flexible budget and fixed budget, capacity is the limiting factor. However, the limiting factor can change over time because as a constraint is removed, another well occurs. After determination of the principal budget factor, a forecast is made of how it is excepted to behave during the budget period. The budget schedule derive form and are tied to the limiting factors and its observed pattern. Forecasting is a very important activity because the effectiveness of the budget on accurate forecasts.

2.6.4 BUDGET EDUCATION Budget education is all about holders knowing what is expected of them in the budgetary process. They should revive a copy of the statement of budgeting premises, participate fully in budgeting and be informed of any revisions made in the budget submitted to them. They are also entitled to receive a copy of the final approved budget. The budget manual and the budget director serve many of these purchases. But in addition, employees can be educated on the budget though the methods of seminars, conferences, lectures, etc. Budget education motivate employees commitment to a successful budgets implementation. The responsibility budget, often failure to the organizational structure of the particulars enterprise is a control device of responsible individuals. It works by comparison of actual performance with the expected performance in order to check significant deviations.

2.6.5 BUDGETING IN THE PURCHASING DEPARTMENT OF SMALL AND LARGE COMPANIES. As already stated, it is very difficult to budget with any great degree of accuracy as far as a year ahead changes in the general economic situation, changes in the companys product line, and employment changes are but a few of the factors which can influence the budget. It is probably a good idea

for the purchasing head to check sales and manufacturing regularly to determine changes in business that might affect his operations. If a company with name xyz manufacturing company had expended its operations to the point where four people could no longer handle the purchasing operation, it might be necessary for the purchasing agent to add another employee or two, say sometime around the middle of the year, in this event he would also have to increase s this budget request for the balance of the year. This can be done in either one ors two ways;
1.

The purchasing agent can prepare a revised budget request for the six months from July 1st through December 31st, increasing each of the various items shown on his budget.

2.

He can submit a separate budget for the individual or two he adds to his staff, indicating the increased cost of payroll and expenses that will result from their addition to his staff. Aljian in his opinion said that this is called a budget supplement and can be stapled or clipped to his regular budget request. In succeeding years, of course, these additions would be integrated into his regular budget.

PURCHASING COMPANIES

DEPARTMENT

BUDGET

FOR

LARGER

The factor to put into consideration when preparing a budget for the purchasing department of a large company are just almost the same as those for a small company. Aljian (1976)started that in a large company, the procurement officer may have responsibilities for many functions, as already mentioned such as traffic , salvage, invoice, clearance, inspection, standards, etc. Involving as many as 100, 200 or more people. This means that the time and effort required to prepare this more complex budget will be increasingly greater. It is basic concerns, however are still with have to request for payroll, operating supplies for the department, and other miscellaneous expenses. Budget preparation in a large purchasing department can be made a joint effort, enhancing the value of the budget and making supervisors or the purchasing staff aware of its importance. This is done by the supervisors in charge of the importance subdivisions of the department prepare their own budget requests for their work group. This is then consolidated into one composite purchasing department budget. A simple form of requesting this budget information from division heads included-s

MAINTAINING THE BUDGET A budget is of little value as a measure as the only attention given to it as the beginning of the year when it is prepared between its preparation and

the conclusion of the year for which it was prepared, the budget should be a living tool Example if individual division heads in different departments of business organization are asked to assist in the preparation of the budget by supplying estimates of the cost of operating their groups. This sample of the purchasing department sown in fig 2 will be similar to be the statement they will prepare.

2.6.6 RELATIONSHIP BETWEEN BUDGETARY CONTROL AND STANDARD COSTING It is clear that standard costing and budgetary control are mostly based on the establishment of pre-determination of performances. The predetermination is used to measure performance and this is done by comparing actual with planned performance and if there is any deviation from planned activity, then corrective action will be taken with promptitude. In many cases, the sane standards are employed for both standard costing and budgetary control. The only difference is that budgetary control is more widely applied than standard costing. Budgetary control covers sales budget, production budget, cash budget, etc. The two techniques are quite different in their aims. The standards are set with the aim of an ideal level to which costs ought to be reduced in their aims. The standards are set with the aim of an ideal level to which costs ought to be reduced while budgets are always based on the

anticipated actual level of costs. Budgetary control can be applied in jobbing business. Budgets can be used to establish the pre-determination of overhead absorption rates. Actually budgets are important to the establishment of standard overhead. In certain cases, standard costing systems can exist without any system of budgetary control despite the benefits that can possibly be derived from the use of budgets.

2.6.7

PARTICIPATIVE BUDGET AND IMPOSED BUDGET A participative budget is a budget that is prepared with the full

cooperation and participation of managers at all levels of the operations. The success of a budget program will be determined in a large extent by the way in which the budget is developed. In the most successful budget programs, managers with cost control responsibilities actively participate in preparing their own budget. This approach is in contrast to the approach in which budgets are imposed from above. The participative approach to preparing budgets is particularly important if the budget is to be used to control and evaluate a managers performance. if a budget is imposed on a manager from above, it will probably generate resentment and ill will rather than cooperation and commitment. in a participative budget system, the initial flow of budget data is from lower level of responsibilities to higher level of responsibilities. Each person with responsibility for cost control will prepare

his or her own budget estimates and submit them to the next higher level of management. These estimates are reviewed and consolidated as they move upwards in organization. A participative budget or the bottom-up budget is initiated by inviting those who will implement the budget to participate in the process of setting the budget. A participative budget which can equally be called the bottom up budget starts by asking those who will ultimately implement the budget to make proposals and have an involvement in the budget process. An imposed budget which can also be called a top-down budget starts with the senior management sending down budgets and targets based on the organizational goals and strategies. The budget is imposed on those who can implement it, without inviting them to share in its preparation. An imposed or top- down budget is set by management without inviting those that will implement the budget to participate in the process of setting the budget.

2.6.8 PRINCIPAL BUDGET/FORECASTING The first step in budgeting is the determination of the principal budget factor. The principal budget factor is that factor which, at any given time, effectively limits the activities of an organization. usually is customer demand, but Novoko argues that of companies in developing countries

like Nigeria, production devices but the effectiveness depends on the accurate prediction of cost behavior patterns. Renold (1984) noted that many well managed companies prefer flexible budgets because it provides management with basis for analyzing and controlling the variance between budgeted and actual costs, which is accompanied by comparing actual expenditure with previously set amounts adjusted for valuing levels of production. Continuous or rolling budgeting is a type of flexible budget but is more regularly updated. Owler and Brown defines the rolling budget by adding ,say a further month or quarter, so that the budget can reflect current conditions. At every point in time, a twelve month budget is available and as the month or quarter expires, a month or quarter is added in the future. The desirability of the continuous budget owes to the fact that it constantly forces management to look to the future and to keep tract of changes into the operating environment. Ifeoma Okoye (1991) noted that it might be possible for an enterprise to use both flexible and fixed budget. Capacity is the limited factor. However, the limited factor can change over time because as a constraint is removed, another will occur. After the determination of the principal budget factor, a forecast is made on how it is expected to behave during the budget period. The budget schedule derives from and are tied to the limiting factor and it observes

pattern. Forecasting is a very important activity because the effectiveness of the budgets is on accurate forecasts

2.6.9 RELEVANCE OF THE REVIEW TO THE STUDY In this chapter, several studies have been reviewed in order to lay the foundation for the main body of the work. Any idea budgetary system, it is generally agreed, ought to participate, flexible, self-motivated and tailored to the specific organizations needs size and objectives. Budgets are not prepared to be tucked away in files but to be used to extend control during the implantation effort. The end of control can be best served when control is tied to a precise and clear organizational structure. Finally there is a chance of opinion that budgetary collapse may occur even after a budget has been prepared in accordance with the ideal in other words, a budget will succeed or fail depending on the operation of the system. Budget are not prepared to be tucked away in files but to be used to extend control during the implantation effort. The end of control can be best served when control is tied to a precise and clear organizational structure. Finally, there is a chance of opinions that budgetary collapse may occur even after as budget has been prepared in accordance with the idea in

other words, a budget will succeed or fail depending on the operations of the system.

CHAPTER THREE RESEARCH DESIGN AND METHODOLOGY. 3.1 RESEARCH DESIGN; In order to do justice in this research work, I employed three different methods to elicit the required information. They are; 1. 2. Survey Method Oral interview

3.

By the use of textbook and magazines as my research instrument. SURVEY METHOD Since it is believed that observation will reveal some of the problems of budgeting and budgetary control. I observed the statement of accounts of most companies and it is brought to my notice that most of these companies and business organizations who failed in their business, if traced back to the find out that the remote cause of their failure is a result of not being able to budget their activities very well, and again, they failed because of inadequate management of their budgetary control

department and their system of budgeting. Through oral interviews and some investigations, I made in the textbooks and news papers, I understood that the body responsible for budget. Preparation/making in a business organization is the budgeting team, which is made up of some of the people working in the budgeting department. And also, the representatives from the various areas of activity within the organization. A business organization may appoint a budget controller to co-ordinate the budgetary activities and the budgeting

team which consists of representatives from various areas of activity within the organization. The task of the team can be considered under the following headings, Objectives

Information

Making decision

Preparing budgets Feed back Master budget (a) CONSIDERING OBJECTIVES The team will undertake Control its activities designed to enable the organization to meet its objectives (e.g profit maximizing, improving market share, and improving product quality) (b) PROVIDING INFORMATION The team will also look at figures from previous years so that new budgets can to some extent be based on past results. A clear knowledge of the environment in which the organization is competing is also important.

(c)

MAKING DECISION Whenever forward planning takes

place, it will highlight the need to make decisions. (d) PREPARING BUDGET Detailed budgets are then prepared for the areas of the organizations activity. (e) PREPARING A MASTER BUDGET The individual budgets, when linked together, can be used to forecast a set of final accounts. (f) CONTROLLING Even though budgets are drawn up,

this does not always mean that such plans are successful. Managers try to se their budgets as a guide to achieving certain results. If there is a difference between actual performances at the end of a year and budgeted

performance, action can be taken.

3.2 SOURCE OF DATA. I obtained the information contained in this project from the following sources; 1. 2. Primary source Secondary source PRIMARY SOURCES These are data I generated from surveys conducted. They are original in character. I went to

Emenite Nigeria Limited Emene Enugu Branch and got some facts through oral interview and use of questionnaire with the staffs of the organization. SECONDARY SOURCE These are informations I gathered from data which are already collected by some other persons and have passed through some statistical process of at least once. I gathered them from both published and unpublished sources. The sources of my unpublished data include materials I found with scholars and research workers. Project reports and thesis I got from different university libraries. Then I also got informations from published materials which includes; Official publications of the government. Reports and publications of trade associations, banks, trade unions, manufacturers, and professional bodies. Technical Journals that is books and news papers. Textbooks These published materials are what I got from my research in some of the libraries in Enugu like; 1. Enugu State library

2. 3.

Caritas university library National library of Nigeria Enugu branch.

3.3

POPULATION SIZE

The population for this research work comprises of top management staffs, middle management staffs and lower level management staffs of emenite Nigeria limited Enugu branch. This gives a total population of forty five (45) staffs.

DEPARTMENT S Sales Production Finance personnel Purchase Total

TOP MAMAGEMEN T STAFFS 3 4 3 2 2 14

MIDDLE MANAGEMEN T STAFFS 4 4 3 3 2 16

LOWER LEVEL MANAGEMEN T STAFFS 3 4 3 2 3 15

TOT L 10 12 9 7 7 45

SOURCE; SURVEY 2010

3.4

SAMPLE SIZE AND SAMPLE TECHNIQUE To determine the sampling size, the Yaro Yamanes

technique was used. The formula stated as-

n= N 1+N(e)2 Where; n=desired sample size N= E= 5% I = Constant Population size under study Level of significance of error. Assumed to be

Therefore, n=? N=45

Sample size (n) = 45 1+45(0.05)2 n= 45 1.1125 n = 40

The next step is to determine the minimum number of staffs/respondents to be chosen from each department. The bowlegs proportional formula is used which is given as NH= Where, n*nh N

NH

number of questionnaires allocated to each department/no of staffs to be chosen from each department. Total sample size Number of staffs in the department. Total population size

N Nh N

= = =

SALES DEPARTMENT Nh= 40*10 = 9 45 PRODUCTION DEPARTMENT NH = 40*12 45 = 11

FINANCE DEPARTMENT Nh= 40*9 45 = 8

PERSONNEL DEPARTMENT Nh= 40*7 45 = 6

PURCHASE DEPARTMENT Nh= 40*7 45 = 6

Therefore from the above calculation the table for the proportional distribution of the sample size will be;
DEPARTMENT NO. OF THE PROPORTIONA NO. IN PROPORTIONA

POPULATION L PERCENTAGE

THE SAMPL E SIZE

L PERCENTAGE

Sales production Finance personnel Purchase TOTAL NOTE-Some

10 22% 9 23% 12 27% 11 27% 9 20% 8 20% 7 15.5% 6 15% 7 15.5% 6 15% 45 100% 40 100 staffs were not able to answer some of the

questions in the questionnaire for some reasons best known to them. So though I distributed 40 questionnaires, some questions had a total number of responses less than 40 like question 4 which had 38 responses, question thirteen which had 34 responses and question 21 which had 12 responses.

3.5 RESEARCH INSTRUMENT These are the various ways or methods of collecting both primary and secondary data. Such instruments include questionnaire and oral interview. I chose these two methods considering three main factors; 1. 2. 3. Nature, object and scope of my research/study. Availability of funds. Availability of time.

A questionnaire is an instrument for obtaining answers to research questions by using a form which the respondents usually filled by him/herself. Then a research interview is a verbal interaction between two people to illicit information. 3.6 METHODS OF DATA ANALYSIS The statistical techniques of percentages and chi-square were used for the analysis of the questionnaires and hypothesis respectively. CHAPTER FOUR PRESENTATION & ANALYSIS OF DATA This is a business study and as the researcher I am thus inclined to measure data not as numerical values but in categories. In presenting the data that way, it is easier to determine from examination of the data, the level, if there is any of dependencies between the two tested variables. In this type of study, the chi-square (or contingency table test) method of data analysis is most appropriate for use. A chi-square test makes it imperative to emulate a null hypothesis, which assumes that there two objects of interest and their methods of classification. It is then my task as the

researcher through data analysis, to prove the assumption wrong. In other words to reject the null hypothesis. The chi-square statistics can be computed from the data in a chi-square table by comparing the observed and expected frequencies in each cell of the table, if the margins between the observed ends expected frequencies are large, the chi-square statistics will be large and the null hypothesis is rejected if however, the difference is small, a small chisquare value will result and the null hypothesis is accepted. Finally compare the chi-square statistics of the decision rule to accept or reject the null hypothesis. The detailed procedure and computations required in chi-square test would be presented step by step as the hypothesis is tested. The data to be used in testing the hypothesis will result from the analysis of questionnaires. The simple percentage method data analysis is used to analyze the questionnaires, the formular for it is, A% = a * 100 n 1 When n = Total number of response to a question. a = Number of respondents ticking a

particular answer option to the question. A% = a expressed as a percentage of N.

In all 50 questionnaires were issued out, but only 40 were collected back.

4.1 DATA ANALYSIS (QUESTIONAIRES) This analysis is restricted to ten (11) questions only, which I consider being of direct relevance in testing the hypothesis. The questions are grouped into three parts. Each group of questions is expected to provide relevant information to test a hypothesis. Each relevant question is first presented and data collected on it analysis. Then the data that result from the analysis of all the questions in the group are combined into a single set tabulated data on which the hypothesis is tested. At the end of any group of is hypothesis and the response are weighed.

GROUP 1 QUESTION NO. 3 Why does your company use budgets? ANSWER OPTIONS NO. OF RESPONDENT PERCENTAGES OF RESPONSE

S (A) To plan profits To keep proper accounts No idea Total (n) 38 2 0 40 5 0 100

(A%) 95

QUESTION NO. 4 Why do you think that budgets help to achieve target profits? OPTIONS TO ANSWERS IT MOTIVATES MANAGERS TARGETS ARE LOW IT MEKES MANAGERS RELAX TOTAL QUESTION NO. 5 When variance occur in your department, into what percentage range does it often fall? OPTIONS TO ANSWERS 0 5% 5%-10% OVER 10% TOTAL NO.OF RESPONDENTS (a) 12 25 3 40 PERCENTAGES RESPONSES (A %) 30 62.5 7.5 100 NO.OF RESPONDEN TS (A) 38 0 0 38 PERCENTAGES RESPONSES (A%) 100 100

DISCUSSION This group of questions was designed to ascertain what purpose the respondents think the budget services, the effect the budget has on the work attitude of the manager, and whether or not the performance of the budget as a profit planning device. All the respondents say it motivate managers. Question if indicates that 92.5% of variances fall within the permissible range of 0.10%.

QUESTION NO. 9 Why do you feel omitted to achieve the targets set for you? OPTIONS TO ANSWERS HIGHER PAY PERSONAL SATISFACTION FEAR OF PUNISHMENT TOTAL QUESTION NO. 13 Which types of variance occur more than often in your department? OPTIONS TO ANSWERS NO. OF RESPONSES PERCENTAGES RESPONSES (A %) NO. OF RESPONDENT S 32 8 0 40 PERCENTAGES RESPONSES (A %) 80 20 0 100

YES NO TOTAL QUESTION NO. 16

22 12 34

64.71 34.29 100

Does variance determine whether a manager should be rewarded or penalized? OPTIONS TO ANSWERS YES NO TOTAL DISCUSSION These questions in this section were asked to find out what makes the respondents to work hand in hand to attain their budgetary goals and how often these goals are attained. 80% work for high pay (i.e for rewards) where as 55% of the time shows that favourable variance (or the desired goals) is achieved. Only 34 persons responded to question number 13. NO. OF RESPONSES (a) 33 7 40 PERCENTAGES RESPONSES (A %) 82.5 17.5 100

GROUP III QUESTIONS QUESTION NO. 22

Do your duties conflict with those of other managers? OPTIONS TO ANSWERS YES NO TOTAL NO. OF RESPONDENTS (a) 8 32 40 PERCENTAGES OF RESPONSES (A%) 20 80 100

QUESTION NO. 10 If targets were not set for you would you feel any less committed OPTIONS TO ANSWERS YES NO TOTAL NO. OF RESPONSES (a) 8 4 12 PERCENTAGE RESPONSES (A %) 67 33 100

QUESTION NO. 20

Do you find yourself in a situation where you take orders from more than one superior?

OPTIONS TO ANSWERS YES NO TOTAL QUESTION NO. 21

NO. OF RESPONSES (a) 12 28 40

PERCENTAGES RESPONSES (A %) 30 70 100

Do you find decision taken by another manager at hand affecting your own department? OPTIONS TO ANSWERS YES NO TOTAL DISCUSSION The purpose of group III questions is to determine the extent to which Job definition, responsibility and authority are met and precisely 70% of persons responding indicate that they take instructions from one supervisor only 60% of respondents who take orders from more than one supervisor say such orders are not contradicting. Likewise, 80% do not encounter cases of overlapping functions. NO. OF PERCENTAGES RESPONSES (a) RESPONSES (A %) 13.5 32.5 27 67.5 40 100

4.2 TEST OF HYPOTHESIS To test the hypothesis, data from each group of section 4.1 are assembled into one simple set of data that I shall call the chi-square table. The questions are set in rows and responses which are recorded under the columns favourable and adverse. The answers entered under the favourable column are those that support the null hypothesis are under the adverse column. There is an additional row for column total and another column for row totals. The result table of data is used to test the hypothesis. The actual test is done step by step Group 1(one) questions are used to test hypothesis 1 (one). Group three (111) questions for hypothesis two (II), then group two (II) questions for hypothesis three (III).

HYPOTHESIS I STEP I STATEMENT OF HYPOTHESIS HO = Budget are an effective guide to business growth.

H1 = Budget are not an effective guide to business growth.

STEP II: CHI-SQUARE TABLE QUESTIONS Q.3

Q.4

RESPONSE FAVOURABLE ADVERSE 38 2 38 0 37 3 113 5

TOTAL 40 38 40 118

Q.5 TOTAL

STEP III: DECISSION RULE (OR CRITICAL VALUE) DF = (r-1) (c-1) (3-1) (2-1) 2* 1 = 2 where, DF = Degree of Freedom c = no. of columns : critical value for a 0.05 level of significance and 2 degree of freedom is 5.991. Decision Rule: If calculated (Fo-Fe)2 Is greater than 5.991 Fe reject Ho. STEP 4: SAMPLING DISTRIBUTION Fo 38 2 38 0 Fe 38.31 1.69 36.390 1.61 Fo-Fe -0.31 0.31 1.61 -1.61 (Fo-Fe)2 0.096 0.096 2.592 2.592 (Fo-Fe)2/Fe 0.003 0.057 0.071 1.61

37 3

38.31 1.69

-1.31 1.31 TOTAL

1.716 1.716

0.045 1.015 2.801

WORKING FOR THE SAMPLE DISTRIBUTION TABLE Chi-square statistics = (Fo-Fe) 2 Fe Where, Fo Fe Fo Fe When Fo = = = = = Observed Frequency Expected Frequency No. of responses to questions. for example Q.3 38

Fe = 40 * 113 = 38.31 118 1 When Fo = 2

Fe = 40 * 5 = 1.69 118 1 It is necessary to determine a level of significance in a chi-square a level of significance in a chi-square test, but there is no specific level that is generally recommended. It is up to the me the researcher to choose a level of significance that suits my research situation and which services my needs for this particular research, the level of significance is arbitrarily fixed at 5% as much as that is conservative.

A decision rule (or critical value or chi-square value) is stated prior to the test. A decision rule is the yard-side for the test. Before we appropriate degrees of freedom for the test is found. In chi-square test, the appropriate degree of freedom is calculated using the formula : Df = (r-1)(c-1) where; Df = Degree of freedom r = number of rows in chi-square table c = number of columns in the chi-square table. The decision rule for the appropriate level of significance and for the appropriate degree of freedom is found using the chi-square distribution table.

STEP 5: DECISION Since the chi-square statistics 2.801 is less than the critical values 5.991, then the null hypothesis cannot be rejected. Therefore, based on the sample evidence collected, it is assumed that budgets are an effective guide to business growth.

HYPOTHESIS II STEP 1: STATEMENT OF HYPOTHESIS

Ho: Budgets are a means to control and synchronize Organizations personnel and function H1: Budgets are not a means to control and synchronize organizations personnel and functions. STEP 2: CHI-SQUARE TABLE QUESTIONS RESPONSE TOTAL 40 12 40 40 132

FAVOURABLE ADVERSE Q.20 28 12 Q.21 8 4 Q.22 32 8 Q.10 27 13 TOTAL 95 37 STEP 3 : DECISION RULE. DF DF DF = = = (r-1)(c-1) (4-1)(2-1) 3*1 = 3

critical value = 7.815 Decision rule: If calculated (Fo Fe)2 is greater than 7.815 Fe then reject Ho

STEP 4: Fo 28 12 8 4

SAMPLING DISTRIBUTION Fe 28.79 11.21 8.64 3.36 Fo-Fe -0.79 0.79 -0.64 0.64 (Fo-Fe)2 0.624 0.624 0.410 0.410 (Fo-Fe)2/Fe 0.022 0.056 0.047 0.122

31 8 27 13

28.79 11.21 28.79 11.21

3.21 -3.21 -1.79 1.79 TOTAL

10.304 10.304 3.204 3.204

0.358 0.919 0.111 0.286 1.921

STTEP 5: DECISION Since the chi-square statistics 1.921 is less tan critical value 7.815, so the information from the sample collected supports the claim that budgets can be used to co-ordinate and synchronize the efforts of workers in the organization.

HYPOTHESIS III STEP 1: STAEMENT OF HYPOTHESIS

Ho: Budgets are more effective when reward penalty is based on goal attainment. H1: Budgets are not more effective when reward penalty is based on goal attainment.

STEP 2: QUESTIONS

CHI-SQARE TABLE RESPONSE FAVOURABLE ADVERSE TOTAL

Q9 Q.13 Q16 TOTAL

32 32 33 95

8 12 7 37

40 34 40 132

Degree value = (r-1)(c-1) Df = 2*1 =2 Critical value: 5.991

DECISCON RULE; If calculated (Fo Fe) 2 is greater than fe 5.991 then reject Ho

STEP 4: SAMPLING DISTRIBUTION Fo 32 8 22 12 33 7 Fe 30.53 9.47 25.95 8.05 30.53 9.47 Fo-Fe -1.47 1.47 -3.95 3.95 2.47 -2.47 TOTAL (Fo-Fe)2 2.161 2.161 15.603 15.605 6.101 6.101 (Fo-Fe)2/Fe 0.049 0.821 0.601 1.921 0.200 0.646 4.27

STEP 5: DECISION Since the chi-square statistics is 4.275,991 is less than 5.991. So the budgetary goals can be attained all the more when attainment of budget targets serves as yardstick for employee promotion and remuneration. CHPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION.

5.1 SUMMARY OF FINDINGS We have tried to discuss the foregoing chapters. Some of the major problems militating against budgeting and

budgetary control in business organizations. The list is by no means exhaustive, but we tried as far as possible t discuss the major problems of budgeting so as to enable the reader of this research work form an informed Judgment of the problems of budgeting and budgetary control in business organization. This chapter will proceed with the suggestions, recommendations made conclusions based on the result of the investigation.

5.2 CONCLUSION The most prominent goal of any reasonable firm is for a credible budget both in the production and exchange of goals and services. To restore the integrity of the budgetary process, a manager must control deficit finance, streamline expenditure with realistic income profile and ensure that budget become

an ultimate and effective instrument in controlling the financial system of their firm. Based on all these facts given in this project work, we can see that budgetary control can be as harmful as it is beneficial depending on how the system is administered. At best it helps management to decentralize responsibilities while it centralizes control. By means of efficient planning, effective communication, motivation ,and if human relations are strained and uncertainties which can result from the presence of variables in budget are not effectively provided for, budgetary control technique can constitute a grave deterrent to the achievement of management objectives.

5.3 RECOMMENDATIONS The findings strongly indicate that the company has a good budgetary system. However, the findings reveal some weakness; the ways these weaknesses may be overcome are outlined below, 1. Management appears to set standards for Junior

managers that are too difficult to attain- There is the danger of frustration, distrust and deliberate to take individual

managers to take individual managers ability, education and aspirations into account in setting targets. When the ability has been assessed, management should set stewards that are only attainable when the manager given his ability and education, is working under efficient conditions. 2. It is dangerous for managers in an organization to compete among themselves in a situation of inter-

dependency. It means, for instance, that one manager can withhold vital information that another manager needs to make a good decision. This competition obviously is because reward is tied to goal attainment and no manager wants to assist another to get ahead of him. All in one, corporate goals lose out to managers selfinterest, and the work

environment is suffered with tension, management can encourage team work among the managers by stressing group reward above individual reward, for all manager at a level when each managers achieves the standards or is at a reasonable range of its attainment. 3. Vague and conflicting instructions can impede effective actio0n and answerability to more than one supervisor can introduce confusion and make control difficult. This can

happen

when

certain

functions

are

duplicated.

The

organizational structure of libraries should be overhauled. Jobs should be thoroughly scheduled and duties precisely defined and described. The supervisorsubordinate

relationship needs to be assessed so that a situation does not arise where a subordinate is answerable to two or more supervisors. A management consultant firm could be

engaged to carry out the overhead.

BIBLIOGRAPHY Aljian, G. W.(1984):Purchasing Handbook: Mograw- Hill publications ,3rd Edition,

Batty, J. (1971): Theory and Heineman Ltd, London, 4th Edition.

Practice

of

Investment:

Bhatia, H. L. (1993): Public Finance: Vikas Publishing House Ltd, MasjidRoad, Jangpure, 17th Edition. Brigham, E. F. (1986): Fundamentals of Financial Management: The Orghan Presshold, Rinehait and Winston Saunders College Publishing, London. 5th Edition. Brown, J. L. and Howard, L. R (1975): Principle and Practice of Management Accounting: Mac Donald & Evans Ltd, London. 2nd Edition. Burkhead, J.(1965): Government Budgeting: John Wiley and Sons Ltd, 3rd Edition. Drury, C. (1996): management and cost of accounting: pitman Publishers London sixth edition. Lucy, T. (1989): Costing An Instructional Manual: DP Publication Ltd London, 6th Edition. Nweze, A.U.(2004), Profit planning Oshisani, K. and Dean, P. (1984): Financial Management in Nigerian Public Sector: Pitman Books Ltd, London. 4th Edition. Owler, L.J. and Brown J.L. (1984):Wheldons Accounting: Mac Donald and Evans Ltd, London. 2nd Edition. Cost

JOURNALS AND UNPUBLISHED BOOKS OR WORKS

Nwoko, C.(1992): Control Theory in Accounting Unpublished Lecture Notes Dept. of Accountancy, University of Nigeria at Enugu,. Odetola Odeleye, J.M. (1991): Managing the Budgetary Process within the Context of Planning Economic Monitor Vol. 6, No. 3. Okoye, F.T.(1991): Budgeting and Budgetary Control Practice and As HDC: Unpublished Thesis, Department of Accountancy University of Nigeria) . Pogue, G.A. (1986):Budgeting as an Aid to Management Performance Student Newsletter, ICMA London.

APPENDIX Department of Accountancy Caritas University, Amorji-Nike, Enugu July, 2010. Dear Sir/Madam,

I am a post graduate student of the above named University, carrying out a research report work on Budgeting and Budgetary Control in Business Organization. I will be pleased, if you can respond to the questions contained in the questionnaire attached for this letter. Your response will aid me in achieving the objective of this research work. All information given will be used purely for academic work and will be treated confidentially.

Thanks for your understanding.

Yours sincerely,

AGU CHIKA E.

QUESTIONNAIRE Tick the boxes () as appropriate. Only one box may be ticked for each question. No need to write your name. (1) Which type of budget do you use?

Static ( ) (2)

Flexible ( )

None ( )

Who is responsible for preparing a budget for your particular department? Budget Committee ( ) Yourself ( )

(3)

Why does your company use budget? (a) (b) (c) To plan profit ( ) )

To keep proper Accounts ( No idea ( )

(4)

Why do you think that Budget help to achieve target profits? (a) (b) (c) Motivates employee ( Targets are low ( ) ) )

It makes managers relax (

(5)

Are your Opinions sought before a budget for the company is prepared? (a) Yes ( ) (b) No ( )

(6)

Do you involve your subordinates in your department budgeting? (a) Yes ( ) (b) No ( )

(7)

Do you sometime see the targets set for you and your department as unrealistic?

(a) Yes ( (8)

) (b) No (

Are the unrealistic targets too high or too low? (a) Too high ( (b) ) )

Too low? (

(9)

Why do you feel committed to achieve the targets set for you? (a) High pay ( ) ) )

(b) Personal Satisfaction ( (c)

Fear of punishment (

(10) Do you find decision taken by another manager at your hand affecting your own department? (a) Yes ( ) (b) No ( )

(11) How often do you receive performance reports? (a) (c) Monthly ( ) ) )

(b) Quarterly (

Bi-annually ( )

(d) Annually (

(12) How soon after the period to which they relate do you receive performance reports? (a) One week ( (b) Two weeks ( (c) Three weeks ( ) ) )

(13) Which type of variance occur more often in your department? (a) Favourable ( ) (b) Adverse ( )

(14) Under what conditions may you revise your budget? (a) Change in government policy ( (b) Unanticipated rise in costs ( (c) Budget goals not being met ( (d) Increased competition ( ) ) ) )

(15) What do you think are the causes of variance in your department? (a) Faulty forecasts ( ) ) ) (b) Adverse changes in the environment ( (c) Uncooperative staff (

(d) Specify ------------------------------------------------------(16) Do variance determine whether a manager should be rewarded or not? (a) Yes ( ) (b) No ( )

(17) When variance occur in your department into what percentage range does it often fall? (a) 0 5% ( (b) 5 10% ( (c) Over 10% ( ) ) )

(18) Which of the following problems do you encounter in budgetary control? (a) Uncooperative staff ( ) )

(b) Managers do not understand budget goal ( (c) Managers pursue individual goals instead of corporate goals ( )

(d) Specify ------------------------------------------------------(19) Recommend budgetary controls that can be used in controlling variance in your department (i) ----------------------------------------------------------------(ii) ---------------------------------------------------------------(20) Do you find yourself in a situation where you take orders from more than one supervisor? (a) Yes ( ) (b) No ( )

(21) If targets were not set for you would you feel any less committed? (a) Yes ( (22) Does ) (b) No ( duties ) conflict with those of other

your

managers? (a) Yes ( ) (b) No ( )