Topic: BUDGETARY CONTROL: AN INDISPENSABLE TOOL FOR EFFECTIVE PERFORMANCE OF AN ORGANISATION (A CASE STUDY OF BETA GLASS PLC, UGHELLI)

Chapter One

INTRODUCTION

1.1 Background of the Study

There are varied and diverse organisations that exist. They include social, political and economic organization, such as business, churches, political parties, chambers of commerce, educational institutions and clubs. They need effective management and accounting system to succeed. Most of these organisations are complex in nature and this cause problem in their management and so needs proper and well articulated accounting system for them to survive. Budgetary control is the process and the former provides the basis for the exercise of the later. While budgetary focuses on planning, budgetary control is the act of executing those plans. The Chartered Institute of Management Accountants (CIMA)Londonhas defined budgetary control in the following words. “The establishment of departmental budgets relating the responsibilities of executive to the requirement of a policy and the continuous comparison of actual with budgeted result, the objectives of that policy or to form basis for its revision. In a nut shell, while a budget may be described as a standard with which to measure the actual achievement of persons, department and organizations; budgeting control is the plan in advance of the various functions of an enterprise so that the business as a whole can be controlled. According to Jim Riley (2012), A budget is a financial plan for the future concerning the revenues and cost of a business. However, a budget is about much more than just financial numbers. Budgetary Control is the process by which financial control is exercised within an organization; budgets for income/revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances. Managers are responsible for controllable cost within their budget and are required to take remedial action if the adverse variance arises and they are considered excessive. There are many use of budgets for example, budget are used to; 1. Control income and expenditure, 2. Establish priorities and set targets in numerical term, 3. Monitor performance, 4. Improve efficiency, and 5. Motivate staff

1.2 Statement of Problem

Over the years, business organisation have had deficiencies in effectively managing their budget. This is as a result of inadequate effective budgetary control system. The inability of the managers to control the organizational budget has created a major set back in the attainment of their goals. The crucial problems this research will address therefore include: 1. The inadequate budgeting and controlling by the various managers during budgeting process. 2. The means of knowing which management tool that is most effective in managing organizational resources by means of budgeting. 3. The ways of measuring efficiency and effectiveness of such management budget. 4. The relevant information required by management in making sound decision for the attainment of the business objectives through budgetary control.

1.3 Aim and Objectives of the Study

The objectives of the study include the following: 1. To determine how budgetary control system plays a significant role in assisting various managers in achieving management objectives. 2. To analyse various types of budget, benefit and problems of budgeting in the business firm. 3. To advance useful recommendations (based on finding) to the company on how to improve on their system of budgeting as a tool for managerial planning and control.

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