TABLE OF CONTENTS
Pages
Title
Certification i
Dedication ii
Acknowledgement iii
Table of Contents iv
CHAPTER ONE
1.1
Introduction and Background of Study 1
1.2
Limitation of Study 3
1.3
Aims and Objectives of the Study 4
1.4
Research Questions and Hypothesis 4
1.5
Scope of the Study 6
1.6
Significance of the Study 6
1.7
Definition of Terms 7
CHAPTER TWO
2.1
Introduction 9
2.2
Definition of Budget 12
2.2.1 Budgeting
15
2.2.2 Budgeting
System 17
2.2.3 The
Budgeting Process 19
2.3
Control Activities 23
2.3.1 Organisation
for Budgetary Control 25
2.3.2 Functional
Budgets 33
2.4
Corporate Governance 38
References 46
CHAPTER THREE
3.1
Introduction 47
3.2
Population and Sample 47
3.3
The Design of the Study 48
3.4
Instrumentation and Valuation 48
3.5
Procedure for Data Collection 49
3.6
Research Methodology 49
3.7
Types of Research Method 51
3.8
Method of Data Analysis 52
References 54
CHAPTER FOUR
4.1
Data Presentation 55
4.2
Data Analysis 55
CHAPTER FIVE
5.1
Introduction 73
5.2
Summary 73
5.3
Recommendation 75
5.4
Conclusion 77
References 79
Bibliography 80
Appendix I
Appendix II
CHAPTER
ONE
1.1
INTRODUCTION AND BACKGROUND OF STUDY
Budgeting
can be traced to the 18th century period when it was used to check the powers
of the king concerning taxation as a source of revenue and the governments
expenditure. It involves management development plans developed in order for
the terms of marketing to be served, the production and distribution process to
be used and the facilities and personnel required.
Controls
can be seen as single procedures or whole systems they are established by
management either directly or by means of external consultants e.g auditors,
accountants, etc to maintain orderliness in the business enterprise. Internal
control activities can be defined as the whole system of controls financial or
otherwise established by the management in order to carry out the business of
the enterprise in an orderly and efficient manner, ensure adherence to
managements policies, safeguard the assets and secure as far as possible the
completeness and accuracy of records. Controls in relation to finance are those
activities that involve planning and control of all aspects of production or
marketing of commodities using the budget as a tool.
Corporate
governance as a term covers all the general mechanisms by which management are
led to act in the best interest of companies’ owners statutory control of
corporate governance has been with us for a long time and has increased
overtime. While it is impossible to have a crime free society, the need to spell
out the rules of the game cannot be overemphasized. Corporate governance means
the system which companies are directed in the best interest of the owners and
investors in this case through the use of budgets.
The
study will be taken from four angles. The first is centered on the preparation
of the budget. The guidelines or rules which the firm follows in preparing
budgets and the consideration given in preparing a budget. It now leads to the
question of how an organization prepares it budget. The second point of
reference is how the budget preparation influences the organizational
performance and also the individual performance. The third point of reference
is centered on how the control system works and its ability to properly direct
the staff of the organization. Finally, we look at the weaknesses or strength
of budgeting and control activities in an organization in relatives to the
performance of its staff.
It
is important to know that budget or forecast is predicting and planning is
taking action on the forecast to make it an economic reality. Planning is
concerned with setting objectives and the means for their attainment. It is
essentially concerned with the future therefore it must be an adequate
predictive model which must have objectives and leads to a higher level of
performance which may not be possible without it. Planning is therefore closely
related to budgeting. Infact a budget is a planning tool.
1.2
LIMITATION OF THE STUDY
A
direct statistical issue in this study is in the preparation of budget and
control activities and their implementation in corporate governance. It is
assumed that every organization prepares budget but the question one will ask
is how seriously are these budgets followed and are their controls in place to
ensure the strict adherence to the budget. It has however, come to notice that
a lot of the businesses do not recognized the important role played by budgets
in the success of their business and this has led to the failure of many
organizations.
The
reasons for this failure can be attributed to:
(1)
Negative
attitudinal trait of the operating managers against budget.
(2)
Lack of
realistic data in budget preparation
(3)
It represents
an ordinary tool which may not be effective without closer supervision.
(4)
Establishment
of unattainable standard or target for workers.
(5)
Budget ignores
responsibility centers in performance evaluation.
1.3
AIMS/OBJECTIVES OF THE STUDY
The
main aim of this study is to highlight the importance of the preparation of
budgets. It is also wants to give an insight into the impact which budgeting
and control activities have in corporate governance.
The
study aims to:
(1)
To describe the
methods employed by an organization in preparing its budget.
(2)
To find out its
effectiveness as a tool of the management.
(3)
To set up
mechanisms which will assist in achieving the objectives of the establishment.
1.4 RESEARCH QUESTIONS AND HYPOTHESIS
The
case study for this research is Unity Bank Plc and sample will be taken from
its branches (2-3 branches) to get the data required for the research. The
research will be based on the following research questions.
R1 - Does
corporate gornannce generate wealth?
R2
- Does the survival of a
company depend on the preparation of budget.
R3
- Can the budget committee
aid the control system of an organization?
R4
- Are performance evaluated
on the standard obtained?
The hypothesis to be tested are;
1. Ho: Enhanced corporate governance does not improve wealth
Hi: Enhance corporate governance generates or improves wealth.
2. Ho: The survival of any company is dependent on how well it
manages its revenue and expenditure
Hi: The survival of any company is largely dependent on how well it
manages its revenue and expenditure.
3.
Ho: The role of the
budget committee cannot be used to strengthen the control system.
Hi: The role of the budget committee can be used to further
strengthen budgeting control system in the corporate sector.
4. Ho: Effective performance evaluation will not boost the success of
the company.
Hi: Effective performance evaluation will boost the success of the
company.
1.5 THE
SCOPE OF STUDY
This
study is carried out to highlight the differences which may exist between the
budgeting and control activities. It will look into budgeting, budgets,
budgetary controls and how they are carried out and the differences between
these various terms.
It
will also examine control activities i.e internal control system of an
organization and its effectiveness in the implementation of a budget. The study
will be carried out in Lagos among 2-3 branches of Unity Bank Plc.
1.6
SIGNIFICANCE OF THE STUDY
This
study is very significant in the sense that it can, if properly utilized, act
as a catalyst to inspire proper use of budgets and budgeting and also inspire
development of control activities in organization whether big or small. It has
the following effects.
1)
It lead to the
gaining of knowledge by providing such information that will broaden the
horizon.
2)
It creates a
high degree of awareness about the need for sound planning and budgeting
systems in various organizations.
1.7
DEFINITION OF TERMS
The
following are the definitions of some terms that one might come across when
going through this topic.
A.
BUDGET: A
budget is a financial statement which is prepared at the beginning of every
period in an organization containing the plans of the management concerning it
revenues and expenditures.
B.
BUDGETARY CONTROL:
According to the institute of cost and Management Accountants (ICMA). It can be
defined as the establishment of departmental budgets relating to the
responsibilities of the executives of an organization to the requirements of
the policies of and the comparison of actual results with the budgeted period.
C.
CASH BUDGET: this
represents the cash receipts and payment and the estimated cash balances for
each month of the budgeted period.
D.
ADMINISTRATIVE EXPENSE BUDGET: This involves forecasting the number of working
people both direct and indirect who will be needed to meet the production
requirements.
E.
INTERNAL CONTROL SYSTEM: It is the whole system of control financial or otherwise set up or
established by the management in order to carry out the business of the
enterprise in an orderly and efficient manner, ensure adherence to management
policies, safeguard the assets and secure as far as possible the completeness
and accuracy of records.
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