ABSTRACT
This
study examined the impact of budgetary control on profitability of an
organization. Thus, the importance of budgetary cannot be emphasized in business
organization, as management needs to embark on budget to effect proper planning
and control. In this vein, budgeting can be seen as a process of planning and
control. Proper budgeting can never affect efficient plans of organization
without control. Thus, the desire to examine whether budgetary control is
practicable in Samsung Electronics Nigeria Plc ignited this study. To achieve
this objective, four research questions and two research hypotheses were
formulated to guide this study. A well structured questionnaire was used as the
major instrument to gather data from the 70 staff and management of Samsung
Electronics Nigeria Plc and a sample size of 60 were randomly selected. The
data collected from the respondents were analyzed using simple percentage and
Chi-square statistical tool was employ for testing the hypotheses. The study
concluded with some recommendations that the management of Samsung Electronics
Nigeria Plc should make use of budgetary control to avoid failure in business.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND
OF THE STUDY
The
process of preparing and using budget to achieve management objectives is
called “budgeting”. Budgeting is an essential element which is vital to
management accounting technique which can benefit all aspect of business if it
is understood and properly used. The growing complexity of the business
environment and the ever increasing competition among firms in the modern time
makes planning and budgeting inevitable tool for business success (Lucey 2010).
Successful
management is no longer just a matter of flair, skill and determination, a
conscious effort is needed to harness available resources towards the
achievement of enterprise objectives (Pandy, 1985). Therefore budgeting is one
of the tools adopted by management for effective cost planning, control and
increase in productivity.
Wildarsky
(1984:213) argued that because a budget served diverse purposes, it mean
different things to different people, among the various possible interpretations
given by him include; it is a plan, it is a prediction, and it is a link
between financial resource and human behavior to accomplish policy objectives.
Also, it is a mechanism for making choices among alternative expenditure.
Rufus Wizon (2012) observed that
without a budget a business may in order aim lessely. It may never know where
it is going or where it should go. Even with a budget a business may not reach
its planned objectives or destination, but the exercise of budgetary control
will note the deviation from the plan and thus provide the opportunity for
necessary corrective action. The making of such plans and the continuous review
and execution are the essence of budgetary control.
Batty
(1982), defined budgetary control as a system which uses budgets as a means of
planning and control-ling all aspects of producing and or selling commodities
or services. This is true as we tend to prepare revenue and expenditure
variance analysis to be able to deduce areas of divergencies for which the
management needs to watch to avoid embarrassment as any adverse variance will
translate into inability to meet the corporate objective which will eventually
lead to disagreement with stakeholders.
1.2 STATEMENT OF THE PROBLEM
Most
often budget and budgetary control research concentrated on its impact in the
Federal Government budget and its attempt to control the use of public fund.
There is no doubt that some other write-ups on budget and budgetary control has
concentrated greatly on profit oriented organization, the issue failed to
emphasize on the issue of budgetary control which is the bedrock for which
budget implementation could be more effective and plans realization
efficient.
Budgets
are attention directed and forward looking on financial statement. Budget tends
to ensure goal congruence and elicit managerial efforts which are both wrapped
up in motivation. Budgets relate to objectives and policies to managerial
responsibilities, and facilitate accountability. In profit seeking organization
budgetary control provide relevant information relating to what the
organization wants to achieve and the measure it would adopt to translate its
plans into reality. Time has come to direct our searching eyes of budgeting to
budgetary control in our manufacturing companies.
1.3 OBJECTIVES
OF THE STUDY
The objective of the study is based
on the statement raised in the preceding paragraph. They are:
a.
To
examine the impact of budgetary control on profitability in an organization.
b.
To
determine whether budgetary control is practicable in Samsung Electronics Nigeria
Plc.
c.
To
find out the benefits of budgetary control to shareholders of an organization.
d.
To
find out whether budgetary control has been implemented in Samsung Electronics
Plc.
e.
To
make useful recommendations based on research findings
1.4 RESEARCH
QUESTIONS
The
following research questions are generated to guide this study:
1)
What
are the impacts of budgeting control of profitability in an organization?
2)
Does
budgetary control is practicable in Samsung Electronics Nigeria Plc?
3)
What
are the benefits of budgeting control to shareholders of Samsung Electronics
Nigeria Plc?
4)
Has
budgetary control been implemented in Samsung Electronics Nigeria Plc?
1.5 RESEARCH
OF HYPOTHESES
The following research hypotheses
were formulated to guide this study.
Hypothesis 1
H0: There is no significant relationship
between budgeting control and profitability in an organization
Hypothesis 2
H0: There is no significant relationship
between budgetary control and the benefits to shareholders in Samsung
Electronics Nigeria Plc.
1.6 SIGNIFICANCE
OF THE STUDY
It
is the major way in which the organizational objectives are translated into
specific plans, tasks and objectives related to individual manager and
supervisors; it should provide clear guidelines for current operations.
It
is an important medium of communication for organizational plans and objective
and of the progress towards meeting these objectives.
The
development of budgets helps to achieve, co-ordinate the various departments
and functions of the organization.
Performance
at all levels is systematically reported and monitored thus aiding the control
of current activities.
1.7 SCOPE
OF THE STUDY
This study centered on the impact of
budgeting control on profitability of an organization with a particular focus
on Samsung Electronics Nigeria Plc.
1.8 LIMITATIONS
OF THE STUDY
One of the major problems encountered
in the course of this study was difficulty in obtaining data from the
management body of the organization due to fear of disclosing their management
strategies to competitors. Time constraints were also a problem in the course
of this research work.
1.9 OPERATIONAL
DEFINITION OF TERMS
Ø PLANNING: Planning
is defined as the activity where the managers analyzed the present conditions
to determine the way of reaching a desired future state.
Ø FORECASTING: This
is the procedures and techniques for predicting condition or event that are
expected to prevail in the future.
Ø BUDGETING: This
is a formulation of plans in a given period in numerical term.
Ø BUDGET: This
is defined as a future plan of action for the whole organization or a section
there of, which is expressed in monetary term.
Ø BUDGETARY CONTROL: This is the establishment of budget, relating to the responsibility of
the executives to the requirement of the policy and the continuous comparism of
actual performance with budgeted level so as to secure either by individual or
collective action the objective of such policies.