BUDGETING AND BUDGETARY CONTROL IN BUSINESS ORGANIZATION (A CASE STUDY OF EMINITE NIGERIA LIMITED EMENE ENUGU BRANCH)

ABSTRACT

This research was conducted with special reference to the budgetary system of Emenite Nigeria Limited. The objectives of the study is to ascertain the major role budgets play in the achievement of profitability for an organization 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 the population of the study consists of 40 managers. Data were obtained through personal interview and the administration of questionnaires as well as secondary data. Data collected were subjected to chi-square test in order to prove or disprove hypotheses therein. The analysis of findings indicates that Emenite Nigeria Limited has a formal system of budgeting and does attach incentives for the attainment of budgetary goals. The paper recommend that jobs should be thoroughly scheduled and duties precisely defined and described.

1.1 BACKGROUND TO 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.
Nweze (2004) see Budget as 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. 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. Budgetary control is the establishment of policies and the periodic review or comparison of the actual result with the budgeted performance 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 the 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 decision 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 background, 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.

1.2 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 making researches take place every organization has to take risks.
Though accounting information may reduce the unpredictability of even 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 significances 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 an ended to fall into line with changing activities.
2) Following a budget to rigidly can restrict an organization’s 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 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 becomes to anticipate bow general economic conditions will affect the business of the company.