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EFFECTS OF BUDGETING AND BUDGETARY CONTROL IN EXTRACTING INDUSTRY (A CASE STUDY OF SHELL CORPERATION OF NIGERIA)

Abstract

The main aim of this write up is to throw more light on the review of budgeting control in a extracting industry. This research purely base on budget as an instrument of control in an organization and also as a means of highlighting the role of budget in any establishment and society at large. Data were collected for this research work were from both secondary and primary source. With the population of 180,questionnaire were administered and interview conducted for a sample size of 180 persons made up of staffs of the corporation .in any attempt to make the research meaningful and comprehensive the researcher has to divide the entire work into five chapters.which comprises of the deal with the introduction where the researcher give a brief discussion of the concept statement of problem, limitation and scope of the study.and also comprises of the literature review which deals with definitions of term classification, important of the subject matter “budget” with the following chapter deals on research methodology which explains the research design and also forms the basis for data collection.also states the analysis and interpretation of data and also shows that the hypothesis was tested, the concluding chapter throws more light on the work by summarizing the work and given the recommendation.

 

CHAPTER ONE

1.1 Background to the Study

Today the important of budget and budgetary control can never be over emphasized. Thus for survival of any oil cooperation, management need to embark on budget to effect proper planning and control. In this view, budgeting can be seen as a process of planning and control. Proper budgeting can never affect efficient plans of an organization without control. Control as it were is an important tool which must be priced to keep in check with the plans of the firms and for correction of any deviation from the stipulated plan of the organization in question. Hence a budgetary control comprises of both plan of operation with the scope of the plan. In pursuit to this, data were collected from journals and related works. In consequent writings it reviews the response of people and it was made known through questionnaires that the factors that affect the company’s profitability most in general economic conditions in the contrary as the people stated that cash budget is the best type of budget. For any cooperation such as multi-national oil company i.e. shell cooperation, would want to succeed it business executives must make use of budgetary control measure to avoid failure in business.

They are different classes and types of budget for different entities i.e. fixed budget, Flexible budget, Master budget, Zero budget and annual budget for government entities. It should be observed that whatever the class or structure of a budget they are used for maximizing managerial efficiency and also to ensure that the activities of the cooperation are not left to chance. In organization the introduction of budget and budgetary control systems compels members of the cooperation from the top hierarchy to the bottom to plan ahead this is undoubtedly paramount owing to the higher level of uncertainty facing present day managers and accountant. Budgets formulate expected performance and express managerial target which gives meaning and direction to the operation in an organization. Budgets are established to guide action within a defined period. At the end of the period the actual result are compared with the budgetary performance, any discrepancies otherwise known as variance is analyzed for the purpose of showing the cause of such discrepancy and initially informed decision to prevent re-occurrence. These variance that could be favorable are of importance to the day-to-day existence of any organization.

A budget is an agreed plan of action used to provide directions and coordination giving more structure to any organization as well as motivation of staff to achieve it basic objective performance management is described as the process of quantifying the efficiency and effectiveness of an action. To achieve performance manager or top executives have to be in control.

Types of Control arm referring to are

1. Financial control

2. Budgetary control

 

1.2 Statement of Problem

Budget is a managerial aid to planning and controlling the operations of any cooperation, such as planning and controlling involve forecasting into the unforeseeable future an attempt to ensure that the organization is sustained, virtually in all organization managers and executives assumes managerial role of planning and controlling their operation with the use of budgeting techniques which enables them to stand the test of competition among other industries.

For these reason the researcher has carefully observed that the following problem would emerge in an organization and some of these problems arises from the following;

1) Budgetary control can be seen as pressure device imposed by management to attain its objectives thus resulting to

i. Bad labour relations.

ii. Inaccurate record keeping.

2) Departmental conflicts arises from

i. Disputes over resource allocation method.

ii. Department blaming each other if targeted objectives are not being attained.

iii. Conflicting objectives.

3) It’s difficult to reconcile personnel and individual cooperate goal.

4) Waste arises as managers adopt the view we had better spend it or we will lose it. This sometimes compelled with entire building in order to enhance the prestige of a department.

5) Managers may over estimate cost so that they will not be blamed in the future, should they over spend.

6) Organization activities will be characterized by planlessness event will be left to chance and the entire organization would lose directions which could result to organizational inefficiency.

7) They will be no yard-stick against which actual result can be measured and this management will be tempted to the complacent with any level of performance.


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