Thursday, 18 August 2016
EFFECTS OF BUDGETING AND BUDGETARY CONTROL IN EXTRACTING INDUSTRY
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.
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