Thursday, 18 August 2016
BUDGETING AS AN INSTRUMENT OF INTERNAL CONTROL IN A MANUFACTURING ORGANIZATION
1.1 BACKGROUND OF THE STUDY
According to Enudu (1999), the business environment is characterized by a lot of uncertainties ranging from such factors as: Economic environment, political and legal factors, social environment, supply and demand forces, competition, consumers' attitude and technological changes.
A critical look at the performances of some of these manufacturing business organizations will reveal a lot of business failures as a result of lack of proper planning against these uncertainties.
According to Drury (2000), proper planning of business helps in reducing uncertainties thereby providing the management of these enterprises with a clear direction by determining their courses of actions in advance.
According to Pandey (2010), for any enterprise to achieve these goals and objectives, they must be managed effectively and efficiently. Management is efficient if it is able to accomplish the objectives of the enterprise and becomes effective when it accomplishes the objectives with minimum efforts and costs. One of the ways in which the management can achieve these objectives is though profit planning and control or budgeting.
According to Nweze (2011), Budgeting in its true word is the design of the future state of an entity and the effective ways of bringing it about. Budgeting or planning involves the determination of the future course of actions for accomplishing the objectives of the enterprise.
According to Lucey (2002), the main purpose of budget planning is to provide the necessary guidelines for making decisions. With the proper budget planning, the enterprise can no longer be under the mercy of whims of Fickle economic and social forces thereby relying on the ability to sense what is required. (Nweze 2011).
The value of budgeting control of any organization can never be over-emphasized as these organizations and companies have limited resources and these scarce resources impose limits on the number of extent and range of end result the organization was set out to achieve.
According to Nwoha and Ekwe (1999), some of these goals include maximizing profit or achieving some satisfactory level of performance, profit satisfaction achieving continual growth or ensuring the survival of the organization avoiding risk in making investment and performing a social services desired by others.
According to Nweze (2011), A budget therefore co-ordinates the separate plans of different departments in an organization be it manufacturing concerns or non-manufacturing concerns and provides means of bringing both the marketing, production and financial activities of the organization together. The proper co-ordination of the various activities of these organization especially manufacturing concerns by their management is the main concern of this study.
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