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Full Project – AN EVALUATION OF BUDGETS AND BUDGETARY CONTROL SYSTEMS IN MEDIUM SCALE INDUSTRIES

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Any organization whether public or private, that fail to plan is planning for failure, so therefore planning can be defined as the process of establishing and clarifying objectives and goals and determing the policies the policies and procedures necessary to meet these objectives and goals. This study is to bring light into different budgetary systems as being adopted in the medium scale industries. As budgetary is made up of budgetary planning as well as budgetary control. Accountants and managers of business need to ensure that emphasis on control of plans comparing actual operation against planned to identify variance upon which corrective action can take place especially under this economic condition have to be maintained.

For the past years, Nigeria has been experiencing economic fluctuation which has led to un table economic activities. Therefore, this has incapacitated the budgeting system adopted in various medium scale industries and as a result has great impact on the budgetary control due to discrepancy in variances resulted into. As a matter of fact, this has a great effect on profit of the medium scale industries.

According to chartered institute of management Accountant (CIMA) budgetary control could be defined as “the establishment of budgets relating the responsibilities of executives to the requirement of a policy, and the continuous comparism of actual performance with budgeted result either to secure by individual actions, the objectives of such policies on to provide a basis for its” revision.

It is therefore the responsibility of the management to ensure that all the variance functions of organization are co-cordinated by preparing plans of actions for future period.

These detailed plans are usually referred to as budgets.

Budgetary control and standard costing techniques are regarded as the two principal control techniques at the disposal of the management accountant when evaluating the budgetary system of any set-up.

This is because both techniques involve.

a) Setting up target

b) Accumulation of historical cost

c) Comparing actual result with targets.

d) Taking corrective measures in the variance highlighted.

Hopefully, this study will be of immense contribution to medium scale industries in Nigeria in widening their knowledge as regards budgetary control and the for adopting appropriate budgeting system in a particular economic condition.

1.2 STATEMENT OF THE STUDY

Medium scale industries world-over are faced with the problem of budgetary system. The problem is facing suitable system of budgetary as regards different sectors of operation that will not have adverse effect on the budgeted income of a manufacturing industry in medium scale as well as taking necessary corrective measures on the variance highlighted consequently to reduce deviation from standard set.

Whether a medium scale industry is adopting fixed, flexible, control or rolling and programmer planning system of budgeting, more important for satisfactory control, budget requires regular review and modification to reflect changing conditions in the business environment.

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