CASH BUDGETING AS A BASIS FOR DECISION MAKING.

(A CASE STUDY OF AGUATA LOCAL GOVERNMENT AREA).

ABSTRACT

 

The research project was on cash budgeting as a basis for decision making (A case study of Aguata Local Government Area).

The whole work has been divided into five chapters.

Chapter one, Introduces the project

Chapter two, talks on literature review

Chapter three takes care of the methodology

Chapter four is about data analysis and

Chapter five is about summary, conclusion and recommendation.

In carrying out this project the researcher applied two pronged approaches to sounding of data.

The two approaches were the primary and secondary source of data collection.

In case of the primary approach researcher developed a list of questionnaire which she distributed to respondents.  The second data collection utilized library research, textbooks, journals and unpublished lecturers.  The questionnaire is attached as an appendix on the end of the work.

The data were analysed in form of hypothesis by using chi-square form of analysis the researcher found out that some project were started and abandoned half way while some other establishments adhere strictly to their cash budgets.

In her conclusion, the researcher said that cash budgeting is an important management tool both in public and private sectors.

Finally, the researcher recommended that orientations programme should be organised for new staff, that modern accounting equipments should be bought and put in use, that monthly cash budget should be introduced to take care of fluctuations in the economy and that management should install effective financial rewards as motivation towards meeting the organisations budget objectives.

PROPOSALS

 

In management audit they attempted to aid the management of the organisation by providing it with information and analysis useful in the process of control.

Management audit can also be significant in financial accounting area.

For many year now, stockholders, potential investors and other interested parties have been concerned with the annual reports of major co-operations and the attached letter from the president of the corporation.

Accountants have been attempting to deal with this problem for some years now and many proposals have been presented to which management audit is the one that I think that has the greatest potential for the future.  For both internal and external reporting purposes.

Who are capable for appraising performance both for accounting data and management analysis.  If this appraisal were made and an opinion rendered, the management audit would be of significant benefit to internal and external parties alike.

The purpose of the audit is being the attestation of management’s representations of an independent examiner.  By attestation I refer tot he reliability of management statements regarding its own decisions as proven by an independent third party.

The auditor’s financial statement examines the performance of the company accountable tot he stockholders for its decision.

Also management audit is a way of evaluating the performance of management in regard tot he decisions made, the efficiency of its operating and the attainment of corporate goals.

To this date, there has been little empirical research to determine the potential value of the management audit to users of the willingness of management audit process.

However, the management audit concepts it carefully designed could prove to be a most important development in the management appraisal field.  With a view to improving management efficiency.

This research is intended to investigate the extend to which management auditing is applied by organization in Nigeria.

For example it is utilized by organisation as a tool of improving management efficiency made.

This research involves, library work, periodicals and consulted published professional journals.

CHAPTER ONE

1.1     Introduction`

1.2     Statement of problem

1.3     Purpose of study

• Significance of study
• Scope and limitation
• Formation of hypothesis
• Definition of terms

Brief history of aguata local government area

Reference

 

CHAPTER TWO

• Review of related literature
• Budgeting as a decision-making tool
• Benefits/advantages of cash budgeting
• Preparation of cash budget
• Functions of the budget committee
• Stages of cash budget preparation
• Guideline for cash budget preparation
• Objective of cash budgeting
• Essential of budgeting

Reference

 

 

 

CHAPTER THREE

• Research design
• Sample size
• Method of data collection
• Method of data analysis tool
• Decision rule chi-square

Reference

 

CHAPTER FOUR

4.1     PRESENTATION AND ANALYSIS OF DATA

 

CHAPTER FIVE

• Summary
• Finding
• Recommendation
• Conclusion

Bibliography

Questionnaire

 

 

CHAPTER ONE

 

• INTRODUCTION

“For which of you desiring to build a tower does not first      sit and account the cost whether he has enough to complete it” (Lk. 14:28).

Every rational economic unit has some objectives to attain. Individuals, corporate bodies or governments have     objectives to achieve.  To achieve their respective objectives,           resources have to be made available.  Unfortunately nature did       not distribute her resources abundantly, whilst objectives and        needs are numerous and varied as there are various economic           units.  But the means (that is resources) to satisfy those needs        are very scarce.  Thus one has to utilize his available resources   effectively in order to realise what one want.  To maximize the    objective of an economic unit requires that one has to plan.

Planning, therefore is the process of determining the future    course of action in order to attain a desired objective or a set      goal.  A business enterprise may have as its objective the           erection of an addition factory in say, seven years time.  It     therefore draws up a plan to accomplish the task it has set for itself.

Because finance is scarce, thus each year the enterprise has to plan towards the building of the factory.  This yearly explain is         known as budgeting – a subset of corporate plan.

To a lay man, budget is just an estimate of how to spend money.  To the government budget is an estimate of a plan of     how resources are going to be supplied and utilized stated a quantitative and monetary terms within a specified period.

To accountant therefore budget is a quantitative statement    in financial terms, prepared for a specific period, it may be one       year for the realization of enterprise set goals.  It is thus a very    important decision-making instrument.

A budget is defined as a financial or quantitative statement,   prepared and approved prior to a defined period of time, of the      policy to be pursued for the purpose of attaining a given objective.

(A budget is the conversion usually by segments and on short range basis of plan into figures, an accounting as it were for the future).

A comprehensive budget is made up of functional or sub-      budgets.  Some of them are, sales budget, production budget,      material purchase budget, factory cost budget, selling and administrative budgets, capital expenditure budget etc.

All these functional budget are summarized and compressed in       one budget called the MATER BUDGET.

This is defined as a total debuget in which are packaged in    one statement the sale; expenses on production, capital         movement on land, equipment and cash budgets of an organization.

 

CASH BUDGET

Since cash is the most active financial account in a business, the key in preparing a financial budget is therefore, a forecast of cash flows leading to a cash budget.  A cash budget is one of the most important budgets prepared in an organisation.  It shows in summary form, the expected cash receipt and expected cash payment during the budget period, liquidity and cash flow management are key successful operations of any organisation and it is with good reason that cash budget should receive close attention from accountants and managers.  A cash budget is defined as the planed cash position by interim period for a specific time span” it consists of two parts.

1. The planned cash receipt (inflows)
2. Planed cash disbursements (outflows)

It is concerned with ways to speed up the inflow of cash, ways to delay outflow of cash, sources of cash and temporary uses of excess cash²

Cash budget shows the effect of the budget activities selling, buying, paying wages, investing in capital equipment and so on, on the cash flow of an organisation, it is a continuous activity with budgets being rolled forwards as time progress³.

Cash budget are prepared in order to ensure that there will be just sufficient cash in hand to cope adequately with budgeted activities.  The cash budget may show that there is likely to be a deficiency of cash in some future period in which cash over draft or loans will have to be arranged or activities curtailed or alternately the budget may show that there is likely to be cash surplus in which case appropriate investment or use for the surplus can be planned rather than merely leaving the cash idle in current account.

 

• STATEMENT OF PROBLEM

Budget is one of the controlling instrument by Management.

It is a plan or estimate to be attained by an enterprise.  The problem is why budget goals in some cases failed to be realised.  It is because of insufficient capital.  There are numerous needs but resources to satisfy these need are very scarce.  It is with the view to find solution to these problems that the researcher has undertaken this study with Aguata Local Government Area as a cash study.

 

• PURPOSE OF STUDY

This study is embark upon in order to assist organizations and other interested groups who use cash budget in decision makings.  Infact the objectives of this research are: To inform an organisation of its cash position at any point in time.  To explain how situational variable could effect budget goals and to point out budget limitations.

• SIGNIFICANCE OF STUDY

The significance of the cash budgeting are:

1. Cash budgeting instills in executive as well as their sub-ordinates the habit of basing decision on investigations studies and research.
2. It provides the yard stick for control of operations is a business firm or any organisation.
3. It makes possible the control over operation, revenue and cost.

 

• SCOPE AND LIMITAITON

In carrying out this work the researcher encounter some constraints.

 

1. Money: A huge amount of money was needed in printing out the questionnaires and equally large amount of money was needed in shuttling between one office and the other in distributing the questionnaires and in collecting them back.

 

1. Time: The time allotted for the research work was not enough as to enable the research give an in-depth treatment to is.

 

1. Low Response by the respondents: Some of the respondents would tell you to come and collect the questionnaire in about two days time, only to be met with their absence on the day appointed.

Then to reduce this constraints made the researcher to

chose Aguata Local Government Area which is nearness as a scope of study.

 

• FORMATION OF HYPOTHESIS

Based on the statement of the problem the following

hypothesis has been formulated.

 

1. Ho: my organization has been operating a system of cash budgeting.

HA:   My organisation has not been operating a system of cash budgeting.

 

1. HO: Operating of cash budgeting in my organisation has been continuous

HA:   Operating of cash budgeting in my organisation has not been continuos.

 

1. HO: If my organisation experiences any cash budget surplus, it invests it to field income

HA:   If any organisation experiences any cash budget surplus, it does not invest.

 

• DEFINITION OF TERMS

 

CASH:                 Money inform of coins and notes rather

than cheques.

 

BUDGET:            A financial summary of estimated income and expense of a government, business or household for a given period of time, usually one year.

CASHFLOW:       The flowing of money into a business (as income and out of business wages materials).

 

MANAGEMENT:         The body of these in positions of

administrative authority.

CREDITORS:      Persons, group of organisation to when money is owned.

 

DEBTORS: Person, group or organisation that owns money.

 

SURPLUS: Amount left over after one has used all that one needs amount by which money received is greater than money spent.

 

DECIFIT:             Amount by which something especially sum of  money is too small.

 

 

 

          BRIEF HISTORY OF AGUATA LOCAL GOVERNMENT       AREA

Aguata Local Government Area was one of the oldest Local Governments in the Eastern Nigeria.  It was created by then colonial master through the indirect rule system.  The came and sought for a land to build and administrative centre to facilitate easy administration and bring their government nearer tot he people that was the year 1918.  A renounced traditional rules and prominent warrant Chief Ezeabasili (Gbulie Aku 1 of Isuofia) showed them a virgin land that is now the headquarter of Aguata Local Government Area to build according to him their temporal office which thought would be temporal.  The district officer (D.O) as he was called then accepted the offer with good faith and started the building.

The district officer was told that the name should be named Aguata meaning land of grasses.  With advent of fine the site had undergone many changes.  Now the headquarters is now an attraction centre with many magnificent buildings here and there.

By then the towns that made up the local government were forty-five (45) in number.  After the independence many of them agitated to carve out their own local government out of their mother local government.

The people of Orumba was granted an autonomy in 1988 by then government of Col. Nnaemeka Akonobi.  Again it was spitted into Orumba North and Orumba South in 1990.

Presently the Aguata Local Government Area is made up of  fourteen (14) town namely:

Achina, Aguluezechukwu, Akpo, Amesi, Ekwuluobia, Ezinifite, Igbougwu, Ikenga, Iusofia, Nkgologwu, Oraeri, Uga, Umuona, Umuchu..  Almost all these communities have one or more secondary school many commercial schools (both approved and inspected, but yet to be approved, are more than 100 primary schools and nursery school.

The Local Government area is bounded in the nest by Anaocha Local Government Area and in the Eastern part by Orumba North Local Government Area.  in its Northern part Anaocha Local Government area on the boundary.  While Ideato Local Government of Imo State is on its southern part.

The Local Government Area is made up of department namely, health and agricultural department and finance department.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REFERENCE

Buter C. I.                      Principles of cost accountancy

Cassell limited, London,

4^th Edition 1973 pg. 467

 

Howard B. B                 Introduction to Business Finance

And Uption M.              Mc. Grawhill Book Company

Incorporated American

1^st Edition, 1953,pg. 169

 

Monwuba A. O              Principles and practice of cost accounting Publisher – Enugu Nigeria

1^st Edition, 1995 pg. 150

 

Enclychlopedia:             Americana Enclyclopedia Vol. 5

new standard Enclyclopedia Vol. 3 pg. 484.

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