CASH BUDGET: A TOOL FOR DECISION MAKING IN AN ORGANIZATION

(A CASE STUDY OF NIGERIA BOTTLING COMPANY, ONITSHA)

 

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ABSTRACT

This study examined cash budget a tool for decision making in business organization.  The purpose of cash budget is to facilitate and ensure that cash is available so that the company can operate effectively at the levels provided for in the other budgets. For effective management of decision making. The objective of this study was achieved by using the under mentioned Nigeria bottling company Onitsha as a case study. The survey research method was made possible through the administration of questionnaires which were distributed randomly to management and supervisory level staff and some accounting staffs their responses where collected form the respondents and then analyzed, using the percentage rate methods. The analysis of data and finding revealed that cash budget is an aid to effective management, impact positively on profitability and above all, it was greatly accepted and applied, through there were some factors that hindered their full implementations. Conclusively, it could be said that without cash budget organizational goals and objectives may not be achieved. Therefore, it is recommended that control should follow planning and variance should be reporting and corrective action taken immediately.

 

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

Title page

Approval page

Dedication

Acknowledgement

Abstract

Table of contents

CHAPTER ONE: INTRODUCTION

• Background of the study
• Statement of problem
• Objective of the study
• Research questions
• Hypothesis (if any)
• Significance of the study
• Scope of the study
• Assumption of the study(if any)
• Definition of terms

CHAPTER TWO: LITERATURE REVIEW

• Conceptual definition of budget
• Theoretical framework
• Current Literature review
• Summary of Literature review

CHAPTER THREE: RESEARCH METHODOLOGY

• Design of the study
• Area of the study
• Population of the study
• Sample size and sampling technique
• Instrument for data collection
• Validity of the Instrument
• Distribution and Retrieval of Instrument
• Method of data analysis

CHAPTER FOUR: DATA PRESENTATION  AND ANALYSIS

• Tabulation of Responses
• Testing of hypothesis
• Discussion of findings

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

• Summary of findings
• Conclusion
• Recommendation
• Limitation of the findings

References

Appendix A

Appendix B

Appendix C

Appendix D

Appendix E

 

 

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY:

Every rational economic unit has some objectives to attain, individual, corporate bodies in government 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 they are various economic units.

In order to make resources available, cash is needed, according to investopedia, cash is legal tender or corns that can be used to exchange goods, debt or services some time it can also incluces the value of assets that can be converted into cash immediately, as reported y a company.

Acoring to Shine Mat (15 June 2012): companies have those primary motives for holding cash and hey are:

The transaction motive

The precautionary motive

The speculative motive.

The transation motive enables firms and companies to conduct their ordinary business making purchases and sales. The precautionary motive depends on the predict ability of cash flow and the ability of company to borrow a short notice. This motive enable a firm to provide enough funds as a protection against unexpected opportunity that may arise. Moreover, sound working capital management require the maintenance of adequate amount of cash. The organization must plan towards its and this plan is know as budgeting a subset of corporate plan.

1.2     STATEMENT OF PROBLEM

Budget is one of the controlling instruments used by the management, it is a plan or estimate to be attained by an enterprise. In this study, efforts are made ot find solution to the following problems. The problem of why budget cases failed to be realized it is because of insufficient capital. Another problem that management face is their liability ot manage (long term) cash budget and forecast which may take up to two years, this is because of instability in the inflow and outflow of cash. Cash balances my fluctunate considerably within a single accounting period, there by making cash short tall that can put a company in serious jeiopardy. To solve this, it is quite common to create and maintain cash forecasts on a weekly basis. If there may be large or unusually cash balances indicated in the cash budget. these balances are dealt with in the financing budget where suitable investment is indicated for them.

 

• OBJECTIVE OF THE STUDY:

The main objective of this study is to investigate cash budget as tool for decision making in an organization specifically, the researcher wants to:

i         Determine where cash budget is actually a basis for decision making in an organization.

ii        Know the impact of conducting continuous cash budget

iii       The level of which cash budget has help organizations increasing more wealth and effective management

iv       How cash budget allows management to establish the amount of credit that it can extend to customers without beginning to have problem’s with liquidity.

v        Know how cash budget help the organization to avoid having a cash shortage during when you have numeral expenses.

vi       To know how management manages it inflow and out flow

1.4     RESEARCH QUESTIONS

i         Is cash budget actually basis for decision making in an organization?

ii        What impact is continuous cash budget is to management?

iii       Does cash budgets help organization to create wealth and run an effective management?

iv       Does cash budget help management to determine the amount of dividend or credit to be given to the customers?

v        How does cash budget help the management in avoiding having cash shortage?

1.5     Formation of Hypothesis

The following are formulated for the study Hypothesis 1

H0: Cash budget does not make decision making in business organization easy and reliable.

HI: Cash budget make decision making in business organization easy and reliable.

Hypothesis II

H0: Cash budget have not brought efficiency and effective decision making in business organization.

HI: Cash budget has brought efficiency and effective decision making in business organization.

1.6     Significance of the study

The significance of this study are:

• It provides the yardstick for control of operation’s in a business organization or any firm
• It provides reference material for others who might wish to conduct enquire into similar area.
• It makes possible the control over operation revenue and cost.
• It instills in executive as well as their sub-ordinates the habit of basing decision on investigating studies and research. It with widen the knowledge of the research on the subject matter.
• It generate and recommend to be government means of initiating the objectives of the cash budgeting.

1.7     SCOPE OF THE STUDY

The scope of this study is to analyze the cash budget tool for decision making in business organization especially that of Nigeria bottling Company Onitsha. The work is focused on Nigeria Bottling Company Onitsha due to certain obvious factors such as financial and time constraints and non-disclose of information by the management of the company.

1.8     DEFINITION OF TERMS

Budget: It is a future plan of action express in quantitative terms, financial or monetary terms. It is also defined as a financial and quantitative statement prepared and approved prior to a given period of time specifying the policies to be pursue for the attainment of some set of objectives. It might be include income expenditure and employment of capital.

Cash: It can be defined as those monetary items that are immediately available for use at any point in time. Cash can be refer to money in the physical form or currency such as bank notes and coins.

Accounting:

It is the process of recording, classifying, seleting, measuring, interpreting and communicating financial data or an organization to enable users make decision.

Budgeting:

It is a process, this means budgeting is a number of activities performed in order to prepare a budget. it is also the crafting of the plan for future events, applying laid down concepts for proper / implementation, monitoring, evaluation and control in order to achieve defined goal.

Cash budgeting:

This is a financial budget which is prepare in an organization, it shows in summary form the expected cash receipt and expected cash payment during the budget period.

1.9     HISTORY OF NIGERIA BOTTLING COMPY

Coca-cola first arrived in Nigeria in 1951. That same year, the Nigerian Bottling company Ltd (NBC) was incorporated to bottle and sell carbonated non-alcoholic beverages. NBC has the sole franchise to bottle coca-cola products in Nigeria.

Coca-cola was an instant hit with the Nigeria consumer and has remained so. Over the next six decades, NBC has continued on its journey keeping its promise of refreshing consumers, strengthening its communities, enriching the workplace land preserving the environment while recording many memorable milestones along the way. To mention a few.

1953:

Production of coca-cola began at a bottling facility in Ebute-metta, Lagos state. The same year the company opened its first bottling plant in Apapa.

1960:

The year Nigeria gained independence, NBC exceeded the one million case a year mark.

1961:

Commissioned its second bottling facility at Ibadan, Oyo state and rapidly expanded its operation over the next couple of years.

1972:

Listed its shares on the Nigerian stock Exchange and became a publicly quoted company

 

1991:

Acquired the Eva premium water and Schweppes brands.

2001:

Became a member fo the newly formed coca-cola Hellenic Bolling Company S.A Can anchor Bottling group with operations in 28 countries worldwide)

2003:

Launched the five alive juice brand

2004:

Launched pet packaging for its sparkling soft drinks category

2006:

Launched the energy drink, burn

2007:

Launched on-the-go can packaging or core brands coca-cola, fanta and sprite in 2006

2008:

Introduced the more environmentally friendly “ultra” glass packaging for its returnable glass Bottling product segments.

2010:

Today the operations stands at 13 facilities and 59 depots across the country.

2011:

The company was recognized for its corporate social responsibility activities as the most socially Responsibility Company in Nigeria and most environment friendly company at he social enterprise Reporting Awards. The company obtained Nigeria’s first food safety systems certification (FSSC) 22000.

From 2011 till date there is not new product in the company.

 

 

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BUDGETING AND BUDGETARY  CONTROL  AS  TOOLS FOR ACCOUNTABILITY  IN GOVERNMENT PARASTATALS

 

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	ABSTRACT
This research work was	focused on investigation on the use of budgeting
and  budgetary  control	as    tools  for  accountability  in  government

 

Parastatals. (A case study of Enugu State Housing Development Corporation). Budgetary control is a quantitative expression of plane of action prepare in advance of period to which it relate. The organization is face with the problem of lack of budgeting while planning and controlling their activities. The objective of the study is to determine if budgeting and budgetary control affect the quality of services delivery in government parastatals. The research also aims at determining if budgetary control contributes to the improvement of management efficiency and high productivity. Data were collected from primary and secondary source. Secondary source of data were collected from textbooks, periodic articles and journals. Questions were distributed as well as personal interviews with functional and departmental heads were conducted. The sample size of 60 were used and was chosen among the number of department / section using Bowleys proportional allocation formula Data were analyzed using table and simple percentage, hypothesis were tested using chi-square statistics. We discovered among other things that budgeting and budgetary control affect the quality of service delivery in government parastatals. It was also revealed that budgeting and budgetary control contributes to the improvement of management efficiency and high productivity. In line with the above, we recommend among other things that the budget plan and preparation should be a corporate duty of the unit heads with head of department in the corporation, improving legislation, realistic budget target. Adherence in the budgeting provision should be practiced by top management.

 

TABLE OF CONTENTS

 

CHAPTER ONE:

1.0     Key words / introduction.……………………………………………………1

• Background of the study .……………………………………………………1
• Statement of problem.…………………………………………….…………4
• Objective of the study.………………………………………………………4
• Research Question.……………………………………………………..……5
• Hypotheses of the study.……………………………………….……………5
• Significant of the study.………………………………………..……………6
• Scope and limitation .……………………………………………………..…7
• Definition of terms .…………………………………………………………8

CHAPTER   TWO

2.0     Review of related literature .……………………………….………………10

2.1     Budgeting and budgets.……………………………….……………………10

2.2     Current literature on theories models.……………………………….……..19

2.3     Empirical study.……… …………………….…….……..21

2.4     Features of budgets.… ……………….……..23

2.5     Budgetary control.…………… ………………..….……..37

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2.6     Innovation in the area of budget zero – based budgeting (Z.B.Z)…….……42

2.7     Advantage of zero based budgeting.……………………………………..44

2.8     Disadvantage of zero based budgeting .………… ……..44

 

CHAPTER  THREE:

3.0     Research Methodology.………………… ………..…..48

3.1     Research design.……………… ………………..……..48

3.2     Source of data .………………… ………………………..49

3.3     Population of the study.……………… ……….………………50

3.4     Sample / sampling technique.……………… …………..…..51

3.5     Instrument  for data collection .………… ……………………..53

3.6     Reliability / validity of  research instrument .………… …………54

3.7     Method of  data Analysis .……… ………………………….…54

3.8     Decision criterio validation of hypothesis .………………………55

CHAPTER FOUR:

4.0     Data Presentation  and Analysis .…………………………56

4.1     Data presentation.……………………………………..………………56

4.2     Testing Hypothesis .…………………………………..………75

CHAPTER  FIVE:

5.0     Summary of Findings / Conclusion and Recommendation ……..……….87

• Summary of Findings .…………………………………………………….87
• Conclusion .……………………………………………..………………88
• Recommendation .……………………………………….……………53

References…………………………………………………………91

Appendix 1.……………………………………………….………………93

Questionnaires .……………………………………………..……………94

	vi

                                          

 

 

                                      CHAPTER   ONE

          

  1.0       INTRODUCTION

 

  1.1       BACKGROUND OF THE STUDY

 

The efficiency and effectiveness of the operations of a business

 

depends on the control available to management in almost every business organization, there are a number of activities going on at the same time such as producing, purchasing, distributing, selling and financing a product. These are interrelated in such a way that they affect the attainment of the organization goals.

 

The institution of cost and management accountant(ICMA)defined budget as a financial or quantitative statement prepared and approved prior to defined period of time of the policy to be pursed during the period for the purpose of attaining a given objectives. It may include income, expenditure and the employment capital.

 

Therefore in order to achieve these objectives or goals, the

organization must economize resources and discover the means of achieving these goals. These goals can only be realized when the property planned use of available resource are controlled and co-ordinate effectively. Thus a system of managing a business by making forecast of the different

activities and applying a financial to each forecast becomes imperative. These forecasts

 

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Are guided by the information and adoption of planned system such as techniques in budgeting, variance analysis. Etc.

 

Pandy (2008) defines budgeting control as the establishment of departmental budget relating the responsibilities of the executive to the requirement of a policy, and the continuous comparison of actual budgeted result either to secure by individual actions. The objective of that policy is to provide a firm basis for its revision.

 

Osisoma, (2000) opined that budgeting is a systematic and formalized approach for accomplishing the planning, co-ordination and control responsibilities of management. It is a process of preparing in advance of the period to which it relates a summary statement of plans expressed in quantitative terms, which if utilized with sophistication and good judgment, would enhance the attainment of an organization’s objectives. A budget therefore, is a plan quantified in monetary terms, prepared and approved prior to a defined period of time, usually showing planned income to be generated and /or expenditure to be incurred during that period, and the capital to be employed to attain a given objectives.

 

A budgetary control is described by lacey, (2002) as a quantitative expression of a plan of action prepared in advance of the period to which it relates. Budget may be prepared for the business as a whole, for

 

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Departments, for functions such as sales and production, or for financial and resources items such as cash, capital expenditure, manpower, purchase. Etc. the process of preparing and agreeing budgets is a means of translating the overall objectives of the organization into detailed, feasible plans of action. It is therefore, germane to say that the level of importance that is attached in this plan and effort made in controlling the finance differ in organizations. Once the goals are set, which must be based on the detailed analysis of feasibility within the content of the political and social value the plans will enable it to strive towards its attachment.

 

Often than not when these plans are put into operation, conditions prevail which trends to cause deviation from the plan and corrective measures are always taken to steer the business back on the right track. The process already mentioned as it is applied entailed budget and its control. And to lend credence to goal congruence suitable techniques should be applied to specific areas that need special attention hence measurement of budgeted with actual to arrive at the finance cannot be over emphasized. A business is said to be on the right track if the outcome of the budgeted estimate is favorable as against the actual. The little that is said concerning this project has encompassed all avenues in which the subject can aid

 

4

 

 

management  decision,  rather  it  should  be  seen  as  a  guide  for  people

 

Business.

 

• STATEMENT OF THE PROBLEM

 

The growth of the business hinges, or better put, rests squarely units

 

Budgetary control system or techniques hence they are considered as vital tools in any business situation. This study then is aimed at assessing and evaluating the event to which budgetary control has been a tool for the growth and global realization of any organization.

 

Lack of budgets in planning and control has required in the indiscriminate use of fund meant for more viable activities. Again the inability of many companies to plan and accomplished budget goals is traceable to their inability to apply controls in their budget system.

 

Budgetary goals are not realized due to low level of understanding of the budget system by middle and low level of management staff. Other problems are shortage of stocks and shut down. These and many more are some of the problem of lack of budgeting control.

 

• OBJECTIVE OF THE STUDY

 

The primary purpose of this study is four fold. They include the

 

 

Following

 

5

 

 

1. To determine if budgeting and budgetary control affect the quality of service delivery in government parastatals.

 

1. To determine if there is a connection between the type of budget implemented and their actual performance.

 

• To determine whether or not budgetary controls as a management tools contribute to the improvement of management efficiency and high productivity.

 

1. To find out the use of the budgetary controls as an appraisal parameter for assessing managers budget.

 

• RESEARCH QUESTIONS

 

1. Does budgeting and budgetary controls affect the quantity of services delivery in government parastatals?

 

1. What are the connection between the type of budget implemented and their actual performance?

 

• How can budgetary control as management tools contribute to the improvement of management efficiency and high productivity?

 

1. How can budgetary control be used for assessing Manager’s budget?

 

                        

• HYPOTHESIS OF THE STUDY

 

1. H0: Budgeting and budgetary control does not affect the quantity of services delivery in government parastatals.

 

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H1:   Budgeting and budgetary control affect the quantity of

 

Services delivery in government parastatals.

 

2. H0: Budgeting and budgetary control does not contribute to the improvement of the management efficiency and high productivity.

 

H1: Budgeting and budgetary control contribute to the improvement of the management efficiency and high productivity.

 

3. H0: Budgeting and budgetary control is not used for assessing manager’s budget.

 

H1: Budgeting and budgetary control is used for assessing manager’s budget.

 

4. H0: There is no connection between the type of budget implemented and actual performance.

 

H1: There is connection between the type of budget implemented and actual performance.

 

• SIGNIFICANCE OF THE STUDY

 

Budgeting and Budgetary control is a function that is very important and of great significant to any of organization. It is not peculiar to only the manufacturing organization but also necessary to service of the government.

 

7

 

 

The study will contribute towards enhancing profits of the organization, business or an individual. It will help to control one’s income.

 

Budgeting is necessary to make matters simple and hence life easy to handle.

 

 

Budgeting guides people towards the allocation of money in different sectors, such as food, shelter, clothing, household expenses, medical care, utilities etc.

 

In case of an annual budget of a nation budgeting makes a blueprint of the overall funds that the concerned government will spend on various sectors, the kinds of tax that would be levied and how the prices of essential commodities would increase or decrease in the month ahead.

 

In summary, this study will be a guide to scholars, researchers or writers who may wish to carry further study on budget and its control apparatus.

 

1.7 SCOPE AND LIMITATION OF THE STUDY

 

This study is aimed at finding out the impact of budget and budgetary control in Enugu State Housing Development Corporation.

 

The limiting factors are that of availability of data which might be difficult to obtain following the trend of the attitude of Nigerians with regards to giving out information. Time constraints are also a limiting factor

 

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in undertaking this study. The availability time and short period of the study made it difficult for the researcher to carry out a wider and more through work on the issue, at the same time carryout academic activities.

 

Also literature on the topic as it relate to government parastatals

 

is very few.

 

1.8 DEFINITION OF TERMS

 

The following are defined in the work:

 

BUDGET: Budget simply means estimate of income and expenditure, which are planned by the organization for a specific future. In Britain, it means the annual statement made to the House of Commons by the Chancellor of the Exchequer, giving details of the government financial plans for the coming year.

 

BUDGETING CONTROL: This means a system of managing a business by making forecasts of the different activities and applying of financial value to each forecast. Actual performance is subsequently with the estimate.

 

BUDGETING PERIOD: The budget period coincides with accounting period. The period varies according to different organization.

 

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THE MASTER BUDGET: This is a total budget package which effectively combines in one statement, the sells, expenses, production and cash budget of an organization.

VARIANCE: This is the difference between the estimates and actual

 

Result.

 

 

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