The Impact of Budgetary Control on the Performance of Nigerian Manufacturing Companies
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Budgeting is a planning process which underlines predicting and quantifying the future in financial terms and predicting the future needs for finance. Aside from the planning role of budgeting, numerous articles on management accounting constantly stress the multi-purpose role of budgeting in business organization. Budgeting is used for forecasting, planning, coordination, communication, control and motivation. In the past few decades, considerable attention has been paid in particular to the role of management control of budgeting (Otley & Pollanen, 2000).
In order to reveal the nature of budgeting at business organizational level, it would be best to begin by comparing budgeting with accounting. Budgeting and accounting have different meanings among managers, planners, and the personnel who use these. Both are critical components that must interact to achieve the goals and objectives of an organization. Accounting is a system used to record, classify, and summarize business operation (Meigs, 1996). The role of keeping the financial information and on-going analysis necessary to provide management and outside interests with the facts necessary for decision, is also considered as accounting (Grigg, 1988).
Relying on certain standards and GAAP (General Accepted Accounting Principles), the accountant of a company develops and reports data to measure firm performance; to assess its financial position, to comply with and file reports needed by securities regulators; to file and pay taxes; and to prepare the balance sheet, financial statements, and the cash flow of the company to recognize sales revenue, expenses etc. when they are incurred. Therefore, accountants provide accounting information used for individuals external to an organization such as shareholders, customers, suppliers, tax authorities, as well as for employees (so-called financial accounts) and internal managers of an organization
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Budgeting is a planning process which underlines predicting and quantifying the future in financial terms and predicting the future needs for finance. Aside from the planning role of budgeting, numerous articles on management accounting constantly stress the multi-purpose role of budgeting in business organization. Budgeting is used for forecasting, planning, coordination, communication, control and motivation. In the past few decades, considerable attention has been paid in particular to the role of management control of budgeting (Otley & Pollanen, 2000).
In order to reveal the nature of budgeting at business organizational level, it would be best to begin by comparing budgeting with accounting. Budgeting and accounting have different meanings among managers, planners, and the personnel who use these. Both are critical components that must interact to achieve the goals and objectives of an organization. Accounting is a system used to record, classify, and summarize business operation (Meigs, 1996). The role of keeping the financial information and on-going analysis necessary to provide management and outside interests with the facts necessary for decision, is also considered as accounting (Grigg, 1988).
Relying on certain standards and GAAP (General Accepted Accounting Principles), the accountant of a company develops and reports data to measure firm performance; to assess its financial position, to comply with and file reports needed by securities regulators; to file and pay taxes; and to prepare the balance sheet, financial statements, and the cash flow of the company to recognize sales revenue, expenses etc. when they are incurred. Therefore, accountants provide accounting information used for individuals external to an organization such as shareholders, customers, suppliers, tax authorities, as well as for employees (so-called financial accounts) and internal managers of an organization
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