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BUDGET AND BUDGETARY CONTROL
IN THE BANKING INDUSTRY (A CASE STUDY OF ACCESS BANK PLC)
ABSTRACT
The worldwide use of budgets in one form or the other and its
inherent problems is the focal point of my interest in this study.
It is one thing to plan a budget using the best projected
figure; it is another thing to ensure that the process of establishing lie
budget is both highly efficient and effective in accomplishing the set
objective. This is simple terms in basically what budgetary control entails.
Therefore budgeting as a tool of planning and control
expressed in financial terms based on predetermined objectives must represent
what is likely to happen after a careful balance has been struck between the
ambition of management and the constraints facing the business.
TABLE OF CONTENTS
Chapter One
1.1 Introduction
1.2 Historical
Background
1.3 Statement of
Problems
1.4 Purpose of
Study
1.5 Significant of
the study
1.6 Scope and
Limitation of Study
1.7 Research
Methodology
1.8 Research
Questions
1.9 Research
Hypothesis
1.10 Definition of
terms
Chapter Two
2.0 Literature Review
2.1 Types of Budgets
2.2 Budgetary Control
2.3 Budgetary control system
2.4 Corporate Planning
2.5 Management Control system
2.6 Budgetary Process
2.7 Budgeting Improvement Techniques
2.8 Problems Associated with Budgeting
2.9 Benefits of Budgeting
2.10 The Concept of Budgeting
Chapter Three
3.1 Research
Methodology
3.2 Introduction
3.3 Research Design
3.4 Sources of Data
3.5 Population and
Samples Size
3.6 Samples and
Sampling Technique
3.7 Research
Instrument and Administration
3.6 Method of Data
Analysis
Chapter Four
Presentation, Analysis and Interpretation of Data
4.1 Introduction
4.2 Presentation of Data
Chapter Five
Summary, Conclusions and Recommendations
Summary of Findings
Conclusions
Recommendations
Bibliography
Questionnaire
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Budgeting is fundamental to every project management. It is
imperative because it is a means to ensure that desired organizations
objectives are met. This is also accomplished by exercising control over scares
resources. Strategically, for an organization to run effectively, there are
four critical factors: organizations objectives of where it intends to go,
plans or how it intends to accomplish such objectives, coordination or whether
individual plans fit in the overall organization objectives and control or
whether operation relating to that period. With this, budgeting and budgetary
control are the devices that an organization makes use of for all these
purposes.
Budgeting is an integral part of planning and coordinating,
it is becoming increasingly important. While control is comparing where you are
supposed to be so that corrective action can be taken when there is a
deviation. When there is no plan, there is no control.
It is almost for an organization to exist and survive without
some sort of budget. To be without one is like a ship without cores, cross
along while being unaware of how far of the route it is or which rock it is
likely to hit, only luck can save it from a catastrophic end and misadventure.
Individuals in their private affairs employ the use of
budgets in their day to day activities. The practice of budgeting and its
control is now established on a world-wide basis and it's still growing
rapidly. Almost every company in Nigeria, indeed in the world at large has its
budgeting and budgetary department.
In general terms, a budget is a plan. It also forms the
standard with which to measure the actual achievement of people, departments,
firms and even governments.
A budget can be viewed as the plan of the dominant
individuals in an organization expressed in monetary terms and subject to the
constraint imposed by other participant and the environment indicating how the
available resources may be utilized to achieve whatever the dominant
individuals agree to be the organization's priorities.
It is one thing to plan a budget using the best project
figures; it is another thing to ensure that the process of establishing the
budget is both highly efficient and effective; in accomplishing the set
objectives. Thus, the simple term is basically what budgetary control entails.
All of this is necessitated by the economic concept of
Scarcity. Though “scarcity” is a relative term, it is right to note that
resources are scarce, consequently, they serve as constraints to management, in
terms of materials, manpower, money and time. Resources must however be
utilized in order to achieve an organization's primary and secondary
objectives, (that of profit maximization and survival, growth, market share
etc.).However budgeting as a tool of planning and control expressed in
financial terms, based on predetermined objectives must represent what is
likely to happen after a careful balance has been stuck between the ambition of
management and the constraints facing the business.
1.2 HISTORICAL
BACKGROUND
The Access bank was incorporated as a private limited
liability company on February 8th, 1989. The bank was converted to a public
limited liability company on March 24th, 1998 and its shares were listed on the
Nigeria Stock Exchange on November 18th, 1998, the bank was issued a universal
banking licensed by the Central Bank of Nigeria on February 5th, 2001.
Effective November 18t, 2005, the Bank acquired two existing
and functional banks of Nigeria, Capital bank International PIc and Marina
International Bank Limited through share exchange considerable and continue
trading as Access Bank PIc.
The bank established a foreign subsidiary known as Access
bank (Gambia) Limited on June 27th, 2006 and fide subsidiary commenced
operation on October 27th, 2006 on receipt of Central Bank, of (Gambia) Limited
have not been consolidated because of the Director are of the opinion that it
would be of no real value to the members; in view of insignificant amount
involved. The subsidiary's year end is December and it has only traded for two
months up to December 31st, 2006.
In October, 2006, the Bank carried out a share reconstruction
exercise to reduce the number of issued and paid ordinary share of the bank by
50%. The restricted shares were allotted to shareholders as fill in the ratio
of 1 ordinary share for 2 ordinary share held. The new shares were revalued
such that there was no loss of Values to shareholder as a result at the share
reconstruction.
The principal activity of the Bank continues to be the
provision of money market activities, retail banking granting of loans and
advances, equipment leasing corporate finance and foreign exchange operation.
1.3 STATEMENT OF PROBLEMS
In an organization, standards of performance need to be set
to act as guidelines in order to reach successful the budget plan. It is
imperative that each manager feel that the budget for his section is realistic,
relevant and not imposed upon him.
However, in practice, this is not always the case. Timing of
expenditure, feedback, problems and human factors in budgeting pose a threat
which hinders the process of providing accurate and suitable measures of
performance and the preparation of performance reports that highlight areas of
concern which eventually lead to wastage.
Statement of problems is as follows:
1. There
may be too much reliance on the technique as a substitute for good management.
2. The
budgetary system, perhaps because of undue pressure or poor human relations may
cause antagonism and decrease motivation.
3.
Budgets are develop round existing organization structure and
department, which may be inappropriate for 'current conditions, and may not
reflect' the underlying economic realities.
4. Lack
of good communication system may be an underling factor affecting budget
performance.
1.4 PURPOSES OF STUDY
The aims and objectives of this study are to:
1. Study
and examine the effectiveness of budgeting and how it is carried out at Access
Bank PIc.
2. To
examine the budgeting policy and budgetary techniques actually in place.
3. To highlight some
of the problems inherent in the preparation and implementation of budgetary
control encountered by Access Bank PIc.
4. To what extent is
the objective of control measures being achieved?
5. Who are the
principal actors involved in budgeting administration at Access Bank PIc?
1.5 RESEARCH QUESTIONS
The following research question will be answered during the
course of this research project.
i.) What is the
relationship between Budget and Budgetary control in the Banking Industry?
ii.) How Technology
does affects budget performance and measurement?
iii.) How does human factors affect the
preparation and implementation of budgets?
iv.) What are the problems encountered on preparation and
implementation of budgeting in Access Bank?
1.6 RESEARCH HYPOTHESES
The following hypothesis will be tested:
Ho: Technology affects
budget performance and measurement.
Hi: Technology does
not affect budget performance and measurement.
Ho: Human Factors
affect the preparation and implementation of budgets.
Hi: Human factors do
not affect the preparation and implementation of budgets
1.7 SIGNIFICANT OF THE STUDY
The worldwide use of budgets in one form or the other end its
inherent problems is the focal point of my interest in this study.
A study of this nature is of immense benefit not only to the
Nigeria government and the economy but also to all stakeholdersin the financial
system. It is of great importance to the banking industry as it offers
strategies for successful implementation of budgets and budgetary control.
The findings of this study will improve the effectiveness of
Access Bank particularly and the banking industry in general and make it more
important creative tool for management rather than merely a means of expressing
objectives.
This study will be benefit to me as a student as it will
serve as a reference tool on related subject area. The government and, the
economy will also be beneficiaries as any improvements to the banking industry
impacts greatly on the economy.
It is also to create a citation or reference to the major
function of managing, coordinating, deployment and control over resources to
realize the maximum objectives of the organization.
1.8 SCOPE AND
LIMITATION OF STUDY
This study is limited to Nigeria, hence its results may not
be entirely regarded as universal, but Nigeria is a dynamic country
representative of any 3rdworld nation. Limitation would also arise due to
restriction on confidential information.
Extensive study of the general population or universe of the
banking industry in respect to commercial banks is not feasible.
The scope of this study shall therefore be concentrated on
Access
Bank PIc, Head office, Victoria Island; Lagos.
1.9 DEFINITION OF
TERMS
MOTIVATION:- It is inner state that energies or activates and
directs behavior towards goals. Motivation involves all the activities which
give rise to the behavior aimed at satisfying one or another kind of want.
PERFORMANCE STANDARD:- This IS known to be the expected level
of performance in each area in the organization. It is also analyzed how well
an employee is expected to perform his duties so as to achieve the
organization's aim.
PROMOTION:- This indicates a move to a more important job or
rank in a company or organization which involves greater responsibility, skill,
status and higher rate pay.
Promotion also involves the movement of a worker to a more
important position with greater responsibility.
PRODUCTIVITY:- This is the rate at which a company produces
goods and the amount produce compared with how much time and amount which was
used for the production. It is also measured of how resource are brought
together and utilized for accomplishing a set of results.
PERFORMANCE:- This is defined as multiplication function of
motivation and ability.
EFFECTIVENESS:- This refers to the extent to which output is
in line with organizational objectives.
MANAGEMENT:- This is defined as the art, science, or process
of combining and utilizing the physical resources and human resources of the
organization to achieve the objective for which that organization was
established.
PROFITABILITY:- This may not result to any loss of production
hour, net production times, no accidental or breakdown and with the standards
or specification of particular products met.
EMPLOYEES:- These are the people engaged in physical and
mental activities for which they are economic reward although this may not be
the primary aim.
ORGANIZATION:- This is a form of organized industrial
activity engaged in commercial or industrial activity providing goods and
services to the society.
BUDGETS:- A budget is a financial and or quantitative
statement prepared and approved prior to a defined period of timer of the
policy to be achieved during that period for the purpose of attaining a given
objectives.
BUDGETARY PLANNING:- This contains the goals and aspirations
and serves as a control mechanism on the organization goal.
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