BUDGET AS A TOOL FOR PLANNING AND CONTROLLING IN AN ORGANISATION. (A CASE STUDY OF HOTEL INDUSTRY IN LAGOS STATE NIGERIA)
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BUDGET AS A TOOL FOR
PLANNING AND CONTROLLING IN AN ORGANISATION. (A CASE STUDY OF HOTEL INDUSTRY IN
LAGOS STATE NIGERIA)
TABLE OF CONTENTS
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background to
the study
1.2 Statement of
the Problem
l.3 Purpose /
objective of the study
1.4 Research
questions
1.5 Research
hypotheses
1.6 Significance of
the study
1.7 Scope and
limitations of the study
1.8 Brief
description of selected hotels
References
CHAPTER TWO
2.0 LITERATURE
REVIEW
2.1 Introduction
2.2 The concept of
budgeting
2.3 Principles of
budgeting
2.4 Prerequisites
for effective
2.5 Budgetary
system
2.6 Budgetary
control
2.7 Behavioural
implications of budgeting
2.8 Types of
budgets
2.9 Budgeting
techniques
2.10 Dynamism
2.11 Dynamic
budgeting techniques
2.12 Budget and
strategy
CHAPTER 3
RESEARCH METHODOLOGY
3.0 INTRODUCTION
3.1 Restatement of
research questions and hypothesis
3.2 Research design
3.3 Sampling
procedure
3.4 Data collection
procedure
3.5 Questionnaire
design
3.6 Statistical
tools
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 INTRODUCTION
4.1 Characteristics
of the population
4.2 Presentation of
data
4.3 Analysis of
data
CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY
5.2 CONCLUSIONS
5.3 RECOMMENDATIONS
BIBLIOGRAPHY
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO
THE STUDY
There is the need for optimization of the scarce resources
available to organizations, that is available resources are to be put to their
most optimal or profitable use. Since these resources are scarce, a plan has to
be drawn to eliminate wastage and arbitrary resource allocation. This trend of
thought brings us to the "concept of budgeting".
An organization plans ahead in terms of sources of revenue
and avenues of expenditure within a specific time frame. Irrespective of the
fact that it is privately or publicly owned, organizations find it of utmost
importance to prepare budgets and put in place budgetary controls for the
purpose of achieving the best possible results.
Omolehinwa (2001 :309) defines budgeting as "the plan of
the dominant individuals in an organization expressed in monetary terms and
subject to the constraints imposed by other participants and the environment
indicating how the available resources may be utilized to achieve whatever the
dominant individuals agree to be the organization’s 'priorities'.
In real world policy- and decision-making, information is
intertwined with, and therefore reflects, interests and ideologies of various
stakeholders (Weiss 1983). The information-content of (performance) measurement
systems has an impact on how management and policy are defined, controlled,
reported on and legitimized (Bouckaert 1995:384).
Thus the information-content of budgetary control systems can
be part of strategies to create meaning, exercise control or establish
legitimacy. (Meyers 1994; Rubin 1997).
Schick (1996) identified three ideal-type budget functions:
control, management and planning and throughout the 20th century, other
functions have been added to those outlined by Schick, for instance achieving
savings or increasing accountability (Rubin 1996). As a result budget processes
have gradually accumulated functions (Caiden 1988). Contemporary budget systems
can thus be understood as multi-functional, multi-formatted and
multi-procedural phenomena. Budget reform then can be described as shifts in
functions, formats and procedures.
1.2 STATEMENT OF
THE PROBLEM
The focus on improving financial control has resulted in
introducing more sophisticated financial accounting techniques in
organizations, requiring long-term financial planning, and more comprehensive
financial statements and financial audits. The performance oriented reforms at
this level have focused on strategic and performance planning, aligning budget
formats to these performance plans, linking performance monitoring with accrual
and cost accounting and conducting performance audits.
It is a common practice for corporate bodies to prepare their
yearly budget proposals for approval, the budget approval in most cases is
hinged on the performance and actualization of the previous years' budgets.
However the underlying problem of the budgetary system is its
strict implementation within the dynamic of an ever changing business and
political environment of the corporate business world.
Thus for corporate management, budgeting and budgetary
controls may be reviewed periodically to attain given objectives with
organizational goals.
That practice of performance measurement against plans would
make management able to take remedial action against variances in order to
bring the deviating operations/departments back on course.
1.3 PURPOSE /
OBJECTIVE OF THE STUDY
The purpose of this study is to examine how budgeting and
budgetary control has been used as a tool for effective managerial planning and
control in organizations in the hotel industry.
It will highlight the budgeting and budgetary control
procedures as they apply to these organizations and the recent innovation in
budgeting and the constraints of administration of budgetary control for
effective decision making and attainment of organisational goals/plans.
1.4 RESEARCH
QUESTIONS
This study attempts to proffer answers to some relevant
research questions, and is meant to give a thorough insight into the analysis
of the concepts and objectives of the study that would enable the researcher to
extract useful deductions from the research work.
1. Are there
qualified and experienced manpower adequate for the formulation of the
budgetary control techniques and budget preparation?
2. What types of
budgetary and budgetary control systems are available?
3. What causes
inefficiency in the budgetary process?
4. What is the
root cause of poor budget implementation and budgetary control in
organizations?
5. What are the
available budgetary control techniques used by the organization?
6. What other
control techniques are available other than budgetary control methods which the
organization uses?
7. To what
extent does the organization’s budget control its activities?
1.5 RESEARCH
HYPOTHESES Hypothesis 1
Ho: There are not
enough qualified and experienced manpower for theformulation and implementation
of the budgetary control techniques.
H1: There are enough
qualified and experienced manpower for the formulation and implementation of
the budgetary control techniques.
Hypothesis 2
Ho: The
organization’s budget to a large extent does not control its operations and
activities.
H1: The organization’s budget to a large extent
controls its operations and activities.
1.6 SIGNIFICANCE OF
THE STUDY
The significance of this research project is that budget
functions always involve an element of control (top-down) as well as an element
of accountability (bottom-up). Control and accountability may thus be regarded
as 'permanent' budget functions. The way in which these permanent functions are
defined however, has varied according to time and place.
The place under scrutiny in this study is the hospitality
industry where the purpose has been to use the budget as a management policy
tool and the concept of accountability has been defined in terms of quality of
service clients. Where the purpose has been to use the budget as an instrument
for financial control, accountability has been defined in terms of detailed
line-items. Where the purpose has been to improve management, accountability
has been defined in terms of performance or results. These 'purposes' can be
regarded as 'variable' functions, whose dominance has been contingent with
changes in the administrative, political and societal context and in the
perceptions and behaviour of the all levels of management in the hospitality
and tourism sector of the economy.
1.7 SCOPE AND LIMITATIONS
OF THE STUDY
The study concentrated on the problems associated with
budgeting and budgetary control which have brought about changes in policy from
the use of a planning programme budgeting system.
This study covered practice and problems of the budget
process in relation to organizations in the hotel industry. Specifically the
five selected hotels are Sheraton Hotel and Towers, Federal Palace Hotel and
Suites, Lagos Airport Hotel, Ikeja Palace Hotel and Eko Hotel and Suites; all
located in Lagos.
However the limitations of this study included the difficulty
in getting extremely busy financial executives and officials to fill the
questionnaire and fear of information divulgence. Non-disclosure letter,
particularly to competitors was submitted to allay fear by the researcher.
In addition some respondents did not answer correctly some of
the questions in the questionnaire while a few others returned partially filled
questionnaires.
1.8 BRIEF
DESCRIPTION OF SELECTED HOTELS
Lagos Airport Hotel, was established in 1942 as 'Grand
Hotel', present owners bought it through the Western Region Government in 1959
and it became a subsidiary of Odua Investment Company. Incorporated in 1961 as
a Private Limited Liability Company. Located on ObafemiAwolowo Way, Ikeja.
Presently it has 277 rooms and suites, halls, restaurant, bars and swimming
pool. Other hotels in Odua group are Lafia Hotel and Premier Hotel, both
located at Ibadan.
Eko Hotel and Suites was established in 1974 but started
operation in 1977, jointly owned by Lagos State Government (25%) and OHA Ltd -
a French company (75%). Located on AdetokunboAdemola Street, Victoria Island
overseeing the Atlantic Ocean and Kuramo Lagoon. Eko Hotel and Suites is made
up ofEko Hotel, Eko Suites, Kuramo Lodge and Ocean View Restaurant. Presently
it has 604 rooms and suites, ballrooms, restaurant, exhibition centre, bars,
sports / health club and swimming pool.
Lagos Sheraton Hotel and Towers, a public quoted company, IS
owned majorly by Ikeja Hotels PIc. Sheraton was opened in 1985. It is managed
and operated formally by Sheraton Overseas Management Corporation and presently
by Starwood Hotels and Resorts Inc and located on Mobolaji Bank Anthony Way,
Ikeja. Presently it has 332 rooms and suites, ballrooms, night club,
discotheque, restaurant, exhibition centre, bars, sports / fitness centre and
swimming pool.
Federal Palace Hotel and Suites, still undergoing renovation
on one of two wings was built in 1960 at the dawn of Nigeria's independence,
incorporated in 1964 and owned by the Federal Government of Nigeria until 1992
when it was acquired by The Tourist Company of Nigeria. One of the wings was
built to coincide with Festival of Art and Culture (FESTAC) '77. Located on
Ahmadu Bello Way, Victoria Island overlooking Lagos Harbour. Presently it has
about 632 rooms and suites, ballrooms, restaurant, mini-bars, sports and health
club and swimming pool.
Ikej a Palace Hotel, is privately owned by His Royal
Highness, Oba G.
A.
Banjo,
the Ajalaye of Ilugun South, Alaro Ogun State, was established in 1979 located
on Toyin Street right at Toyin, Allen and Opebi Roundabout. Presently it has 20
rooms and casino, restaurant, bars, sports/ health club and houses many shops
including Courier Company, bureau de change and boutique.
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