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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:
There may be too much reliance on the
technique as a substitute for good management.
The budgetary system, perhaps because of
undue pressure or poor human relations may cause antagonism and decrease
motivation.
Budgets are develop round existing
organization structure and department, which may be inappropriate for 'current
conditions, and may not reflect' the underlying economic realities.
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:
Study and examine the effectiveness of
budgeting and how it is carried out at Access Bank PIc.
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 stakeholders in 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 3rd world
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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