The increasing complexity of the business environment has necessitated a systematic approach to the impact of budgetary control on the profit of business enterprise.
Based on business philosophy, nationally or internationally corporate goal in centered on high production with minimal production cost and hence profit maximization. Sufficient profit is required so that the rating of the efficiency of the business organization will be high.
The owners of the business will expect their rewards as dividends, the creditors require payment, the employees of the business organizations will demand their remunerations and the social responsibility to the community where they are located. All of the demands have to be met form the cash inflow. As a result, the need arises of the management of the business enterprises to plan their operation and channel their resources into projects that would yield the highest profit.
REVIEW OF RELATED LITERATURE
The ICMA terminology defined “a budget as a plan quantified in a monetary terms prepared and approved prior to a defined period usually showing planning income to be granted and expenditure to be employed to attain that objective.
Wison R.M.S. (1974 in his book financial control) a system approach defined “a budget as a quantitative plan of action that aids in the co-ordination and control of the acquisition and utilization of resources over a given period of time”.
It is the means by which the conflicting goals of various departments may be reconciled so that the best possible interest of the enterprises as a whole may be achieve. In one man operation, it may be possible to get by without reducing over all plans to quantitative terms.
On the other hands, even smaller businesses and becoming complex to the point that some systematic progress of getting figures down on paper is increasingly essential if all areas of a business are to be harnessed for achieving over all company aims budgetary control according to ICMA terminology refers to the establishment of budges relating the responsibilities of the executives to the requirement of a policy and the continuous comparism of actual results with budgeted results either to secure by individual actions the objectives of that policy or to provide a firm basis for its revision.
As important part of the managerial task is to ensure that operations, departments, process and cost are under control and that the organization and its constituent parts are working efficiently towards agreed objective.
Budgetary control stems the process of comparing actual results with planned or budgeted results. It is not simply a matter of financial manipulation, but a tool which shows a realistic terms the effect of adopting a particular policy and carryout plans made. It is an accounting system that lays down a plans for future operations. The starting point is the income to be expected from future sales.
Subscribe to access this work and thousands more