The Role Of Budgeting In The Present Nigeria Economic Situation
HISTORY OF BUDGETING
There are many books on budgeting however, very few traced the history of budgeting while majority only deal with the techniques. The word budget is derived from the old French bough meaning little bag (the new Encyclopaedia Britinica). Many of the few attempts at the history of private sector budgeting lacked charity. This can be seen form the statement of Brown and Howard who said that “Budgetary control appears to have been operating for a considerable time about two centuries in government departments in U.K it is only during the last 20 years that this vital concept of control has been tried in the industry. This statement is not clear as it failed to state the year on which their “Last fifty years was based.” To order the Complete Project Material, Pay thr Sum of N3,000 to: BANK NAME: FIRST BANK PLC ACCOUNT NAME: CHIBUZOR TOCHI ONYEMENAM ACCOUNT NUMBER: 3066880122 Then send the Project Topic, Your Email Address and Full Name to 07033378184.
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Some authors quote the bible to indicate the old history of budgeting. In Egypt Joseph Budgeted to cover the expected supply and demand for command for the related activities. “So Joseph must have practiced elementary government budgeting. In England, however, budgeting evolved through the process of allocating money for the maintenance of the kings” as was written in Manga Courts (2116) “The control of expenditure came much late with the evolution of 1688 when parliament extended its concerns to the question of expenditure control.
Budgeting in France evolved from the struggle between the Monarchy and the nobility over the control tax revenues, which was one of the causes of the revolute on of 1789.
The united state budgeting also provided out of controversy in congress between 1789 and 1795, and advanced to the creation of “The bureau of the budget in 1921 “Standard Educational Corporation new standard encyclopaedia). The history of business budgeting is not simple to trace because the conerate has even been the greatest stumbling block to the development of a science. The peculiar fascination which numbers as individual. Exerted on the mind of man from time immemorial was the main obstacle in the way of developing a collective theory of numbers (Selwyn) backer and David Green. Budgeting and employee behaviour. And it has been with budgeting where for source there with is still question on whether or not a theory has developed. Business Budgeting is a Management innovation in the twentieth century. Its development has been characterized by a fragmentary literature and an emphasis on technique early business practice and technique began with the imposed” budgets are obvious” controls (J. Batty: 1979. P 41). This private sector budgeting have largely developed through learning from mistakes “Cut and try” approach Government budgeting developed in England in 1276. Government other countries followed later. Business budgeting developed from government budgeting. All government budgeting systems evolved out of struggle and need for better management. Therefore, tertiary institution budgeting must have developed form the survival struggles, characteristics of the industrial revolution the 18th and 19th Centuries. The industrial revolution resulted in rapid growth in industries. With this growth competition also emerged. The need to withstand competition made management innovation called budgeting. It was firmly developed and formalized to be recognized with this name budgeting before 1923.
EARLY HISTORY OF INFLATION
Raising prices has been of great concern to mankind from the earliest days of recorded history, one of the causes throughout the ancient period was the metallic currency due to the discoveries new mines and the improvement methods of mining gold. The early Mediterranean also caused inflation as a result of the release of loads of metallic money accumulated through pillage. Perhaps the greatest single inflation act of ancient periods was during the capture of the Persian gold loads by Alexander The Great. Acquisition of substantial gold and silver loads by the conquering roman empires also had inflationary impact in the kingdom. With the adoption of pear money towards the end of the seventeenth century in the U.S.A and France. Inflation began to accurate regular intervals. Ms U.S.A experienced substantial inflation as a result of the issue of continental dollars by the government to Frances the war of independence. The discovery of gold mines in California in 1849 and the gold rushes in Australia, Alaska, South Africa and the Yokou caused inflation.
In the present century, instance of substantial inflation are the war and postwar inflation that occurred during and immediately after the first and second global wars. The German hyper inflation in the early twenties was the worst in the living memory and prices had increased on trillion times of their pre-war level. In camadu, rapid inflation occurred during early part of the twentieth century. There was a return to the doubled digit inflation in 1951 as the North American economy became over stimulated by the demand of the Koreanwari. However, the subsequent 15 years prices was marked by relative price stability. From 1966 – 1970, the average annual price increase in the Canadian economy was 4 percent. In Brazil, price inflation accurate rapidly in 1959 until it was pushed to over 80 percent in 1963. During the past 10 years, it has average over 20 percent per year. India substantial prince rise occurred in 1973 and 1984 when price rise by 26 percent and 19 percent respectively. During 1975 – 76, although the wholesale price index declined marginally by 1.8 percent during 1977 – 78. In a nut shell, inflation remains a pervasive and persistent world problem because no economy in the world has been spared by inflation while no full proof solution of the problem has been successfully fund.
EFFECTS OF INFLATION
Consumers real disposal personal income and consequently their spending capacity are significantly affected by changes in wages and prices inflation also effects the government sector in a number of ways, as price rise revenues yield by indirect taxed also increases inflation not only affects the income and expenditure patterns of distribution of relative to others. For example, debtors gain while creditors supply people depended on fixed income, such as pensioners suffer most from inflation and their share of the national income inevitably declines unless they receive special assistance.
Inflation initially activates the economy, a business boom in its early stages causes only a modest rise in its cost of living of the people while it raises the level of employment in the economy. However, continuos inflation shakes the foundations of the political and economic stability of the system. It causes inequitable and arbitrary redistribution of income and wealth in the society the group of people who suffer most are the fixed income earners by way of salaries persons and quantities.
CONTROL OF INFLATION
It is a known fact that excess aggregate demand in relation to aggregate output at fuel employment is the main factor accounting for the emergency of inflation. This has to be controlled by the public sector before it spread contagion in economy. The control of inflation should therefore, involves monetary and fiscal step aiming at reducing the level of aggregate demand so as to equate it with full employment output on the economy.
Inflation can be checked with the following measures:
(a) Direct Measure
(b) Fiscal measure
(c) Monetary measure
Direct measure could either be in the form of compulsory or voluntary method of compulsory converting the appropriate part of te earning of the work which he does not save voluntarily into the voluntarily savings and taxation of the entrepreneur (J. M. Keynes). Fiscal measures is an economy policy which involves the use of government expenditure and taxes in guiding the nations economy to achieve pre-determine economic goals. Fiscal measures can either be in the form of expansionary fiscal policy or contradiction fiscal policy depending on the inflation it interned to have on the economy.
Money measure according to Bannock G. F, 1972 Monetary policy is that part of economic policy which regulate the level of money or liquidity in the economy in order to achieve some desired policy objectives. Such as the control of inflation. In Nigeria, it is the central bank of Nigeria that is charged with the responsibility of directing the nations monetary policy.
ACCOUNTING IN I.M.T
I.M.T Enugu as one of the tertiary Institute in Nigeria falls under a group known as non – profit orientated organization in accounting. They employ in all their accounting process the generally accepted accounting principle of double entry which says “debit the receiver and credit the giver” the financial reports of non – trading organizations such as I.M.T should be presented in the form of income sheet, the format adopted in IMT Enugu is accordance which enables then to present their true state of affairs.
DIFFERENT VIEWS ON BUDGETING
Budgeting has been said by same as an exercise infertility because of its dependence upon the forecasting of future even which cannot be foretold with precision it is not usual to criticise for every aspects of management technique grows and develop with keen supporters and opposers which leaves the subject in a hard vagueness. Therefore, budgeting cannot be an exception. The researcher has first examine the meaning, role and problems of budgeting as explained by different experts and later draws conclusion on which the study is based. P.C. Unamka rightly noted that “the budget is the most widely used tools for planning co-ordination and controlling in an organization.
The absence of budgeting makes internal control difficult. E.S. Ekezie, viewed budgeting as an accounting process and aso as a managerial process. Budgeting is a systematic formalised approach for accomplishing the responsibilities of management (Benjamin Osisoma) he also stated other roles of budgeting include feed favored and feed-back thereby identifying budgeting as a process with two-way communication systems.
A. W. Millsmore, in addition to the above described budgeting as a service function completely intentioned with the process of management, a predictive accounting that acts as an early warning in detecting change J. Fred Weston and Evgene Brigham added that “Corporate budgeting should not be a device for limiting expenditure. This clearly highlight the peculiarity of budgeting the problems of budgeting as “over budgeting” budgeting goals superseding enterprises goals and hiding inefficiency”.
The four problems of budgeting as stated by Konts are the same with the above and he conclude “pressure device” but exchanged it for inflexibility which rarely exists these days because of a host of techniques including the flexible budgeting. However, the researcher agrees with the statement of Knoontz that budgeting correlate planning and allow authority to be delegated without loss of control.
L. F. Hand rightly says “That budgeting advantages are planning, decision – making, co-ordination, control and motivation, and that if the budget system is designed carefully and managed effectively then this benefit should be gained. He also discussed the more important problems of budgeting as those problems relating to responsibility accounting target setting and black. Careful design and effective management of the budget are very important and the problems he also stated set in with the least tax in these who factors.
J. Batty associated budgeting to corporate planning but discountenanced that costs or values are stated that the use of cost or value is not only a matter of convenience but fundamental to budgeting and its roles since budget is quantitative plan. Man dizzy in his book principles of cost accounting stated that “Budgeting itself stems from a long term corporate plan on the strategy of the organization and is one of the steps towards the attainment of organizational goals. All activities in the business are fitted in the budget plan and complied into the master budget. The budget is a co-ordination, communication and motivation”. This view points to the list native of budgeting and his emphasis on co-ordination communication and motivation strengthened the role of budgeting in the face of inflationary pressures.
Budgeting process is made up of the planning and controlling sections. The feedback marks the end of one budgeting circle. The feed back is necessary for decision making, the decision may amend, uphold or abandon project plan. The decision amy also amend some control measures and in rare circumstance, the strategy and corporate plans, the budgeting process its base illustrated with a chart as presented in figure 2.1 below:
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This article was extracted from a Project Research Work Topic
“THE ROLE OF BUDGETING IN THE PRESENT NIGERIA ECONOMIC SITUATION (A CASE STUDY OF INSTITUTE OF MANAGEMENT AND TECHNOLOGY) I.M.T”
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