Problems of Budgetary Control as Management Tool for Planning and Control

Problems of Budgetary Control as Management Tool for Planning and Control (A Case Study of First Bank Nigeria Plc Asaba Branch Delta State) 2010 -2015

The world budget is derived from the French word “Bovgette” meaning little or small bag. It symbolized a bag containing financial proposal of the finance minister of a budgeting has grown to encompass all the activities of an organization, blossoming form its original conception. Budget means different things to different people according to their point of view, but the underlying philosophy and conception perception remains the same.

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The accountants remain the same preparation aspects and the behavioural scientist sees it as human implication aspect. Thus all these point put together makes it possible for budget to obtain its best functional results. In private life, few people embark on a project involving expenditure without some ideal of what it will cost or plan on how to carry on his expenditure efficiently, even if there is never committed in paper. Thus it will be necessary to know the importance and effectiveness and efficiency of budget.

To demonstrate its commitment to customers and development to the Nigeria Economy, first Bank Nigeria Plc was used and it was restricted to Asaba Delta State. The bank was established in the year 1894, by a shipping magnate form liver pools, Sir Alfred Jones. Before now it was named “British Bank of West Africa” now first Bank Nigeria Plc in 1991. The banks has since broadened its loan and credit portfolio to various sectors of he economy, it has improved tremendously judging form a number of parameter including number of branches growth in deposit based, assists size and size of loans and advance. Furthermore, its tracts records of profitability and liability in sound banking ahs continuously place the leadership position.



Ray et al (2014), Defined budget as a detailed plan cutting the acquisition and use of financial and other resources over some given time period usually one year. It represent a plan for the future expressed in formal quantitative term. Budget is seen as a financial plan that sets for the resources necessary to carryout activities and meets financial goals for a future period of time.

Oxford Advance Learners Dictionary (2012), Edition state budget as an official statement by the government of a country’s income form taxes and it will be of the money that is available to a person or an organization and a plan of how it will be spent over a period of time.


Horgren et al (2013), classified base on the time of their duration, the nature and their functions. Thus the following are classes of budgets.

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Budget  can be classified from the point of view of duration to fall into two classes as such a long term basis budget and short term basis budget.

  1. Long term basis budget: These are long term based budget formulated mainly in setting long term goal and determine the means by which they will be attained. They cover period of time ranging from 2 to 10yesrs.
  2. Short term basis budget: In the type of budget, it last only for 12 months and it can be divided into quarterly monthly as the case may be


  1. i) Sales Budget: Is a formal plan that sets forth a firm’s anticipated sales in quantities and value for the coming year based on the sale forecast. A sale fore cases is a formal predication of the quantities expected to be sold in he coming year based on such factors as past sales, economic and seasonal conditions pricing policies and market research studies.
  2. ii) Production budget: Is a formal plan quantifying in units the required production for the coming year base on budgeted sales and the budgeted inventoried of finished goods. This is the responsibilities of the production manager.
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iii)     Selling and Administrative Expense budget: it has been combined to simplify the presentation. It is a detailed schedule of planned expenses that will be incurred in areas other than manufacturing during a budget period in practice separate budget should be prepared, the sales manager will be responsible for selling the budget while the administrative officer will be responsible for the administration budget, which is a quantitative listing of each planned administrative cost for the coming year such as officer rent, salaries etc.

  1. iv) Marketing Cost Budget: Is a quantitative listing of each planned marketing cost for the coming year such as sales person’s salaries, commissions and the litre. A significant position of this budget is dictated by the budget. Thus the two are usually prepared in conjunction with each other.
  2. Cash Budgets: It is a summary of project cash balance based on expected cash receipts from operations, cash payments for operation and cash receipts and payments form financing and investing activities, it enables firm to plan and time such discretionary payouts as dividend payments and equipment purchases.


  1. i) Fixed Budget: Is a financial plan that does not charge through the budget period, irrespective of any changes form the plan in actual activity levels experienced. The major purpose of a fixed budget is at the planning stage when it serves to define the broad objectives of the organization. It is lithely to be of any real value for control purpose expected if the level of activity tuned to be exactly as planned.
  2. ii) Flexible Budget: Is a budget which is designed to adjust the permitted cost levels to suit the level of activity actually attained. The process by which this is done is by analyzing cost into their fixed and variable elements so that the budget may be fixed according to the actual activity. Only by comparing what the cost should have been with the expenditure incurred at the actual level can only control be exercised thus a flexible budget is vital for control purpose.


*        Zero Based Budgeting: Phyor (2013), in the United State of America has gained wide acceptance probably because it is a sample idea obviously based on common sense. ZBB is concerned with the evaluation of the costs and benefits of alternatives and implicit in the techniques; it’s the concept of opportunity cost.

Zero based budgeting can be applied in both profit and nonprofit seeking organization. This is a time consuming process which can generate volumes of paper work especially for the decision package, out of properly carried out; it should result in a more efficient allocation of resources to activities and department.


Obisi (2012), sees planning as fundamentals, choosing, and a planning problem arises only when an alternative course of action is discovered, PPBS is based on system theory and its output objectives oriented with a substantial emphasis on resources allocation based on economic analysis. The system is based not on traditional organization structure and division, but on programmes grouping of activities with common objectives.

PPBS is similar to corporate planning process for profit seeking organization PPBS required a sophisticated information system able to monitor progress towards meeting system should be able to report upon result in term of the programmes of activities unlike conventional reporting which is geared to existing organization submissions and usually deals only with expenditure.

*        INCREMENTAL BUDGETING: This is the oldest and most widely used techniques; it is based on the premise that the priest is a good guide to the future. Increment budget is planning systems that start with the previous period budget as a base and either increase or decrease these figures depending on whether the organization wishes to increase or decrease it’s output during the company period.

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According to Cambell (2013), the following approaches are possible in budgeting preparation.

1)      Imposed Budgets: This is where the master budget and the detailed sectional budgets are prepared by the budget officers and passed down ward for comment all levels. This the termed top to button budget to lauder (2012). This is manner of budget is sometimes justified on the ground that it keeps the management workers on the toes and assumes that they will select their performance if they can easily meet budget.

  1. ii) Participative budget: Combell information is sought form lower level manager and their estimates are then co-ordinated and communication upward which would be used in preparing the budget also, Ray and Noreen (2014) refers to this manner of budget preparation as self imposed budget. It is a method of budget. Preparation in which manager with responsibility over cost control prepared their own budget figures.


The steps taken in the preparation of a budget differs from one firm to another depending on the size of the firm and seriousness of the management.

In most cause there is a budgeting committee which sets out a budget manual that aids managers in drawing up their own budgets. The detailed budgeting exercise commences with two particular reviews which includes;

  1. Review of Environment
  2. An inward looking assessment of strength and weakness of the firm.

Under the review of the environment some major variables looked at are market size, market standing spending power to customers, economic conditions government policies (interest rates public sectors spending, credit restriction etc) while under the (b) option, the financial position of the firm, the recent profit level, the promising opportunities open to the firm and the pressing problems facing the firm are reviewed.


Debola (2014) budget should be emphasized that budget preparation is an executive or management function while the organization and administration of budget is a staff function. The executive or management have the responsibility to decide what the plans are to be for area of responsibility of the staff is to assist the executive or management in the preparation of budget by providing data and technical advice and coordinating the budget of various departments to form a master budget. budget administration is  the process of planning, organizing, coordinating directing and controlling of budgeting activities.

The following are crucial to effective administration.

  1. i) Budget time Table: This is a time plan of the budgetary process from the movement of objectives setting up to the adoption and communicating of the budget.
  2. ii) Principal budget factor: These refers to as limiting factor or key

factor, it is that factor which, at any given time, effectively limits the activities of an organization.

iii)     The budget committee: A budget committee is the representative from various high levels managers officers who have the primary responsibility for and participated in the preparation of the budget.



Different authors have their own view towards definition of budget. Such definition could be seen by authors like:

Lucy (2012) noted that a budget is a quantitative expression of a plan to action prepared in advance of the period of which it relates.

1        Calvin (2014) sees a budget as a financial plan that sets forth the resources necessary to carryout activities and meets financial goals for a future period of time.

Levine (2013) noted that a budget is the estimated of next year’s income and expenditure statement. It represents a plan for the future expressed in formal quantitative term.

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According to Dominwa (2014) budget can be defined is an estimate of costs, revenues and resources over a specified period reflecting a future financial conditions and goals.

Campbell (2013) stated a budget is a comprehensive and coordinated plans expressed in financial terms for the operation and resources fo an enterprise for some specific period of time in future.

Obisi (2012) noted that a budget is a financial plan of government for a definite period.

Nnamdi et al (2013) defined budget as a document containing a preliminary approved plan for public revenues and expenditure.

Garrison (2014)) examined budget as an amount of money available for spending that is based on a plan for how it will be spent.

Yomere et al (2015) state that budget is a plan used to decide the amount of money what and be spent and how it will be spent.

According to Okeke (2014) budget is an official statement form a government about how much it plans to spend during a particular period of time and how it will pay for the expenses.

Okafor (2012) opined that a budget is an amount of money available for spending that is based on a plan for how it will be spent.

Okonkwo and Okoli (2013, examined budget as an estimate often itemized, of expected income and expense for a given period in the future.

Onyeagba (2015), defined budget as a managerial decision regarding the commitment of fund in the present time with the hope of realizing return over a period of time in he future.

Obasi (2012) noted that budget is an estimate of cost, revenues, and resources over a specified period reflecting a reading of future.


Some corporation and business organization are opposed to budget and budgetary planning and contract because of the ignorance of its meaning.

Galvin (2013) stated that budget may be classified base on the time o their duration, that nature and their function. Thus it is classified based; duration, function, nature. The approaches of and manner of budget preparation are possible in budgeting preparation; it includes imposed budgets, participative budget and on preparation. The necessary steps taken in the preparation of a budget different from one firm to another depending on the size of the firm and seriousness of the management.

Budget is an essential tool for management that wishes to exercise comprehensive control of the activities of the organization. Budget and budget control is of paramount important to a business entity and it is used by management / manage to carryout their day to day functions especially in financial mater in the areas of planning, controlling and appraisal.

A great percentage of human problems in budgeting remain unsolved. It is impracticable to solve all human problem, but they can be reduced if the recommendation stated in this research are implemented, then a lot of problems in budgetary control ill be solved.

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