BUDGETING IN ALL INFLATIONARY ENVIRONMENT

BUDGETING IN ALL INFLATIONARY ENVIRONMENT

(A CASE STUDY OF BINEZ HOTELS LTD ABA)

 

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ABSTRACT

This topic was designed to highlight the importance and prominence budgeting in a very dynamic economy like ours as well as the difficulty to forecast the rate of inflation with accuracy and the problem posed by changing price level and how these problems are addressed in making budgeting decisions.

Highlighting the advantages as well as he problem associated with budgeting will enhance the managers skill and ability in the preparation and implementation of budgets. They will also see the correlation between budgeting and success as well as appreciate it students on the dynamics, complexities and mechanics of today’s business decision making. a part from making some contribution to knowledge, the study would also add to the existing. Finally, the study is significant as it is in partial fulfilment of the polytechnics requirement for the award of Higher National Diploma (HND) in Accountancy. This study report is five chapters. The first chapter introduces the topic, present the nature of the problem, the objective of the study significant of the study, the significant of the study the scope of the study as well as statement of hypothesis. The chapter also given a brief history of the company and the aware ship structure. Hence the first chapter serves as a prelude to the main study.

The second chapter examines the work of the other people on the study. Review is divided into sections top cover areas like of meaning and purposes of budget  and the techniques of the data treatment will be explained and the limitation to which we are subjected in the data treatment. The data collected will be analyzed and discussed so as to develop our findings in the context of the purpose for which the study was conducted chapter four.

Here, the statement of fact in connection with the study will be made. The finding of the study will determine whether the hypothesis were true or not.

Finally, in chapter five, statement of findings is made, conclusion are draw remarks and recommendations based on the study are made.

 

TABLE OF CONTENTS

 

CHAPTER ONE

  • Introduction 1

1.1     Background statement                                             1

1.2     Nature of the problem                                              3

1.3     Statement of hypothesis                                           5

1.4     Objective of the study                                              6

1.5     Research question                                                    7

1.6     Significance of the study                                         8

1.7     Scope of the study                                                             9

1.7.1  Brief history of the company                                   10

1.7.2  Ownership structure                                                11

1.8     Organisation of the study                                         11

1.9     Definition of terms                                                  12

 

CHAPTER TWO

  • Review of related literature                                     16

2.1     Introduction                                                             16

2.2     Meaning and purpose of budgeting                         21

2.3     Types of budgeting                                                  23

2.3.1  The operating budget                                               23

2.3.2  The finance budget                                                  26

2.4     Stamps in preparing budget                                     28

2.5     Techniques of budget                                              29

2.6     Meaning of inflation                                                31

2.7     Rates of inflation                                                     32

2.8     Types of inflation                                                    33

2.9     Pos and cons inflation                                              35

2.10   causes of inflation                                                    36

2.11   Control of inflation                                                  39

2.12   How Binez Hotels Ltd, Aba take care of inflation in

their budgets.                                                                     40

2.13   Budget planning implementation and control in Binez Hotel Ltd. 41

2.14   Types of budget prepared in Binez hotel                 42

2.15   Budget preparation implementation and control procedures in Binez Hotel Ltd.                                                                43

2.16   Data presentation, interpretation and various analysis. 45

2.17   Summary                                                                 45

 

CHAPTER THREE

  • Research design and methodology 47

3.1     Research design                                                       47

3.2     Area of study                                                           48

3.3     Determination of sample size/population                 48

3.4     Sample and sampling procedure                              49

35      Types of data used                                                   49

CHAPTER FOUR 

  • Data presentation and analysis 53

 

CHAPTER FIVE

  • Findings, recommendation and conclusion 67
    • Introduction 67
    • Recommendations 69
    • Suggestions for further research 70
    • Summary/conclusion 71

Bibliography                                                            72

Appendix                                                                 77

 

 

 


CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND STATEMENT

The concept of budgeting is as old man. In history, we learnt that the early man had to determine whatever he needed in advance before it eventually materialized. This very obvious in the present days in lives of individual, a state or a nation, as nation plans ahead in terms of revenue and disbursements within a specified period of time. Every establishment, be it public or private, finds it necessary to prepare budget and institutes budgetary control for the purpose of translating policies the best possible activities as well as financial control in order to achieve the best result.

 

A budget had been defined as “a financial and /or quantitative statement prepared and approved prior to a defined period of time of the policy to be pursed during that period for the purpose of attaining a given objective. It may include income, expenditure and the employment of capital.

 

The institute of cost of management accountants (ICMA) defines budgeting control as’ the et of departmental budgets relating the responsibilities of executives to the requirements of a policy and the continuous comparison of actual with budgeted results, either to serve by individual action the objective of that policy or to provide a firm basis for its revision. In a nutshell a budget is a permute which measures the actual achievement of people , artments, ministries, firms etc.

Statement for review and control purposes. These financial statement as a guide to chief executives had of parastatals etc. In the operation of the resources at their disposals.

However, in recent times, increases in the general level of prices has in no small way unlimited the numerous advantages of budgeting planning as well as increased the degree instability and uncertainly in the business environment. No rigid reliance on budgeting as a management tool to provide direction basis for performance appraisal and for profit measurement can be grossly misleading inflationary result in reduced profits. It can equally create a false sense of well being for a company. For instance, where a company makes holding gains by merely deliberately holding its stock and reselling at a much higher price when actual supervisor managerial ability has not been demonstrated nor has capacity utilization or sale volume increased.

 

 

Also during inflation, the value of fixed assets are usually understated because the replacement or current cost of the assets are usually higher than their book values. This is turn understates the amount of deprecation charged for these assets and consequently overstate profit. The distribution of this Phony profit as dividends may result in capital depletion. This a negation of fundamental principle of income determination, which state that provision should be made to maintain the of existing capital intact.

Budgeting in an inflationary environment therefore requires considerable forecasting and predication of the economic, social political, and even legal trends in the business environment and their impact on both the centre economic factor in today’s activities of the particular business enterprise. As a recurring factor in business environment the need to recognize and incorporate inflationary pressure in budgeting decision is therefore very paramount.

 

  • NATURE OF THE PROBLEMS

The dynamic complex, unstable and competitive environment under which Nigerian operates to day has made advance planning very crucial and infact a key factor for success. a business plan is usually actualized through the use of a budget. However, no matter how through and painstaking the preparation of a budget may be unforeseen fluctuations in general price level may cause unfavourable distributions or deviations between actual and budgeted activities.   

As a result of the dire need to plan effectively and keep pace with developments in the business environment, the following problems are addressed.

Inflationary pressures are incor

 

 

 

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