The Effects of Budgetary Control On Organization's Performance (Case Study of East African Breweries Limited- Kenya)

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TABLE OF CONTENTS

DECLARATION .................................................................................................................. i

APPROVAL ....................................................................................................................... ii

DEDICATION ................................................................................................................ , .. iii

ACKNOWLEDGEMENT ..................................................................................................... iv

TABLE OF CONTENTS ....................................................... : ............................................... v

CHAPTER ONE .................................................................................................................. 1

INTRODUCTION ................................................................................................................ 1

1.1 BACKGROUND OF THE STUDY ..................................................................................... 1

1.2 STATEMENT OF THE PROBLEM .................................................................................... 2

1.3 PURPOSE OF THE STUDY ............................................................................................. 2

1.5 OBJECTIVES OF THE STUDY ........................................................................................ 2

1.4 RESEARCH QUESTIONS ............................................................................................... 3

1.5 SCOPE OF THE STUDY ................................................................................................. 3

1.6 SIGNIFICANCE OF THE STUDY ..................................................................................... 3

CHAPTER TWO ................................................................................................................. 5

LITERATURE REVIEW ....................................................................................................... 5

2.1INTRODUCTION ............................................................................................................ 5

2.2 BUDGETARY CONTROL ............................................................................................... 5

2.2.1 Definitions: ................................................................................................................. 5

2.3 GENERAL BACKGROUND TO BUDGETARY CONTROL .................................................. 7

2.3.10bjectives of budgetary control ........................................................................................ 8

2.4 ROLE OF BUDGETARY CONTROL ................................................................................. 9

2.5 LIMITATIONS OF BUDGETARY CONTROL SYSTEMS ................................................... 10

2.6 TYPES OF BUDGETS ................................................................................................... 11

2. 7 GUIDELINES TO EFFECTIVE BUDGETING ................................................................... 13

2.7.1 ESTABLISHING BUDGETARY CONTROL .................................................................. 14

2.7.2 ADMINISTRATION OF BUDGET CONTROL ............................................................... 15

2.7.3 BUDGETARY CONTROLS ......................................................................................... 16

2.8 ORGANIZATION'S PERFORMANCE ............................................................................. 17

2. 8.1 Definitions: ............................................................................................................... 17

2.8.2 PERFORMANCE MEASUREMENT ............................................................................. 17

2.8.3. POTENTIAL DEFECTS OF PERFORMANCE MEASURES ............................................. 18

2.8.4 RELATIONSHIP BETWEEN BUDGETARY CONTROL AND ORGANIZATION'S

PERFORMANCE .............................................................................................................. 19

2. 9 Conclusion ................................................................................................................... 20

CHAPTER THREE ............................................................................................................ 21

RESEARCH METHODOLOGY ........................................................................................... 21

3.1 INTRODUCTION ......................................................................................................... 21

3.2 THE RESEARCH DESIGN IS A CASE STUDY OF EABL .................................................. 21

3.3 RESEARCH POPULATION ........................................................................................... 21

3.4 SAMPLE SIZE ............................................................................................................. 21

3.5 SAMPLING DESIGN .................................................................................................... 21

3.6 DATA COLLECTION INSTRUMENTS ........................................................................... 22

3.7 DATA ANALYSIS ....................................................................................................... 23

CHAPTER FOUR .............................................................................................................. 24

DISCUSSION, ANALYSIS AND INTERPRETATION OF FINDINGS ........................................ 24

4.1 INTRODUCTION ......................................................................................................... 24

4.2 BACKGROUND INFORMATION OF THE RESPONDENTS ............................................... 24

4.2.1 Respondents gender ..................................................................................................... 24

4.2.2 Respondents level of education ...... : ............................................................................... 25

4.2.3 Respondents working period at EABL ............................................................................. 25

4.2.4 Respondents position in the organization .......................................................................... 26

4.2.5 Respondents department in the organization ..................................................................... 26

4.3 RESPONDENTS FEEDBACK ON EFFECTS OF BUDGETARY CONTROL ON THEIR

RESPECTIVE DEPARTMENTS ........................................................................................... 26

4.4 ROLE OF BUDGETARY CONTROL IN EABL ................................................................. 27

4.5 VARIANCES BETWEEN BUDGETED AND ACTUAL EXPENDITURE ............................... 27

4.61MPACT OF BUDGETARY CONTROL ON ORGANIZATION'S PERFORMANCE ................ 28

4.7 LIMITATIONS OF THE STUDY ..................................................................................... 29

CHAPTER FIVE ............................................................................................................... 30

SUMMARY, CONCLUSION AND RECOMMENDATIONS ..................................................... 30

5.1 INTRODUCTION ......................................................................................................... 30

5.2 SUMMARY OF FINDINGS ............................................................................................ 30

5.3 CONCLUSION ............................................................................................................ 30

5.4 RECOMMENDATIONS ................................................................................................ 31

5.5 AREAS FOR FURTHER RESEARCH .............................................................................. 32

DATA COLLECTION INSTRUMENTS ................................................................................ 34

Appendix A: Time frame ..................................................................................................... 38

Appendix B: Budget ........................................................................................................... 39

CHAPTER ONE INTRODUCTION This chapter is an introduction. It covers the background of the study, statement of the problem, purpose of the study, objeetives of the study, research questions, scope of the study, conceptual framework and significance of the study. 1.1 BACKGROUND OF THE STUDY Of all business activities, budgeting is one of the most important and requires management to take due attention in order to achieve objectives of the organization. Colin (2000) argues that it is essential that all organizations set objectives and plan for the future. The fonnation of such plans should include the optimum use of resources. The short-term plans involving the use of resources are often referred to as budgets. (ACCA,2003 official textbook to professional qualification). Effective management determines successful business since it is supposed to be able to raise organizational resources to achieve organizational goals. Business organizations are established for a variety of reasons; including profit motive, creation and retention of customer, survival, growth and an array of social economic objectives. For any organization to continue in business, it must achieve its goals. According to Daff (1988), "the ultimate responsibility of managers IS to achieve high performance after proper allocation of resources in an efficient and effective manner." Stacey ( 1999) shows that pelformance of an organization in financial terms must be accepted to owners and other stakeholders. He indicates that there are several measures of financial performance including cash flows, profitability, sales volume, capital expenditure, price levels, assets and liabilities including borrowing and other funding requirements. He argues that these financial measures are influenced by the budgetary controls used in organizations.

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The Effects of Budgetary Control On Organization's Performance (Case Study of East African Breweries Limited- Kenya)

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