CHAPTER ONE

1.1 Background to the Study
Today the important of budget and budgetary control can never be over
emphasized. Thus for survival of any oil cooperation, management need to
embark on budget to effect proper planning and control. In this view, budgeting
can be seen as a process of planning and control. Proper budgeting can never
affect efficient plans of an organization without control. Control as it were is
an important tool which must be priced to keep in check with the plans of the
firms and for correction of any deviation from the stipulated plan of the
organization in question. Hence a budgetary control comprises of both plan of
operation with the scope of the plan. In pursuit to this, data were collected from
journals and related works. In consequent writings it reviews the response of
people and it was made known through questionnaires that the factors that affect
the company’s profitability most in general economic conditions in the contrary
as the people stated that cash budget is the best type of budget. For any
cooperation such as multi-national oil company i.e. shell cooperation, would
want to succeed it business executives must make use of budgetary control
measure to avoid failure in business.
They are different classes and types of budget for different entities i.e. fixed
budget, Flexible budget, Master budget, Zero budget and annual budget for
government entities. It should be observed that whatever the class or structure of
a budget they are used for maximizing managerial efficiency and also to ensure
that the activities of the cooperation are not left to chance. In organization the
introduction of budget and budgetary control systems compels members of the
cooperation from the top hierarchy to the bottom to plan ahead this is
undoubtedly paramount owing to the higher level of uncertainty facing present
day managers and accountant. Budgets formulate expected performance and express managerial target which gives meaning and direction to the operation in
an organization. Budgets are established to guide action within a defined period.
At the end of the period the actual result are compared with the budgetary
performance, any discrepancies otherwise known as variance is analyzed for the
purpose of showing the cause of such discrepancy and initially informed
decision to prevent re-occurrence. These variance that could be favorable are of
importance to the day-to-day existence of any organization.
A budget is an agreed plan of action used to provide directions and coordination
giving more structure to any organization as well as motivation of staff to
achieve it basic objective performance management is described as the process
of quantifying the efficiency and effectiveness of an action. To achieve
performance manager or top executives have to be in control.
Types of Control arm referring to are
1. Financial control
2. Budgetary control

1.2 Statement of Problem
Budget is a managerial aid to planning and controlling the operations of any
cooperation, such as planning and controlling involve forecasting into the
unforeseeable future an attempt to ensure that the organization is sustained,
virtually in all organization managers and executives assumes managerial role
of planning and controlling their operation with the use of budgeting techniques
which enables them to stand the test of competition among other industries.
For these reason the researcher has carefully observed that the following
problem would emerge in an organization and some of these problems arises
from the following;

1) Budgetary control can be seen as pressure device imposed by
management to attain its objectives thus resulting to
i. Bad labour relations.
ii. Inaccurate record keeping.
2) Departmental conflicts arises from
i. Disputes over resource allocation method.
ii. Department blaming each other if targeted objectives are not being
attained.
iii. Conflicting objectives.
3) It’s difficult to reconcile personnel and individual cooperate goal.
4) Waste arises as managers adopt the view we had better spend it or we will
lose it. This sometimes compelled with entire building in order to
enhance the prestige of a department.
5) Managers may over estimate cost so that they will not be blamed in the
future, should they over spend.
6) Organization activities will be characterized by planlessness event will be
left to chance and the entire organization would lose directions which
could result to organizational inefficiency.
7) They will be no yard-stick against which actual result can be measured
and this management will be tempted to the complacent with any level of
performance.
8) Activities will be sectional and unintegrated, they will be tendency for
every part of the organization to formulate it own objectives, strategies
and policies which will not in any long-term achieve the entire
organization purpose, mission and objectives.

1.3 Objectives of the Study
It has been noted that budget are necessary tool to an efficient and effective
planning process in an organization, the effectiveness of budget as a tool to
management depends on whether the plans under the budget are well
formulated. The objectives are essentially:
1) To investigate concisely the budgetary control of shell as a cooperation
with the view of determining their efficacy in the managerial process of
the company.
2) To find out the extent of use of budgeting as a tool for its managerial
planning and control process.
3) To find out how budgeting is help in coordinating the activity of various
department in the company.

1.4 RESEARCH QUESTIONS
Some basic researches questions are meant to be asked are as follows.
1) How can budgetary control system be used to predict concisely the
operations of the company and determining the efficacy of managerial
process.
2) How far has budgeting control system used as a tool for managerial
planning and control process in extracting industry.
3) How can budgeting control system coordinate the various activities of
extracting industry thereby securing its operations?

1.5 STATEMENT OF HYPOTHESIS
The objectives of the study are to find out if persistent deviation of actual
expenditure from budgeted expenditure constitutes inefficiency for the above
purpose. The following hypothesis can be formulated;
Hypothesis One
H0: Budgeting control system is a not tool be used to predict concisely
the operations of the company and determining the efficacy of its operations.
H1: Budgeting control system is a tool used to predict concisely the
operations of the company and determining the efficacy of its operation.
Hypothesis Two
H0 : Budgeting control system cannot improve managerial planning and
control process of the firm.
H1 : budgeting control system can improve managerial planning and
control process of the firm.
H0: Budgeting control systems do not coordinate the various
activities of the organizational operations and securing it.
H1: Budgeting control system coordinates the various activities of the
organizational operations and securing it.

1.6 SIGNIFICANCE OF THE STUDY
It can be beneficial for the researcher that the study will be of the following;
1) That the management of shell Petroleum Company in Nigeria is aiding them to policies, the planning and controlling aspect of managerial function will be clearly stated and understood as it is applicable to the
cooperation for better achievement of its objectives.
2) That other cooperate individuals, agents, accountant, businessmen and
women, government parastatal, and scholars who may be interested in
these form of budgetary system of aforementioned company might make
an objective use of it.
3) The study might show the effects of budget information’s to the
cooperation and possibly the remedies and the impact it generate on these
remedy to effect of the society in general.
4) The research work also gives a long way in increasingly the knowledge of
students studying budget control system.

1.7 SCOPE OF STUDY
The scope of the study is as follows
1) The study is basically restricted to 2001-2005 operating and capital
expenditure budget of entering shell cooperation.
2) The analysis made in this study was based on data made available to the
researcher by the company’s staff and head of department and top
executives of the firm in response to the researchers question that were
administered.
3) The scope of theses study can only be limited to budgetary control system
of shell cooperation in Nigeria.
4) The study also investigates and evaluates budgetary control measures in
Nigeria i.e shell cooperation to its regards.

1.8 LIMITATION OF THE STUDY
1) The reluctant nature of part of the company’s personnel in making data
available for the purpose of the study, although the budgetary unit was of
greater help, they were also constrained by the company’s rule and
regulations that relate to the release of the information.
2) The researcher’s work was carried out along side with academic work
this means sharing of the available time between the researcher’s work
and other academic and non-academic work all the factor mentioned
above restricted the researcher from covering large scope of the study as
would have been desirable.
3) Budgetary control can result to short term analysis of the researchers
decision to keep within its budget variation rather than the right long
decision analysis which might exceed the budget variation.
4) Managers of the cooperation or top executives in the company can be too
pre-ocupied with the setting to focus on the realistic objectives of target
performance and in acquiring better and more customers.