GT College

Department Of ACCOUNTING AND FINACE

ASSESSMENT OF BUDGETARY PERFORMANCE
(IN CASE OF FINANCE IN CENTRAL GONDAR ZONE
A RESEARCH PROPOSAL SUBMITED IN
PARTIAL FULFILLMENT OF THE REQUIREMENT FOR
BA DEGREE IN ACCOUNTING

BY:-
1. ……………………
2. ..……………………….
3. ….………………
4. ….………………..
5. ….………………….

ADVISOR:-…………………

MAY 2023
GONDAR, ETHIOPIA

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ACKNOWLEDGEMENT
First of all our depest thanks goes to the almighty of God for let we to stay
in life to this day and enables we to complete my academic life. we also
would like to express our deepest gratitude to our advisor ….. for his
enthusiestic support from the preparation until the final discussion of this
proposal with frequent follow up , receiving in detail, main body of the
proposal and for warding constractive suggestion.

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 ABSTRACT
The establishment of effective budgetary performance is important for every organization in
order to achieved its objectives and future plan of action. This research proposal conducte to
the assessment of budgetary performance in central gondar zone finance organization.
The objective of the study will to assess the budgetary performance and identify any problems
which affect its effective implementation of budget in general.
In collecting data the researcher proposal use both primary and secondary source of data. The
primary data collected from questionnaire and through interview. The secondary source of data
collected from reference books, internet and also used the four year budget report of the
organization.
The sample used for this research proposal will simple random sampling techniques.
The data analysis will be carried out based on tabulation and percentage method and interpreted
accordingly.
During the study major limitations like shortage of finance, lack of sufficient written materials
from the organization & shortage of time.

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 TABLE OF CONTENTS
Title Page
1. Acknowledgment -----------------------------------------------------I
2. Abstract----------------------------------------------------------------II
3. Table of Content ------------------------------------------------------III
CHAPTER ONE
1. Introduction
1.1 Background of the study ---------------------------------------1
1.2 Back ground of the organization -------------------------------3
1.3 Statement of the problem --------------------------------------4
1.4 Objective of the study--------------------------------------------5
1.4.1 General Objective---------------------------------------------5
1.4.2 Specific Objective----------------------------------------------5
1.5 Significance and Scope-------------------------------------------6
1.5.1 Significance of the study-------------------------------------6
1.5.2 Scope of the study--------------------------------------------6
1.6 Limitation of the study-------------------------------------------7
1.7 Organization of the paper----------------------------------------7

CHAPTER TWO
Literature Review
2.1 Meaning of budget------------------------------------------------8
2.2 Characteristics of budget----------------------------------------8
2.3 Effect of budgetary control--------------------------------------8
2.4 The master budget------------------------------------------------9
2.5 Budget implementation------------------------------------------9
2.6 Budget relative to time ------------------------------------------10
2.6.1 Long range goal------------------------------------------------10
2.6.2 Short term plan------------------------------------------------10

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 2.6.3 Intermediate objective ---------------------------------------10
2.7 The structure of budget------------------------------------------10
-----------------------------------------------------------------------
2.7.1 Operational budget-------------------------------------------10
2.7.2 Financial budget-----------------------------------------------10
2.7.3 Sales budget ---------------------------------------------------11
2.8 Cash budget -------------------------------------------------------------12
2.8.1 The receipt section--------------------------------------------12
2.8.2 The disbursement section------------------------------------12
2.8.3 The cash surplus of deficit section-------------------------12
2.9 The budget process-----------------------------------------------13
2.10 The need for budgetary control---------------------------------13
2.11 The basic objective of budgetary control----------------------14
2.12 Purpose of budgeting system-----------------------------------15
2.13 Basic principle of budgeting ------------------------------------17
CHAPTER THREE
Methodology
3.1 Source of data--------------------------------------------------------19
3.1.1 Primary data-----------------------------------------------------19
3.1.2 Secondary data--------------------------------------------------19
3.2 Sampling technique----------------------------------------------19
3.3 Method of data analysis -----------------------------------------20

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 CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Budget is a predetermined statement of management policy during a given period, which provides a standard
for comparison with results actually achieved (Brown and Haward 8th edition)
Budgetary performance of the organization against many problem such as budget deficit, unequal distribution
of budget, etc. Hence, there should be an inviting effort to minimize budget deficit (Chandra 1998 in page
205). This study attempts to give a good answer for why budgetary performance are assess on the
organization and why budgetary performance are needed to the organization.
The study focus on the assessment of budgetary performance in the organization. Each year there is an
inventory valuation process which is taken up on regular basis out according to the growth of the
organization, it was not fully recorded and not taken the extent as a means of budget utilization.
Most of the time budget deficit should be controlled by finance organizations and by periodical performance
of the organizations.
But taking this case into account there is a gap created with in the organizational system which affect the goal
of the organization.
The study would be focused to show the solution of budgetary performance, deficit and how to assess or
utilize the budget to the organization. The objective of the study is to assess the budgetary performance in
central gondar zone ffinance organization & to see the organization if they are earning a good return on
budget or not.
If they are good position it is better to keep on, if not to reduce them try to manage it.
Properly managed budgetary performance is good to the organization development. But absence of this the
organization would be not fulfill their goals and objectives.
The budget at the right place supports the organizational objectives, customer service, return of investment,
promoting high profit and others objectives. Organization performance is different from one organization to
other organization, but all need adequate budgetary performance management, Assessment of budgetary
performance would be consistent with the finance organization to utilize the planned budget.
Generally now a day, every business is required budgetary performance, it should be available management
tool, express plan for the future year and it states how available resources would be employed and what
additional resource will be needed.

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 1.3 Statement of the problem
The organization always prepare annual budget for the current year activities by designed budget proposal
and its active implementation of objectives. Budget is one of the techniques used to control the
organization activity and it is also quantitative expression for set of time period and a proposed future plan of
action by management.
Budget is the formal expression of the plan and objective of management to the organization which covers all
phases of operations for a specific period of time.
Good budgetary performance can be a vehicle for addresing of objectives and goals in the most carful way.
But in preparing budget many problems were take place and consequence creats a great impact on the
performance of the organization. The problems are using inappropriate budget preparation procedures & not
well utilization of budget for each department within the organization.
The problem of budgeting is not only in preparation stage but also on implementation. The concern of this
study is to examine the assessments of budgetary performance in particular area central gondar zone
The study is primary focus on the organization, in order to give the final solution and suggestion to the
problems.
The researcher raised the following question that would be answered in this course of study.
 What are the factors that affect budgetary performance of the organization?
 How to assesses budget utilization on central gondar zone finance organization?
 Why budgetary performance is necessary?
 What means the organization use to prepare good budget system?
1.4 Objective of the study
1.4.1 General Objective
The general objective of the study is the assessment of budgetary performance in case study of
central gondar zone finance organization
1.4.2 Specific Objective
The specific objective of the study are the following
 To see the organization effectively implement its budget or not
 To indicate for the finance organization how properly managed budget is important successfully and
to exhibit which factors affect the demand for budgetary performance.
 To know the purpose of budgetary performance in the finance organization
 To identify ways and means by which the organization budgetary performance improved to best level
expectation.

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 1.5 Significance and scope of the study
1.5.1 Significance of the study
This study will help the organization to have a good budgetary practice and to properly budget the available
resources and to effectively implement it. In addition to this study will be use to provide ground line
information for the organization about its budgetary performance, which is very help full for the organization
advancement to provide a better service.
The study helps to examine about the factor affecting budgetary performance in the organization and create
awareness to the organization about budget utilization and implementation, which requires improvement.
Furthermore, it helps to identify ways and means by which the organization budgetary performance is
improved to the best level expectation, in addition to the above the following play a great role to avoid the
problem of budgetary performance for the future society
Initiate the employees to undertake a great measure over the problems concerning budgetary performance.
1.5. 2 Scope of the study
To come up with effective and better study, it will be better if the study will be conducted on over all
organization performance as compared with other similar organizations performance but due to the financial
and other constraints this study conducted only in central gondar zone finance there fore the study is
limited to the organization.

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1.7 Organization of the paper
This proposal includes three chapters. The first chapter present the introduction part which reflecting the
background, statement of the problem objective of the study, significance of the study, scope of the study, and
organization of he paper. The second chapter deals with literature review. The third chapter deals with
methodology of the study.

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 CHAPTER TWO
LITERATURE REVIEW
2.1 Meaning of Budget

According to Cherington budget is defined as follows

Budget is an itemized estimate of the operating result of enterprise for a future time period. Forms of budget
vary from organization to organization. Budget is eventually summarized in to the form of normal financial
statements. The major difference between budget and the financial statement is the data used to develop each,
financial statement are based in actual result of past operations, where as budget are based on planned
operations for a future time period, because of this budget is a performa statements. (Cherington P.140)
2.2 Characteristics of budget
Budget has many characteristics, According to MN. ARORA budget have the following characteristics
 A budget is primary planning and control device
 A budget is prepared in monetary term and/or quantitative term
 A budget is prepared for defined future period
 It shows planed income and expenditure and also the capital to the employed
 Purpose of budget is to implement the policies formulated by management for attaining the given objective
(Source MN. ARORA, 8th edn, P 13)
2.3 Effect of budget control
Budget are major future of management control system. In general they can:-
 Provide performance criteria
 Compel planning including the implementation of plan
 Promote communication and coordination within the organization
 Effect behavioral and organizational processes.
2.4 The Master Budget
A master budget is a set of period budgets that have been consolidated into forecasted financial
statements for the entire company. Each period supplies the projected costs and revenues for a part of the
company. When combined these budget show all anticipated transaction of the company for a future
accounting period.
Three steps lead up to the completed master budget
1. Periodic budget are prepared
2. For casted income statements prepared
3. Forecasted balance sheet is prepared

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 (SOURCE NEEDLES, ANDERSON, CALDWELL, P. 805)

2.5 Budget Implementation

Budget implementation is the responsibility of the budget directory. Communication and support
determine the success of budget implementation process proper communication of expectation and
targets to all key people in the company is essential.
All employees involved in the operations of the business must know what is expected of them and
they must receives directions on how to achieve there goals.
Equally important top management must support the budgeting processes and encourage
implementation of the budget.
The processes will succeed only if middle, and lower level managers can see that top management
truly is interested in the outcome and willing to reward people for meeting the budget goals.
Budgets must be classified and then charged to the different general ledger account the projected
financial statement are the end product of the budgeting process
At this point, management must decide whether to accept the proposed master budget, as well as the
planned operated results , or ask the budget director to change the plans and do part of the budget
over again.
(SOURCE NEEDLES, ANDIRSON, CALDWELL, P.812)
2.6 BUDGET RELATIVE TO TIME
Development of an annual budget is only one segment of the ongoing planning process of business, for the
planning process to be more successful, there must be long range goals, intermediate objective and short term
plan of action according to Cherrington P141
2.6.1 Long range goal: Identify the direction of a company over a 5 year to 10 year the goal are stated in
general term but deal with specification in which the company intended to be successful
2.6.2 Short term plan: Is budget or annual forecast, identify the activity to be accomplishing during the
coming year.
2.6.3 Intermediate Objective: Identifies the specific stages that will lead to accomplishing the long
term goals, they provide a link between short term plan and long term objective
2.7 The stracture of budget
Budget is classified broadly into two category these are operational budget and financial budget.
2.7.1 Operational budget: which reflect the result of operating decision of the firm
2.7.2 Financial budget: which reflect the financial decision of the firm .

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 The operating budget consists, sale budget, production budget, Ending inventory budget cash receipts
budget, direct material budget, factory overhead budget, selling and Administrative expense budget.
(Source Schaum’s P.70)
2.7.3 Sales budget
The starting point of any master budget is the sales revenue budget based on forecasted sale of goods
or services
Sales forecasting: is the process of predicting sale of services of goods. Various procedures are used
in sale forecasting and final forecast usually combines information from many different sources.
Many firm have top management-level market research staff whose job is to coordinate the
company’s sale forecasting efforts (source: Hilton, Maher & Selto, P.627)
2.8 CASH BUDGET
Cash budget is prepared inorder to forecast the firms future financial need. It is also a tool for cash
planning and control, because the cash budget detail is the expected cash receipt and disbursement for a
designed time period, it helps to avoid the problem of either having idle cash on hand or suffering a cash
shortage, However, if a cash shortage is expected, the cash budget includes weather shortages temporary
or permanent, i.e. weather short term or long term borrowing need. Cash budget typically consists of
the following four major section.
2.8.1 The receipt section:- Which gives the beginning cash balance, cash collection from customers and
others.
2.8.2 The disbursement section: which should all cash payment made or listed by purpose
2.8.3 The cash surplus or deficit section: which simply shows the difference b/n cash receipts and cash
disbursement action.
2.8.4 The financial section: Which provide a detailed account of the borrowing and repayment expected
during the budgeted period (Source Schams P.75)
Estimate of cash at particular point of time may be made with the help of the following:-
1. Budgeted Balance sheets cash budget: the cash budget may be prepared inline of capital budget
with the help of budgeted balance sheet. This cash budget is essential for static type.
2. Fund flow type of cash budget: It does not show as to how the expected cash deficits arising
3. Cash account type or receipts and payment type of cash budget: Fund flow type analysis is better
balance sheet type of approach
(Source Hrishikesh Chakraborty & Srijit Chakraborty, P. 672)
2.9 The budget process
The budget process is as important into day’s globally competive operation environment as in traditional
environments. In fact budget becomes even more important when just in time (JIT) or total quality manager
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(TQM) technique are a plied and when computer and other electronic operation and data accumulation device
are used. In these new operating setting actual operating data are made available quickly, and budgets must
be updated continuously to accommodate management’s need for performance evaluation. The basic
principles of budgeting do not change in these environments, only the speed and timing with which they are
applied (Source: Needles, Anderson, Caldwell P798)
2.10 The Need for Budgetary Control
Budgetary controls the process of developing plan for company’s expected operations and controlling
operations to help carry out those plans. The basic objective of budgetary control are the following:
2.10.1 To aid in establishing procedures for preparing a company’s planned revenue and costs
2.10.2 To aid in coordinating and Communicating those plans to various levels of management
2.10.3 To formulate a basis for revenue and cost control
A business does not benefit from budgetary control by operating haphazardly the company must first set
quantitative goals, define the role of individuals and establish operating targets or detail operating budget.
A period budget is a forecast of operating results for segment or function or a company for a specific period
of time, it is quantitative expression of planned activity and requires timely information and careful
coordination.
(Source Needles, Anderson, Caldwell, P.800)
2.11 THE BASIC OBJECTIVE OF BUDGETARY CONTROL
1) It lays down define targets of production and sales with corresponding allowable expenses. Which can be
exceed only with prior approval
2) It provides definite and precise guidance regarding sales, production and finance. Types and quantities to
sold and expense allowable for sale are clearly indicated. As regards production, definite instructions
regarding types, quantities materials, labour and other allowable expense are available similarly, from the
point of view of finance; guidance is available with respect to working capital and capital expenditure to
be incurred.
3) It acts as coordinating machinery between different functional heads. Otherwise, there might be
production without chance of sales, or there may be commitment for supply when chance of production
would be meager, or production might be held up for want of certain materials, or for certain grades of
labour
4) This is helpful in controlling production by limiting chance of wastage. Similarly, it keeps in control cost
and expense by limiting the allowable expenses where decentralized functioning of is essential.
5) An aid to management in policy matters, from working of one budget management may change future
plans and programs by eliminating proper line and by concentrating on more profitable illness or area.

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 Budgetary control thus continually helps management in modification and revision of policy, and the
revised policy shall be the basis of the next plan and budget.
6) It provide objective basis of judgment executives rather than pure guess these providing them with an
opportunity to strive for some calculated better result
Budgetary control is the system of management control in which all the operations sale purchases,
production etc. are for case in advance and the results, when known, are compared with the planned
targets.
(source, HRISHIKESH CHAKRABORTY & SRIJIT CHAKRABORTY, P. 584)

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 2.12 Purpose of budgeting system
A budget is a detailed plan, expressed in quantitative terms, that specifies how an organization will
acquire and use resources during a particular period of time.
Budgeting systems have five primary objectives
 Planning
The most obvious purpose of a budget is to quantify a plan of action, the budgeting process forces the
individual who constitute an organization to plan a head
 Facilitating Communication and Coordination
For any organization to be effective, each manger throughout the organization must be aware of plan
made by other managers. Inorder to plan reservation and ticket sale effectively for facilitating
communication and coordination is one example.
 Allocating Resources
Generally an organization resource is limited and budgets provide one means of allocating resources
among competing users.
 Managing Financial and Operational performance
A budget is a plan and plans are subjected to change. Nevertheless, a budget serve as a useful bench mark
with which actual results can be compared
 Evaluating performance and providing incentives
Comparing actual results with budgeted results also helps managers to evaluate the performance of
individuals, departments, divisions or entire companies, since budget are used to evaluate performance,
they can also be sued to provide incentive for people to perform well.
Different types of budget serve different purposes. A master budget, or a profit plan, is comprehensive
set of budgets covering all phase of an organizations operation for a specified period of time.
(Source Hilton, Maher, Selto, P.625)
2.13 Basic Principles of budgeting
The preparation of an organizations budget is important to its success for three reason, first, preparing a
budget forces management to look ahead & plan both long range and short range goals and events. Second
the entire management team must work together to move and carryout the plans. Third, by comparing the
budget with actual results and it is possible to review performance of all levels of management.
1. Long range goals principles
Annual operating plans cannot be made unless those preparing the budget known the direction that top
management expects for the organization long range goals, projections covering a five to ten years period,
must be set by top management (Needles, Anderson, Caldwell P.802)

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2.Short-range goals and strategies principle
One management has set the short-range goals the controller or budget director takes charge of preparing
budget. These person designs a complete set of budget development plans & time with deadlines for all
levels and parts of the year’s operating plan (Needle, Anderson, Caldwell, P.804)
3. Human responsibilities and interaction principle
First the section of a budget director (and staff, if necessary) a very important to an effective budgeting
system. These person must be able to communicate well with the people both above and below in the
organization hierarchy 2nd we have mentioned that all participants should be identified and informed of there
responsibilities, the identification process begins with high level managers. Full communication throughout
the budgetary process is our final interaction principles. In particular, the budget must be communicated
clearly to the participants each one of these people playing a part in developing the budget and
implementation effective budgeting then require participative budgeting, which means that all level of
personnel task part in the budgeting process in meaning full active way.
(Source, Needle, Anderson, Caldwell P804)
4. Budget housekeeping principles
Which means that three guidelines should be followed, first a realistic approach must be taken by the
participants. Second deadlines must be meet. Third the organization must use the flexible procedures for
implementing the budget. Realisms a two-way street. Top management must first suggest attainable targets
and goals, there each manager must provide realistic information and not place departmental goals a head of
the goal of the whole organization .
Deadlines are important because budget preparation depend on the timely cooperation of many people if one
or two people ignore a dead line for submitting information, the budget might not be ready on time,
management should communicate the important of time table to all participant & should review time
submission of budget data as part of each manger performance evaluation.
Our final principle of budget housekeeping call for flexibility. Budget should always be treated as guide and
not as absolute truths, budget are important guide to the action of management.
5. Budget follow-up principle
Since the budget consist of projections and estimates, it is important that it be checked and corrected
continuously. It more sense to correct and error than to work with an incorrect guide. Budget follow up and
data feedback are part of the control aspects of budgeting cost organization and departmental expectations can
also be unrealistic. Such problems are detected when performance reports compare actual results with
budgeted results.
(Source Needle, Anderson, Caldwell, P.805

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 CHAPTE THREE
METHODOLOGY
3.1 Source of data
To collect the necessary data the study team will use both primary and secondary source of data.
3.1.1 Primary data:- will gather from employees of the organization by
distributing questionnaire and interview through related parties
Questionnaire:- contain both open-end and close-end questions
Interview:- by directly communicate with the finance manager
3.1.2 Secondary source of data: which will collecte or obtained from review of selected materials which
are related to the assessment of budgetary performance, like reference book, magazines, used internet and the
organization budget report document.
3.2 Sampling techniques
The sample selection carried out by a research, so that it will be reliable as to the representation of the total
population, who are believed high civil servants to the finance organization.
The research, therefore, focus on the employee of the organization by using simple random sampling
techniques to acquire the necessary information and to make clear investigation for the current research. The
total population of the study are would include 28 employees. Out of the total, the researcher
would study only forteen (14) or fifty (50%) randomly selected employees taking
this in to account on factors it is found necessary to use personal judgment.
3.3 Method of Data analysis
In this study the data has been analyzed and interpreted using different methods, the method include
tabulation and percentage. Tabulation used to arrange data in a table or other summary format to
facilitate the process of comparison of various data analysis.

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3.4.2. Estimate Costof the proposal /Budget

This Budget is including for paper ,pen ,transport ,printing and soon.
Table.2.Estimatedcost for the activities
No Activities Birr Cents

1 Proposal Expense 400 70

2 Pen 500 00

3 Print 200 80

4 Total 1101 50

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REFERENCE
1. Cherrington “Cost Accounting managerial Approach 2nd edition
2. Hrinshikesh Chakraborty & Srijit Chakraborty 1997 Management Accounting
3. M.N. Arora Cost Accounting Principle and Practice 8th edition New Delhiviskas (2003)
4. Needles, Anderson & Caldweel 1994 Financial and Managerial Accounting third edition
5. Ronald W.Hilton, Michael W.Maher & Frank H.Selto 2000” Cost management stratagies for
Business Decisions
6. Schaum’s Theory and Problem of financial management second edition

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