Cash Budget: A Tool For Decision Making In An Organization

Project and Seminar Material for Accountancy / Accounting

Project and Seminar Material for Accountancy / Accounting


This study examined cash budget a tool for decision making in business organization. The purpose of cash budget is to facilitate and ensure that cash is available so that the company can operate effectively at the levels provided for in the other budgets. For effective management of decision making. The objective of this study was achieved by using the under mentioned Nigeria bottling company Onitsha as a case study. The survey research method was made possible through the administration of questionnaires which were distributed randomly to management and supervisory level staff and some accounting staffs their responses where collected form the respondents and then analyzed, using the percentage rate methods. The analysis of data and finding revealed that cash budget is an aid to effective management, impact positively on profitability and above all, it was greatly accepted and applied, through there were some factors that hindered their full implementations. Conclusively, it could be said that without cash budget organizational goals and objectives may not be achieved. Therefore, it is recommended that control should follow planning and variance should be reporting and corrective action taken immediately.

Table of Contents

Preliminary Page(s)

  • Title page
  • Approval page
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of contents

Chapter One:


  • 1.1 Background of the study
  • 1.2 Statement of problem
  • 1.3 Objective of the study
  • 1.4 Research questions
  • 1.5 Hypothesis (if any)
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Assumption of the study(if any)
  • 1.9 Definition of terms

Chapter Two:

Literature Review

  • 2.1 Conceptual definition of budget
  • 2.2 Theoretical framework
  • 2.3 Current Literature review
  • 2.4 Summary of Literature review

Chapter Three:

Research Methodology

  • 3.1 Design of the study
  • 3.2 Area of the study
  • 3.3 Population of the study
  • 3.4 Sample size and sampling technique
  • 3.5 Instrument for data collection
  • 3.6 Validity of the Instrument
  • 3.7 Distribution and Retrieval of Instrument
  • 3.8 Method of data analysis

Chapter Four:

Data Presentation and Analysis

  • 4.1 Tabulation of Responses
  • 4.2 Testing of hypothesis
  • 4.3 Discussion of findings

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary of findings
  • 5.2 Conclusion
  • 5.3 Recommendation
  • 5.4 Limitation of the findings
  • References
  • Appendix A
  • Appendix B
  • Appendix C
  • Appendix D
  • Appendix E

Chapter One


1.1 Background of the Study:

Every rational economic unit has some objectives to attain, individual, corporate bodies in government have objectives to achieve. To achieve their respective objectives, resources have to be made available, unfortunately nature did not distribute her resources abundantly, whilst objectives and needs are numerous and varied as they are various economic units.

In order to make resources available, cash is needed, according to investopedia, cash is legal tender or corns that can be used to exchange goods, debt or services some time it can also includes the value of assets that can be converted into cash immediately, as reported y a company.

Acoring to Shine Mat (15 June 2012): companies have those primary motives for holding cash and hey are:

  • The transaction motive
  • The precautionary motive
  • The speculative motive.

The transation motive enables firms and companies to conduct their ordinary business making purchases and sales. The precautionary motive depends on the predict ability of cash flow and the ability of company to borrow a short notice. This motive enable a firm to provide enough funds as a protection against unexpected opportunity that may arise. Moreover, sound working capital management require the maintenance of adequate amount of cash. The organization must plan towards its and this plan is know as budgeting a subset of corporate plan.

1.2 Statement of Problem

Budget is one of the controlling instruments used by the management, it is a plan or estimate to be attained by an enterprise. In this study, efforts are made ot find solution to the following problems. The problem of why budget cases failed to be realized it is because of insufficient capital. Another problem that management face is their liability ot manage (long term) cash budget and forecast which may take up to two years, this is because of instability in the inflow and outflow of cash. Cash balances my fluctunate considerably within a single accounting period, there by making cash short tall that can put a company in serious jeiopardy. To solve this, it is quite common to create and maintain cash forecasts on a weekly basis. If there may be large or unusually cash balances indicated in the cash budget. these balances are dealt with in the financing budget where suitable investment is indicated for them.

1.3 Objective of the Study:

The main objective of this study is to investigate cash budget as tool for decision making in an organization specifically, the researcher wants to:

  1. Determine where cash budget is actually a basis for decision making in an organization.
  2. Know the impact of conducting continuous cash budget
  3. The level of which cash budget has help organizations increasing more wealth and effective management
  4. How cash budget allows management to establish the amount of credit that it can extend to customers without beginning to have problem’s with liquidity.
  5. Know how cash budget help the organization to avoid having a cash shortage during when you have numeral expenses.
  6. To know how management manages it inflow and out flow

1.4 Research Questions

  1. Is cash budget actually basis for decision making in an organization?
  2. What impact is continuous cash budget is to management?
  3. Does cash budgets help organization to create wealth and run an effective management?
  4. Does cash budget help management to determine the amount of dividend or credit to be given to the customers?
  5. How does cash budget help the management in avoiding having cash shortage?

1.5 Formation of Hypothesis

The following are formulated for the study

Hypothesis 1
  • H0: Cash budget does not make decision making in business organization easy and reliable.
  • HI: Cash budget make decision making in business organization easy and reliable.
Hypothesis II
  • H0: Cash budget have not brought efficiency and effective decision making in business organization.
  • HI: Cash budget has brought efficiency and effective decision making in business organization.

1.6 Significance of the Study

The significance of this study are:

  1. It provides the yardstick for control of operation’s in a business organization or any firm
  2. It provides reference material for others who might wish to conduct enquire into similar area.
  3. It makes possible the control over operation revenue and cost.
  4. It instills in executive as well as their sub-ordinates the habit of basing decision on investigating studies and research. It with widen the knowledge of the research on the subject matter.
  5. It generate and recommend to be government means of initiating the objectives of the cash budgeting.

1.7 Scope of the Study

The scope of this study is to analyze the cash budget tool for decision making in business organization especially that of Nigeria bottling Company Onitsha. The work is focused on Nigeria Bottling Company Onitsha due to certain obvious factors such as financial and time constraints and non-disclose of information by the management of the company.

1.8 Definition of Terms


It is a future plan of action express in quantitative terms, financial or monetary terms. It is also defined as a financial and quantitative statement prepared and approved prior to a given period of time specifying the policies to be pursue for the attainment of some set of objectives. It might be include income expenditure and employment of capital.


It can be defined as those monetary items that are immediately available for use at any point in time. Cash can be refer to money in the physical form or currency such as bank notes and coins.


It is the process of recording, classifying, seleting, measuring, interpreting and communicating financial data or an organization to enable users make decision.


It is a process, this means budgeting is a number of activities performed in order to prepare a budget. it is also the crafting of the plan for future events, applying laid down concepts for proper / implementation, monitoring, evaluation and control in order to achieve defined goal.

Cash budgeting:

This is a financial budget which is prepare in an organization, it shows in summary form the expected cash receipt and expected cash payment during the budget period.

1.9 History of Nigeria Bottling Company

Coca-cola first arrived in Nigeria in 1951. That same year, the Nigerian Bottling company Ltd (NBC) was incorporated to bottle and sell carbonated non-alcoholic beverages. NBC has the sole franchise to bottle coca-cola products in Nigeria.

Coca-cola was an instant hit with the Nigeria consumer and has remained so. Over the next six decades, NBC has continued on its journey keeping its promise of refreshing consumers, strengthening its communities, enriching the workplace land preserving the environment while recording many memorable milestones along the way. To mention a few.


Production of coca-cola began at a bottling facility in Ebute-metta, Lagos state. The same year the company opened its first bottling plant in Apapa.


The year Nigeria gained independence, NBC exceeded the one million case a year mark.


Commissioned its second bottling facility at Ibadan, Oyo state and rapidly expanded its operation over the next couple of years.


Listed its shares on the Nigerian stock Exchange and became a publicly quoted company


Acquired the Eva premium water and Schweppes brands.


Became a member fo the newly formed coca-cola Hellenic Bolling Company S.A Can anchor Bottling group with operations in 28 countries worldwide)


Launched the five alive juice brand


Launched pet packaging for its sparkling soft drinks category


Launched the energy drink, burn


Launched on-the-go can packaging or core brands coca-cola, fanta and sprite in 2006


Introduced the more environmentally friendly “ultra” glass packaging for its returnable glass Bottling product segments.


Today the operations stands at 13 facilities and 59 depots across the country.


The company was recognized for its corporate social responsibility activities as the most socially Responsibility Company in Nigeria and most environment friendly company at he social enterprise Reporting Awards. The company obtained Nigeria’s first food safety systems certification (FSSC) 22000.

From 2011 till date there is not new product in the company.

Chapter Five

Summary of Findings, Conclusion and Recommendations

5.1 Summary of Findings

The study ahs clearly revealed that budget is one of the basic tools of management control. The objective of the research has to find out whether managerial decisions have been affected positively by cash budgeting, with Nigeria Bottling Company Onitsha as a case study of which the researcher found out that some establishment kwho based their decisions making on budgeting, achieved their goals and objectives as hey planned it. But those establishments, who embarked on some capital project without realistic and attainable budget did not achieve their objectives

In the cause of this study, some research questions were asked and it was discovered after data collection and analysis that: Budget assists management co-ordination, budget establishes standard against which actual performance could e measured.

A good budgeting system improves the communication network withn the organization.

The responses and the answer relieved form responded clearly indicate that budget is a strong basis to decision making in business organization and establishment.

5.2 Conclusion

With particular reference to the result obtained in chapter four (answer to question 3 and 10) the researcher concluded without any fear by saying that:

Cash budget is an important public and private sectors management tool. It is used to allocate resources among various users. The performance of this instrument, through not 100% to efficient especially as regards the public sector is encouraging.

According to Ogundele (2004) “An inefficient or losing public enterprise may continue in operation indefinitely without any automatic discipline operation”.

The researcher finally concluded that cash budget is a basis for decision making in an organization and is still a managerial instrument.

5.3 Recommendations

In ordr ot assist management to derive he full benefits of cash budgeting, the following recommendations were made:

  1. That management should organize orientation programmed for all new staff in account department on budget activities.
  2. Monthly cash budgeting should be introduced to take care of the in fluctuation in he economy.
  3. That modern accounting equipment should be bought and put into use e.g photocopying machine and counting machine etc for effectiveness and efficiency.
  4. That management should install effective financial reward as motivations towards meeting organization budgeted objectives.
  5. That the preparation of the budget should involve all concerned rather than restricting to the top management, with a view of reducing or remaining completely the aspiration distortions. The reason is that with greater participation in the preparation and implementation, there will be objectives, targets and performance because those who prepare also execute in any case.

5.4 Limitation of the Finding

In carrying out this work the researcher encountered a lot of problems. The first was money a huge amount of money was needed in shuttling the questionnaires and in collecting them back. Another limitation or constraints was time factors, the time allotted for the researcher work was not enough as to enable the researcher to give in-depth treatment to it.

The third and finally prominent problem was that respondent would tell you to come and collect the questionnaire in two days time, on getting their you found out that they are not on site on that appointed day.

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