INVENTORY CONTROL / ECONOMIC ORDER QUANTITY

ZERO BASE BUDGETING - FRAME WORK FOR 2016 NIGERIA BUDGET

    
   Zero base budgeting is a means of eliminating unnecessary expenditure and increasing profitability. The technique was device originally to help management in the difficult task of allocating resources more efficiently between project and other cost item, in service and support areas.

It was first introduced by Peter Physs in 1969 at Texas instrument incorporation in U.S.A since that time it has gain considerably following in U.S.A and Canada but it has been slow to develop in UK. It was use by Jimmy Carter when he was the governor of Georgia.

Zero base budgets require a budget to be prepared from a Zero base. This means that future budgeted level of expenditure must be justified in their own merit ignoring past expenditure levels.

Zero base budgeting therefore is particularly use in certain spending limits for area whose cost are mainly fixed cost for example, Advertising ,Research and Development and Adm. Dept. which tend to have a relatively small proportion of variable cost.

The basic approach of Zero Base budgeting is in three steps.

a)                       Each separate activity of the company or Government is described in the decision package. A decision package is documents which identifies and describe the specific activity in such a way that management can evaluate it and rank it in order of priority against other activities.

b)                      Each activity (Decision package) is evaluated and rank by cost/ benefit analysis.

c)                       Resources in the budget are then allocated accordingly to fund available and the evaluation and the ranking of the competing packages.

Conventionally budget are queried when they show increases in the expenditure over previous years. In Zero base budgeting there should be a positive attempt to eliminate inefficiency and slack from current expenditure.

ADVANTAGES

The advantages of Zero base budgeting are as follows.

1.                       It is positive to identify and remove inefficiency or obsolete operation.

2.                      It adds psychological impetus to employees to avoid wasteful expenditure.

3.                         It obliges government or an organization to look very close into its cost           behavior patterns in order to decide the effect of alternative causes of action i.e. it is necessary to identify fixed cost, steps cost directly attributable cost.

4.                    It provides a budgeting planning tool for management. This responds to  changing in business environment, obsolete items of expenditure are identified and cease.

5.                    The documentation enables coordinated in-depth knowledge of an organization operation to be available to all management.

6.                    In summary, zero base budgeting should result in a more efficient allocation of resources to activities and department of the organization.

DISADVANTAGES

1.                 The major disadvantage of zero base budgeting area as follows

2.        The volume or extra paper work created by the decision packages is much

3.        The assumption of about cost and benefit in each package must be         continual updated, and new packages develop as soon as new activity emerges.

4.        ZBB might also emphasis short term benefit to the detriment of long term    benefit.

5.        It might encourage the false idea that a decision has to be made in the budget.

6.        Government must be able to meet unforeseen opportunity and treat at all time, and must not feel restricted from carrying out new ideas simply because they were not approved by a decision package cost benefit and ranking analysis.

7.        The time to implement and maintain ZBB may outweigh the benefits.

8.        The ranking of simple dissimilar activity is difficult.

There may be lack of commitment on the part of lower government staff which may dilute the effectiveness of the system.

           

THE BENEFITS OF FINANCIAL ACCOUNTING

       Accounting is one of the social science subjects that is studied in secondary school high schools), polytechnics, universities and other tertiary institutions. The benefits or importance of this course or subject is so great that you hardly see any higher school that does not offer the course. But before we look at the benefits of this indispensable course called accounting, it will be imperative to get the overview and the definition of accounting.

     In any society, individuals, group as well as nation make economic decisions , which may entails exchange of goods and services at agreed price and money is use to assign value to them. Because of the continuous need to price or even measure goods and services, this is where accounting comes in. Accounting responds to the need for quantitative and in particular financial information.

 Therefore Accounting can be defined as the process by  which data relating to the financial and economic activities of an individual, organization or the nation are recorded, measured and communicated to interested parties for analysis, interpretation and use

The benefit of studding accounting to individual is that it will give him adequate knowledge of financial and monetary issues. It makes him or she has wider or broader views of what money is all about and facilitates means of acquiring and using it judiciously. If one study accounting and engaged in business it helps him to keep accurate record of his transaction. It will enable him to determine the  value of his asset and liabilities. Also for any person that qualifies as accountant, the sky is his limit, he can work in any iorganization, because there is no sector of economic life that accounting are not needed. Accounbtants are respected people in the society. They can work in financial institutions, the military, hospitals, schools Etc.

The wide use of accounting makes the accountants less vulnerable to unemployment As a chartered accountant you can be self-employed by opening  your chartered accounting firm. ‘An enterprise or organization also derived immense benefits from accounting. The sole-proprietorship, the partnership and the big corporations, all make use of accounting. They use accounting to prepare financial records and other financial statements such as Trading Account, Profit and Loss Account and the Balance sheet. These accounts are prepared to determine the profitability or otherwise of a business. It is also use to produce information that will help the public to form an opinion about the financial standing of an organization.

 To the government, the benefits of accounting can not be over-emphasized. The governments make use of accounting in the determination of balance of payment, gross domestic products, gross national products. Government makes use accounting in preparation of budget and other financial statements’