EFFECTIVE LEADERSHIP STYLES AND ITS IMPLICATION ON ORGANIZATIONAL PRODUCTIVITY

EFFECTIVE LEADERSHIP STYLES AND ITS IMPLICATION ON ORGANIZATIONAL PRODUCTIVITY

(A CASE STUDY OF OBAJANA CEMENT FACTORY)

ABSTRACT

This research work titled ‘’Leadership Styles and their Impact on Organizational Productivity’’ using Obajana Cement Factory as a case study. The research work is divided into five chapters with the first chapter focusing problems which necessitate the exercise as well as the objectives and the significant impact of study. The chapter two which is normally termed as review of literature has to do with discussion of where relevant to the field being researcher into. Thus, attempt was made by the researcher at reviewing books, journals or prevails and attracts relevant to the topic in particular and Obajana cement factory Plc in general. In chapter three, the research methods employed by the researchers in gathering data includes both primary and secondary methods as well as random sampling techniques for analyzing response receiving from the field. A research population sample of thirty (30) human elements drawn from both the organizations leadership and staff were chosen for the study and upon who are analyzed, discussed and findings deductively summarized. Finally, the last chapter is summary conclusion and recommendations where stating points as adduced in chapter two and three of the write up are re-emphasized thereafter recommending possible ways/means of solving leadership problems.

CHAPTER ONE

INTRODUCTION

1.1   BACKGROUND OF THE STUDY

The success or failure of any organization be it at home level, private company, government or an educational institution depend on how it is managed. This means that there must be capable hands at the top to coordinate the efforts of the subordinates towards the attainment of the individual and for organizational goods. The coordination of efforts based on an effective system of communication which has to flow freely within and between all sectors of the organization.

However, the ones is on the organization’s leadership to ensure that these objectives are achieved. One of the most leadership. Important roles to be played are that of leadership. Although, the people at the top are addressed by different names like managers, directors, sole administrators, if certain yet their functions remains basically the same i.e the management of available human and specific resources towards the attainment of specific goals.

The organization image depends on how effective it is managed and administered.

Hence, these are need for authority structures defined according to roles and objectives of the organization. It is the authority structures that invariably steers, guides, directs, coordinates and indeed pilot the affairs of the organizations. By implication, there, the success or otherwise of the organization to a large extent depends on these structures. This contention is incomplete without Lucky, R. (1986) when she said ‘’the styles of supervision are more important in achieving better results than any more general factors such as job interests and loyalty towards the organization ‘’ therefore, authority structures (leadership styles) are the subject of investigation. In this research study, meanwhile, leadership can be conducted on leadership have concluded that the style of leadership depends on three factors.

1. The leaders attitude
2. The individual subordinates characteristics as well as the characteristics of the group and
3. The situation in which the leader finds himself.

The nation’s premises and gigantic Obajana Cement Factory Plc. Kogi State located in Obajana Lokoja local government of Kogi State.

It is in view of the negative effects of leadership styles and their implications on organizational productivity that I am prompted to carry out research in the field work is a furtherance of such other research done in this field.

It is equally aimed at analyzing the causes of industrial disharmony and its negative impact on the productivity of an organization concerned.

Obajana Cement Company Plc, Kogi State is used as a case study because, the company constitute the nucleus of the industrial base of Kogi State.

1.2   STATEMENT OF THE RESEARCH PROBLEMS

The personality of the styles adopted, the situation under which he separate and above all the subordinates he/she deals with influences the organization leadership drives in achieving maximum efficiency and effectiveness of real goals for which the organization was established.

Modern administrative leadership especially those in public organization faces problems of varying degree and magnitude in public organizations obviously have problems of ineffective leadership based on the fact that many of the subordinates are not given formidable examples to follow. For instance, while some leaders have patience and tolerance for ambiguity in dealing with their subordinates while, some play truancy when it comes to control and guidance.

In the private sector, promotion, placement and selection process are sometimes inconsistent and selection process are sometimes inconsistent with set down rules and regulations, these assertions, one can authoritatively say that there is lack of seriousness towards official responsibilities, improper guidance, supervision and control exercised on the subordinates. It therefore means that when the right calibres of staff are occupying the right officers/positions definitely these are every tendency to succeed and vice versa.

Finance like blood that runs through vain is the backbone of any organization under consideration like other public corporation in Nigeria faces problems of inadequate funds to execute us laudable objectives. Coupled with these facts is the inconsistency in policy implementation on the part of the management in particulars and the government in general. Furthermore, the recognition is not an exception of the activities of industrial union in Nigeria. At times, the activities of industrial unions as a result of managerial lapses pose serious problems to the organization. In most cases, issues are not usually concluded through negotiation and or dialogue thus constituting challenge to the organization undoubtedly, the outcome of such irreconcilable interests is as exemplified in the series of industrial activities witnessed in recent times. It is on these notes that the researcher deemed it fit to venture the adventure of discovering the root cause, recommending means of improving the organization’s productivity and proffering lasting solutions to these challenges.

1.3   RESEARCH QUESTIONS

1. Does leadership style has any adverse effect on the level of production in your organization?
2. Is leadership style an automatic one that can be effectively and efficiently coordinate in your organization
3. Does growth prospect have direct link with the leadership style in your organization?
4. Does growth prospects irrespective of the leadership style subjected to situational factor in your organization?

1.4   OBJECTIVES OF THE STUDY

The objective of the study amongst other is to critically look into the authority structure of the organization leadership, in other words, the study is aimed at finding out whether the style of leadership at the said organization constitutes to the efficiency and effectiveness of the production process and the staff in particular. Other salient aims and objectives include the following:

1. Evaluate the leadership styles of both past and present management leadership.
2. To state the extent to which the leadership and hint have been able to relate with their subordinates.
3. To determine the managerial responsibilities of managers and/or directors of the organization and low effective. They carry out such responsibilities.
4. To identify problem areas of leadership that hinders effective organizational management.
5. To make recommendations in low best to achieve higher productivity through effective leadership style.

1.5   SIGNIFICANCE OF THE STUDY

The research study is of importance to all organizations and Obajana Cement Factory in particular.

All organization either public or non governmental have leaders with varying degree of approach to leadership styles and roles performed more importantly the study helps in determining how well these roles are carried out as regards to their duties which could either stabilize or de-stabilized productive organizations.

Meanwhile, the study is very relevant and timely especially as modern organizations are becoming more complex and sophisticated. The researchers strongly believe that the study can lead to the understanding of general administration in organization; thereby indicating areas of weaknesses and strength which either militate or help in achieving effective leadership within the hierarchical structures of an organization.

Finally, it will also helps in correcting some anomalies and imbalances in the leadership styles and suggesting ways of improving on them. Consequently, by so doing, it helps in inculcating in them the ability to identify what it takes to be a leader and the ideal theories of leadership, roles, qualities and behaviours/styles to be adapted. Lastly, the wrong notion held by many persistent leadership shall be corrected in their study.

 1.6   SCOPE OF THE STUDY

The research study is entitled ‘’leadership styles and their implication on organization productivity’’ and it is limited to Obajana Cement Factory, especially the intension of the researcher is to examine deeply the management styles of one of the nations cement factory locates in Obajana Lokoja local government area of Kogi State and perhaps evaluate their inputs on the organization productivity.

As an academic exercise, the study especially sampled the organization leadership and staff as population to be considered in the course of the study. This is made so n the order to enable the researcher narrow down the study within a controllable or limit. More so, the study is made more relevant not because the company relies mostly on expatriates and firms like Dumex and Julius Berger in the construction and operation of the cement factory but how their on the departure of these expatriate will affect the organization productive capacity. (2007 to date).

1.7   LIMITATIONS OF THE STUDY

In a research study of this nature especially where the existence of the object of study is relatively new, one is bound to be confronted with various problems ranging from inadequate data lack of proper record keeping, inadequate fund, non-availability of key offices and sectional heads to grant interview, and the convenience of official bureaucracy in getting information from organization on of this nature. Obviously, such technical works of officials secret affect the free flow of information which would have been useful for deterred analysis of data.

The researcher is particularly saddled with the problem of overlapping of time and period allocated for the research work with the actual academic exercise to parent details four of a large organization of this picture. Finally, the fact that human being are not hundred percent perfect the researcher is never an exception and therefore all the importations observed are solely mine.

        CONCEPT CLARIFICATION/DEFINITION OF TERMS

        Operational definitions of some technical concepts or terms are well defines so as to graphically dive home the impact of the study to the end users. Some of such terms are giving below:

LEADERSHIP: According to Cole, (1976), leadership is a dynamic process, at work in group whereby one individual over a particular period of time and in particular organizational context, influences the other group members to commit themselves freely to the achievement of the group tasks or goals.

ORGANIZATION: The process of putting people into jobs and grouping jobs together into departments whereby duties and responsibilities are delegated to qualified staff so that the works or functions of management are carried out as planned.

STYLE: This is a systematic manner/way of doing performing, presenting or carrying out leadership functions and/or roles in an organization.

IMPLICATION: The resultant consequences of any leadership style theory and type adopted. In other words, it is the outcome of whichever behaviour/ styles exhibited by the leadership of the organization.

PRODUCTIVITY: The ration of output of goods and services to the units of the resources. Hence, it is a measure of low well these resources are being utilized (1988:45)

1.8   ORGANIZATION OF THE STUDY

The research work is divided into five chapters with the first chapter focusing problems which necessitate the exercise as well as the objectives and the significant impact of the study.

The chapter two which is normally termed as review literature has to do with discussion of where relevant to the field being researcherd into. Thus, attempt was made by the researcher at reviewing books, journals, or prevails and attracts relevant to the topic in particular and Obajana Cement Factory Plc in general.

In chapter three, the research methods employed by the researcher in gathering data includes both primary and secondary methods as well as random sampling techniques for analyzing response receiving from the field. A research population sample of thirty (30) human elements drawn from both the organizations leadership and staff were chosen for the study and upon who are analyzed, discussed and findings deductively summarized.

Finally, the last chapter is summary, conclusion and recommendations where stating points as adduced in chapter two and three of the write up are re-emphasized there after recommending possible way/means of solving leadership problems.

 

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WHAT IS MANAGEMENT BY OBJECTIVE (MBO)

WHAT IS MANAGEMENT BY OBJECTIVE (MBO)

Management by objectives (MBO) is a systematic and organized approach that allows management to focus on achievable goals and to attain the best possible results from available resources. It aims to increase organizational performance by aligning goals and subordinate objectives throughout the organization. Ideally, employees get strong input to identify their objectives, time lines for completion, etc. MBO includes ongoing tracking and feedback in the process to reach objectives.

It was first outlined by Peter Drucker in 1954 in his book ‘The Practice of Management’. In the 90s, Peter Drucker himself decreased the significance of this organization management method, when he said: “It’s just another tool. It is not the great cure for management inefficiency… Management by Objectives works if you know the objectives, 90% of the time you don’t.”

CORE CONCEPTS OF MBO

According to Drucker managers should “avoid the activity trap”, getting so involved in their day to day activities that they forget their main purpose or objective. Instead of just a few top-managers, all managers should:

• participate in the strategic planning process, in order to improve the implementability of the plan, and
• Implement a range of performance systems, designed to help the organization stay on the right track.

MANAGERIAL FOCUS

MBO managers focus on the result, not the activity. They delegate tasks by “negotiating a contract of goals” with their subordinates without dictating a detailed roadmap for implementation. Management by Objectives (MBO) is about setting yourself objectives and then breaking these down into more specific goals or key results.

Main Principle of MBO

• The principle behind Management by Objectives (MBO) is to make sure that everybody within the organization has a clear understanding of the aims, or objectives, of that organization, as well as awareness of their own roles and responsibilities in achieving those aims. The complete MBO system is to get managers and empowered employees acting to implement and achieve their plans, which automatically achieve those of the organization.

WHERE TO USE MBO

• The MBO style is appropriate for knowledge-based enterprises when your staff is competent. It is appropriate in situations where you wish to build employees’ management and self-leadership skills and tap their creativity, tacit knowledge and initiative. Management by Objectives (MBO) is also used by chief executives of multinational corporations (MNCs) for their country managers abroad.

INDIVIDUAL RESPONSIBILITY

Management by Objectives (MBO) creates a link between top management’s strategic thinking and the strategy’s implementation lower down. Responsibility for objectives is passed from the organization to its individual members. It is especially important for knowledge-based organizations where all members have to be able to control their own work by feeding back from their results to their objectives.

Management by objectives is achieved through self-control, the tool of effectiveness. Today the worker is a self-manager, whose decisions are of decisive importance for results.

In such an organization, management has to ask each employee three questions:

• What should we hold you accountable for?
• What information do you need?
• What information do you owe the rest of us?

MBO STRATEGY: THREE BASIC PARTS

All individuals within an organization are assigned a special set of objectives that they try to reach during a normal operating period. These objectives are mutually set and agreed upon by individuals and their managers.

Performance reviews are conducted periodically to determine how close individuals are to attaining their objectives.

Rewards are given to individuals on the basis of how close they come to reaching their goals.

MBO ADVANTAGES & DISADVANTAGES

Advantages

• MBO programs continually emphasize what should be done in an organization to achieve organizational goals.
• MBO process secures employee commitment to attaining organizational goals.

Disadvantages

• The development of objectives can be time consuming, leaving both managers and employees less time in which to do their actual work.
• The elaborate written goals, careful communication of goals, and detailed performance evaluation required in an MBO program increase the volume of paperwork in an organization.

MANPOWER PLANNING AND DEVELOPMENT

MANPOWER PLANNING AND DEVELOPMENT

Manpower planning and development is the first and the most important function of management. The essence of manpower planning and development involves a critical analysis of the supply, demand, surplus, shortage and utilization of human resources. It is important to note that manpower planning is often taken as the most important resources of an organization because through it, other resources (material and financial) are harnessed to meet the need of man

The concept of manpower planning has been given different definition by different authors. Malthus and Jackson (1992) see manpower planning as the process of analyzing and identifying the need for the availability of human resources so that the organization can meet its human resources objectives.

Griffin (1997) sees human resources planning as a plan which involves accessing trends, forecasting the supply, demand for labour and the development of appropriate strategy for addressing any differences.

Ehegbunna (1992), sees manpower planning as having the right person in the right number, in the right place and at the right time.

Olutola (1986), when manpower planning is mentioned, it generally refers to the projection of future requirement for a given number of people with specific skill to meet the demand of various sector of the economy.

Manpower planning and development helps measurement to determine:
(a) Number of employees
(b) The level of experience each must possess
(c) Their salary scale
(d) The best way to utilize them in an activity which practice increase skills.

TYPES OF MANPOWER PLANNING AND DEVELOPMENT:

There are many ways to classify plans. According to Okoye (1997), these could be thought of in terms of substance of planning, the variety of plan that is produce, and the value to be anticipated from planning.
Koontz etal (1980) classified manpower planning and put them in a hierarchy as below;

(1) Purpose of mission:– The mission or purpose identifies the basic function or task of an enterprise or agency or any part of it.

(2) Objectives:– This is the results towards which the organization activity is directed.

(3) Strategies: This is used in the military to mean plan made in the tight of what is believed on adversary might not be so. The purpose of strategies then is to determine and communicate through a system of major objectives and policies a picture of what kind of enterprises is envisioned.

(4) Policies:– Hicks and Gullet (1981), define policies general statement that guide decision making. Within the framework existing or anticipated resources.

(5) Budget:- Agu (2003), budget are statement of financial resources, the budget is necessary for control but cannot serve as a sensible standard of control unless it reflects plan.

EFFECTS OF MANPOWER PLANNING AND DEVELOPMENT:

According to Agu (2003), Manpower planning and development gives the organization a sense of direction and purpose. Thus, the consistent guides needed in resources allocations are used in performing other activities are provided.

It increases the skill of a manager in accurate decision making and thereby reduces the chances of mistakes and errors. It also reduces waste of materials, time and money.

According to Obi (2005), manpower planning and development is used to anticipate problems and take corrective action before they become menace to the organization operations and to co-ordinate all significant activities so that personnel, facilities and materials can be made available at required time.

It also minimizes redundancy, duties and correctly helps to allocate duties and positions in business. It set a precise practicable and understandable manner in the organization. It provides the means of integrating and viewing the organization as well as visualizes how the overall goals are interrelated in achieving the overall goals rewarding subordinates.

According to Drucker (1954) defines it as a means of using subordinates. It is a means of using goals to motivate people rather than to control them.

FACTORS THAT INFLUENCE MANPOWER PLANNING AND DEVELOPMENT IN NIGERIA

(1) Educational factor:- The pursuit of wrong policy or a shift in the educational policy of a country can cause a shortage in manpower requirement of a nation. This is in the case of developing countries where the educational policies had focused on the trading of administrative personnels to the neglect of their technical counterpart. The result is that, the colonial masters had to escort their labour in the areas of scarcity to the former colonies thereby getting employment for their nationals.

(2) Technological factors:- With change in technology, there must be change in skill requirements of industries. Many jobs are been deskilled because many factories, apart from manufacturing new parts are decommissioning old ones while many joinery workers are now factory maids. Therefore a change in the technology employed in an organization or in any arm of the enterprise or the use of semi-finished
product will have definite effect on human resources, especially on their occupation and skill.

(3) Social change or factors:- Experience has shown that many youths, do not want to remain in rural areas but want to go to the urban centres where they can enjoy social amenities provided by the government. Where there is a dearth of labour for the industries located in the rural areas, there is excess for those in the urban areas.

(4) Economic factors:- Economic also play an important role in the labour supply and mobility in any country. In the case of early 1970’s that is immediately after the civil war for instance, there was a general reconstruction and rehabilitation, and the Nigerian economy was growing fast. This lead to more employment competition and some skills become scarce.

(5) Political changes:- A change in government in this country usually put fear in organization or enterprises as the policy statements of successive government create one hardship or the other for industries and some time disrupt continuity.

References

Bedeian Arthur G. (1987); Management, CBS College Publishing, New York.

Burton Gens (1997); Management Today; Principles and practice New Delhi, McGraw Hill Tata.

Drucker P.F.G (1973); Management; London: Heinemann Publication.

Drunker P (1977); People and Performance the best of Drunker on Management London: Heinemann Ltd.

Ejiofor P.N.O (1989); Foundation of Business Administration London: Africa Feb. Publishers Ltd.

Eyre E.C (1984) Mastering Basic Management London, Macmillan Education Ltd.

Glueck F.W (1980); Management (2nd Ed.) C.d Illinois: The Dryden Press.

Handy C.C.B (1981); Understanding Organization, Great Britain: Penguin books.

Haywood Phil (1974); Planning and Human Need; Singapore: McGraw Hill Book Company.

Koontz H et al (1993); Management: A Global Perceptive New York: McGraw Hill.

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TYPES OF RETAILER

TYPES OF RETAILER

Consumers today can shop for goods and services in a wide variety of retail organizations. There are store retailer, nonstore retailer, and retailer organization.

1. SUPERMARKETS

These are large self-service stores traditionally selling food, drinks and toiletries, but range broadening by some supermarket chains means that such items as non-prescription pharmaceuticals, cosmetics, and clothing are also being sold. While one attraction of supermarkets is their lower prices compared with small independent grocery shops, the extent to which price is a key competitive weapon depends upon the supermarket’s positioning strategy.

2. DEPARTMENT STORES

So-called because related product lines are sold in separate departments such as men’s and women’s clothing, jewelry, cosmetics, toys, and home furnishings, in recent years department stores have been under increasing pressure from discount houses, specialty stores and the move to out-of-town shopping. Nevertheless, they are still surviving in this competitive arena.

3. SPECIALTY SHOP

These outlets specialize in a narrow product line. For example, many town centers have shops selling confectionery, cigarettes and newspapers in the same outlet. May speciality outlets sell only one product line such as Tie Rack and Sock Shop. Specialization allows a deep product line to be sold in restricted shops space. Some speciality shops focus on quality and personal services such as butchers and greengrocers.

4. DISCOUNT HOUSES

These sell products at low prices by bulk buying, accepting low margins and selling high volumes. Low prices, sometimes promoted as sale prices, are offered throughout the year. As an executive of Dixons, a UK discounter of electrical goods, commented we only have two sales each lasting six months. Many discounters operate from out-of-town retail warehouses with the capacity of stock a wide range of merchandize.

5. CATEGORY KILLERS

These are retail outlets with a narrow product focus but with an unusually wide width and depth to that product range. Category killers emerged in the USA in the early 1980s as a challenge to discount houses. They are distinct from speciality shops in that they are bigger and carry a wider and deeper range of products within their chosen product category, and are distinguished from discount houses in their focus on only one product category.

Two examples of the category killer are Toys “R” Us and Nevada Bob’s Discount Golf warehouses, e-marketing 20.1 discusses how Toys “R” Us operates and gains competitive advantage over traditional toy outlets, while facing a major threat from a new internet – based competitor eToys.

6. CONVENIENCE STORES

These stores offer customer the convenience of close location and long opening hours every day of the week. Because they are small they pay higher prices for their merchandise than supermarkets, and therefore have to charge higher prices to their customers. Some of these stores join buying groups such as spar or mace to gain some purchasing power and lower prices. But the main customer need that they fulfill is for top-up buying, for example when short of a carton of milk or loaf of bread. Although average purchase value is low, convenience stores prosper because of their higher prices and low staff costs, many are family businesses.

7. CATALOGUE STORES

These retail outlets promote their products through catalogues which are either posted or are available in the store for customers to take home. Purchase is in city center outlets where customers fill in order forms, pay for the goods and then collect them from a designated place in the store. In the UK, Argos is a successful catalogue retailer selling a wide range of discounted products such as electrical goods, jewelry, gardening tools, furniture, toys, car accessories, sports goods, luggage, and cutlery

NONSTORE RETAILING

MAIL ORDER

This non-store form of retailing may also employ catalogues as a promotional vehicle but the purchase transaction is conducted via the mail. Alternatively, outward communication may be by direct mail, television, magazine or newspaper advertising. Increasingly orders are being placed by telephone, a process which is facilitated by the use of credit cards as a means of payment. Goods are then sent by mail. A growth area is the selling of personal computers by mail order. By eliminating costly intermediaries, products can be offered at low prices. Mail order has the prospect of pan-European catalogues, central warehousing and processing of cross-border orders.

AUTOMATIC VENDING

Automatic vending is used for a variety of merchandise including impulse goods like cigarette, soft drinks, coffee, candy, newspapers, magazines, and other products like hosiery, cosmetics, hot food, condoms, and paperbacks. Vending machines are found in factories, offices, large retail stores, gasoline stations, hotels, restaurants and many other places. They offer 24 hours selling, self-service, and merchandise that is always fresh.

BUYING SERVICE

This is a storeless retailer serving a specific clientele usually employees of large organizations who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership.

DIRECT SELLING

Direct selling, sometimes called door-to-door retailing, involves direct sales of goods and services to consumers through personal interactions and demonstrations in their home or office.

TELEMARKETING

Another form of nonstore retailing, called telemarketing, involves using the telephone to interact with and sell directly to consumers. Compared with direct mail, telemarketing is often viewed as a more efficient means of targeting consumers, although the two techniques are often used together.

ONLINE RETAILING

Online retailing allows consumers to search for, evaluate, and order products through the internet. For many consumers the advantages of this form of retailing are the 24-hour access, the ability to comparison shop, in-home privacy and variety.

REFERENCES

Aham Anyanwu (2000), Dimensions of Marketing. 2^nd Edition. (Owerri: Pascal Publications), p.146.

Ben, Ogedengbe (2007), Small Business Management: A Contemporary Approach. 1^stEdition (Kaduna: Data Prints), p. 152.

David Jobber (2009), Principles and Practice of Marketing. 3^rd Edition. (New York: McGraw – Hill), p. 745 – 760.

 

STANDARD COSTING

STANDARD COSTING

Standard costing are target cost that should be incurred under efficient operating conditions. According to Vafeas (2005) standard costing are predetermined costs.

A standard costing system can be applied to organizations that produce many different products as long as production consists of a series of common operations.

For example, if the output from a factory is the result of a given common operations, it is therefore possible that a large product range may result from a small number of common operation. This standard costs should be developed for respective operations and product.

Standard costs are simply derived by combining the standard cost from operations which are necessary to make the product. Standard costing is a system of accounting which is used in determining the standard cost relating to each element of costs material, labour and overhead for each line of product manufactured or service supplied.

According to Brown (2006) a standard is a predicted measurement of what amount of input should be and what that input should be and what that input should cost per unit of that input. A standard should be reasonable be reasonable in that it should be attainable by skilled and motivated workers and should also enable the company to produce a product that is high enough in quality and low enough in cost so as to meet the demands of the competitive market.

It is a tool used by management for cost planning and cost control purpose. When a company uses standard cost, all costs affecting the investor accounts and the cost of goods sold accounts are stated in terms of practice, five standards are usually predetermined for the product of a manufacturing company.

They are as follows:

1. Material quantity standard: This is the amount of material that should be used from a unit of product. In some cases more than one type of material is used, as a standard is set for each material.
2. Material price standard: This is the cost per unit of material.
3. Labour Quantity Standard: is the amount of labour usually expressed in direct labour hours that should be used per unit of product.
4. Labour Price Standard: is the cost of direct labour per direct labour hours. The common name for this type of standard is wage rate standard.
5. Overhead Standard: This is the amount of overhead cost that should be per direct labour hour.

From the definition above, it will be seen that the following process are involved:
1. Predetermination of standard cost.
2. Recording of actual cost.
3. Comparing actual cost with standard cost.
4. Obtaining the cost with standard cost.

Establishment of Standard Cost

The success of any system is assured if cost control depends to some extent on getting the standard cost guaranteed. If the target costs are unattainable, most of the subsequent work of cost control system may be wasted. The first stage warrants constant consideration and setting of suitable standards is not difficult provided that certain rules are observed and certain pitfalls are avoided.

Whether dealing with materials labour or overhead labour, the basic principle of setting standards are similar. The target cost should be estimated in terms of two distinct fact quality expressed in physical terms and the price to be paid for each physical unit. For example, in estimating material cost, the amount of material needed to make the product should be per unit of material.

There are reasons for recommending that target cost be considered in terms of both factors. First, prices may change especially in times of inflation but the physical quality which is required for production is not affected by change in price. This is because the same quantity has to be used and at the same time be maintained.

The second ad more important reason for distinguishing these two factors is that it is essential for analysing the causes of variances if the actual material cost is said to be N300, 000 more than the standard estimated cost, the question that will arise because too much material were used or because the actual price paid was higher than the material allowed for the machine? Without this fundamental knowledge, it may be impossible to identify that proper standard which is extremely important because management will evaluate past performance.

References

Ezeamama, M. C. (2002). Fundamental of financial management (A practical guide). Enugu: Ema Press Publishing Ltd.

Seal, W. (2006). Management accounting and corporate governance. An institutional interpretation of the agency problem. Management Accounting Journal, Vol. 15.

THE CONCEPT OF PROFIT PERFORMANCE

THE CONCEPT OF PROFIT PERFORMANCE

There are various measures or means of attaining profit maximization. Embedded in them are concepts that boost the goal of profit performance. Key performance indicators (KPI) are one of the essential measures through which an organization define and measure progress toward organizational goals. Key performance indicators are quantifiable measurements agreed beforehand that reflect the critical success factors of an organization. They will differ depending on the organization.

A business may have as one of its key performance indicators the percentage of its income that comes from customers return. A school may focus its key performance indicators on graduation rates of students. Also a customer service department may have as one of its key performance indicators, in line with overall company‟s KPIs, percentage of customers calls answered in the first minute. Whatever key performance selected they must reflect the organizations goals, they must be key to its success, and they must be quantifiable (measurable). Key performers indicators usually are long term consideration the definition of what they are and how they are measured do not change often. The goals for a particular key performance indicator may change as the organizations goal changes, or as it gets closer to achieving its goal.

An organization that has as one of its goals to be the most profitable company or industry will have key performance indicators that measure pre tax profit and shareholders equity will be among them. However, if a key performance indicator is going to be of any value, there must be a way to accurately define and measure it. It is important to define the key performance indicators and stay with the same definition from year to year. for a key performance indicator to increase its sales, you need to address considerations like whether to measure by units sold or by naira value of sales.

Will returns be deducted from sales in the month of the return? Will sales be recorded for KPI at a list price or at the actual sales price?

Thus, if a company‟s‟ key performance indicator is increased consumer satisfaction? That KPI will be focused differently in different departments.

The manufacturing department may have a KPI of number of units rejected by quality inspection, while the sales department has a KPI of minutes a customer is on hold before a sales representative answers: success by the sales and manufacturing departments in meeting their respective departmental key performance indicators will help the company meet its overall KPI which is to enhance the company‟s profit performances.

Finally, Key performances indicators can be used as performance management tool, but also as a carrot. KPIs gives everyone in the organization a clear picture of what is important, of what they need to make to make happen. You use that to manage performances and maximize the organizations profit as well. And also that everything the people in your organization do is focused on meeting or exceeding those key performances indicators.

Furthermore, Walter Johnson and Demand media (2005) stipulated that maximizing corporate or organization profit, as an idea seems straight forward, simple and obvious. In terms of basic managerial policy, however, it is anything but maximizing corporate profit at first blush seems to negate the maximization of less tangible assets such as public welfare, efficiency, labour, loyalty, managerial accountability or work place satisfaction. In free market economy, however this is rarely the case.

He argued that the foundation of maximizing organizations profit means that the value of goods and services created and sold in the open market is greater than the costs of creating this value. More specifically to maximize profit is to squeeze as much value out of the resources, machines and labour as possible so that the surplus value will go to the firm owners. The conceptual problem is how this goal of profit maximization relates to other genuine business assets in the market place. Therefore, other variables such as social welfare or marketing share cannot be terminated totally since all of these assist in the development of profit performances.

WHAT IS ACCOUNTING SYSTEM

WHAT IS ACCOUNTING SYSTEM

Accounting systems is defined by different scholars, among this are:

Hussey (2005) defines accounting system as the system designed to record the accounting transaction and events of a business and account for them in a way that complies with its policies and procedures.

Hartzell (2006) says that accounting system is a consistent way of organizing, recording, summarizing and reporting financial transactions.

The minimum requirements for an accounting systems include the following;

It must provide financial information for management to make policy decisions, prepare budgets and grant proposals and provide other. Useful financial reports, also, similar transitions must receive consistent accounting treatment.

Ama (2004) defines the accounting system as “ a formal system for identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating accounting information about a particular entity to a particular group”.

By formal system, we mean that the accounting system carries out its functions with laid down rules, regulations, methods, procedures and techniques. It is also a routine and an automatic system.

An accounting system as opined by Ama (2001) is a formal mechanism for gathering, organizing and communicating information about an organization’s activities.

An accounting system can also be defined as mechanism for gathering and communicating data for the ends of assisting and co-ordinating collective decision in view of the overall objective of a firm or an organization.

Accounting system by definition is a financial information system which includes accounting terms, records instruction manuals flow charts programs, and reports to fit the particular needs of the business.

Accounting systems is a set of records, procedures and equipment that routinely deals with the events affecting the financial performance and position of the organization.

Finally, according to business online dictionary, a system is an organized set of manual and computerized accounting methods procedures and control established together, record, classify, analyze, summarized interpret and present accurate and timely financial data for management decisions.

Financial Management

Financial Management

Financial management is concerned with the planning organizing, procurement and utilization of government financial resources as well as the formulation of appropriate policies in order to achieve the aspiration of members that society.

Premchand (1999) sees public financial management as the link between the community‟s aspirations with resources, and the present with future. It lies at the very heart of the operations and fiscal policy of government of government.

The Stage of Financial Management

1) Policy Formulation: policy formulation is one of the most important stages in financial management structure according to Premchand (1999), the transformation of the society‟s aspirations into feasible policies with well recognized financial implication is at the heart of financial management.

Issues not well addressed during policy formulation tend to grow in magnitude during implementation and may frequently contribute to major reversals in the pursuit of policies or major slippages that may lead to contrary results”.

Financial management should be designed to achieve certain micro and macro economic policies. It entails a clearly defined structural and articulated system that moves to promote cost-consciousness in the use of resources.

The government needs to have an estimate of revenue and expenditure to achieve the policy objective of government.

2) Budget formulation: the budget formulation is the step that involves the allocation of resources before the submission to the legislature for review and final approval.

According to Appah (2009), in Nigeria the budget formulation involves the articulation of the fiscal, monetary, political, economic, social, and welfare objectives of the government by the president; based on these,

I. The department issues policies and guidelines which form the basis of circulars to ministries/departments requesting for inputs and their needs for the ensuring fiscal periods.

II. Accounting officers of responsibility units are required to obtain and collate the needs of their units.

III. Accounting officers of ministries in this case the permanent secretaries are required to collate these proposals which would be defended by units‟ heads before the supervising minister.

1) Budget structures: according to Anyanwu (1997), a budget structure addresses the question of how the budget is or should be composed. In Nigeria, budgets have revenue and expenditure sides. According to prenchard (1999), many governments have yet to put in place cash management systems, which would pave way for coordinated domestic management.

The practice of limiting outlays to collected revenues has exacerbated this problem. He, further argued that there is a massive underfunding of programs and projects provided for in the budget.

2) Payment system: This involves the operational procedures for receiving monies for the public and for making payment to them. In Nigeria, government makes payments using a variety of procedures. These include book adjustments, issue of cheques, and payment authorities and electronic payment systems.

3) Government accounting and financial reporting: this is a very important component of the public sector financial management process in Nigeria. As Adams (2001) noted that government accounting entails the recording, communicating, summarizing, analyzing, and interpreting financial statement in aggregate and in details.

In the same vein, premchand (1999) argues that government accounts have the dual purpose of meeting internal management requirement while providing the public with a window on government operations.

Government financial reports should be prepared with the objective in mind of providing full disclosure on a timely basis of all material facts relating to government financial position and operations (A chua, 2009).

Financial reports on their own do not mean accountability but they are as indispensible part of accountability.

4) Audit: One of the fundamental aspects of public sector financial management in Nigeria is the issue of audit of government financial reports.

Audit is the process carried out by suitably qualified Auditors during the accounting records and the financial statement of enterprises are subjected to examination by the independent auditors with the main purpose of expressing an opinion in accordance with the terms of appointment.

The purpose of expressing an opinion in accordance with the terms of appointment. The high level corruption in the public sector of Nigeria is basically as a result of the failure of auditing.

As prenchand (1999) put it “many audit agencies are legally invented from reviewing policies. Most of them cannot follow the trail of money, as they do not have the right to look into books of contractors, and autonomous agencies”. One fundamental failure of audit is the absence of value of money in the Nigerian public sector.

5) Legislative Control: Nigeria is expected to perform this very important task of controlling and regulating the revenue and expenditure estimates in any fiscal year.

It is the responsibility of the members of the national assembly to ensure that the budget estimates are properly scrutinized to ensure accuracy, effectiveness and efficiency of government revenue and expenditure.

EFFECTS OF TAXATION

EFFECTS OF TAXATION

The effects of taxation is conceived to cover all the changes in the economy resulting from the imposition of tax. Generally, the presence of tax distorts the patterns of production, consumption, investment and employment thus giving validity to what HARPER (1963:213) calls the concepts of “general fiscal rationality”.

The Effects of Taxation are as follows:

a. INCENTIVE TO INVEST:- Heavy taxes may reduce the preventive to invest especially if the tax heavily on savings and profits. All the discrimination features of the companies income tax stems from the fact that company’s net income is the base.

By definition of tax, all unincorporated activities are exempted and even within the corporate sector of the economy. The tax falls more heavily on activities with low rations of debt and it is a deductible expense.

The consequence of this discrimination is the distortion of the economic structure favoring non-corporate sector, there is distortion favoring those activities which can readily be financed in large measure by dealt capital over those that cannot.

However, the Nigerian companies income tax attempts to attract investment in certain preferred sectors by giving tax incentive to firms engaged in such activities.

b. INFLATION &TAXATION:– taxation as a fiscal tool available to the government can be used to fight inflation, deflation, stage, flation and other undesirable trends.

For example, an increase in the rate of both companies and personal income taxes during inflationary period can reduce expenditure from the private sector thereby reducing pressure on the market and curtailing inflation.

The chief of inflation on taxation as noted by EREASER (1980:116) is to change and often increase its filed in money terms without the need to adjust tax.

c. INCENTIVES WORK:- Heavy direct tax may reduce incentive to work if the amount paid too much, the tax payer quite the job or at least work less.

A highly progressive and steep tax structure may serve as demonization from working harder once it has reached a certain income level because and additional increase income after that level will more proportionality increase tax of the individuals.

d. IT REDUCES PRODUCTION: if exercise duties are high, production will be adversely affected.

e. IT WILL ALTER DEMAND SUPPLY:– When few goods are produced and their prices high as a result of indirect taxes demand and supply will be low.

f. CAUSES SCARCITY OF GOODS:– Taxation reduces the quality of goods produced locally an imported thereby causing scarcity of goods.

FUNCTIONS OF TAXATION

FUNCTIONS OF TAXATION

There are three (3) main functions of taxation which were explained by SIUS (1972:522 -523) as:

a. REVENUE:– A tax extracts money from people or organizations and provides revenue for government.

This makes it possible for individuals to have less money for spending while the government has more to spend.

The reduction in the spending potential of the public sector and the corresponding increase in the potential of the public sector are clearly by power of taxation hence tax was solely introduced to help the government out of financial needs rather than from a public objective of reducing the citizen’s spending power.

b. RESOURCE RE-ALLOCATION:– Tax can alter the product mix generated within the private sector. The imposition of taxes may make certain commodities expensive.

Example includes TOBACCO, LIQUOR etc. whereas the use of subsidies or negative tax could make certain commodities of essential nature less expensive. As a result of this, people will tend to use more of the later group and less of the farmer.

The tax includes charge in the product mix which comes about through the effects of taxes on prices and qualities produced. Also, the potential income tax purposely leaves some gains subject to little or no tax and thereby encouraging source activities.

C. INCOME REDISTRIBUTION: Economic power as measure by income or wealth could be redistributed through the use of taxation. When tax is substantially progressive, it takes an increasing proportion of income.

TYPES OF TAX

TYPES OF TAX

Tax according to AGYEI (1983:3) and OKEKE (1994:259) is generally grouped into DIRECT AND INDIRECT TAX. Tax is also classified as proportion, progression and regressive tax.

He (AGYEI) West further to define DIRECT TAX as those taxes levied on factor of production, in world this consist of the following.
a. Personal income tax

b. Companies income tax

c. Petroleum profit tax

d. Capital gain tax

e. Capital transfer tax

f. General property tax

g. Expenditure tax

h. Stamp duties

i. Poll tax

j. Gift tax

k. Estate duties and inheritance/death duties

l. Capitation tax: Some of these taxes are not levied in Nigeria and Africa as a whole, the ones levied in Nigeria include.

a. Personal income tax (payee)

b. Companies income tax

c. Capital gains tax

d. Capital transfer tax

e. Sales tax and petroleum

f. Profit tax and so on Nigeria accountant (1993:2)

He also mentioned that INDIRECT TAX are those tax levied against goods and services, example of these in Nigeria include the followings.

a. Sales tax

b. Import duties

c. Export duties

d. Excise duties

e. Purchase tax

f. Value added tax (VAT)

PRINCIPLES OF TAXATION

PRINCIPLES OF TAXATION

These are guiding principles of governing the various tax systems we have today and even in the past.

According to ADAMS SMITH (1996:87), there are major principles of taxation, among these principles of taxation are the following

1. EQUALITY OF PAYMENT:- This principles of taxation state that income earned the same level and with the same responsibility should pay the same amount of money in tax. This also means that people should pay tax according to their ability of pay (PAYE) pay as you earn.

2. CERTAINTY: This principles  of taxation holds that the amount of tax to be paid by one tax payer should be made known to him or her and how it is worked out should be clearly explained to him or her.

3. CONVENIENCE: This means that tax payment should be arranged so as to be convenient to the tax payers.

4. ECONOMY:- The tax system should be arranged to make it possible to send little amount of money in tax collection. Any system, where by a proportion of the tax money is spent on its collection, is not a good tax system that is to say that the tax authorities should be efficient in their collection of taxes.

5. SIMPLICITY: The tax system or principle should be simple enough for everybody especially the payer to understand.

6. FLEXIBILITY: A good tax system must be easily changed. These tax system concerned must be capable of being easily or conveniently adjustly as occasion warrants.

7. IMPARTIALITY: In this case, there shall not be any partiality in tax assessment. This means that tax officials should not discriminate against tax payer while assessing them for tax payment.

8. PRODUCTIVITY: In tax principle the amount realized from tax should be sufficient to cover some government expenses. According to ANDY (2001:199), this is otherwise referred or known as the principle of fiscal adequacy.

In his own contribution in the subject under consideration, FALDDUMETA (1877:212-213) agrees with the above principle of equality, there are two nations of equality. These are horizontal equity (i.e.) equal treatment for equal and vertical equality, which is the poor and rich. In the authors view, the principle of equality often envisages a transfer of income from the very rich to the poor. Progressive income tax is devised to achieve such redistribution. It takes a greater proportion of income from the rich than from the poor. The principle of equality or ability to pay reflects a concern fro the poor members of the society.

9. NEUTRALITY: In the case of neutrality, a particular tax system should not interfere with the demand and supply of goods and services. This implies that the system involved does not have to be in such a way as to hinders consumers and producers from demanding and supplying various goods and services, also it should not discourage the payers from working, investing and of cause saving.

WHAT IS TAXATION

WHAT IS TAXATION

WHAT IS TAXATION: Taxation has been given various definitions by different author’s some of these definitions are as follows.

OKEKE (1994:254) Defines tax as a payment compulsorily made to individuals, companies, cooperate bodies by the government or governmental agency for the public use.

STEIN (1991:14) defines tax as a means by which the government raises revenue to meet its expenditure. It may also be used as a means of influencing or controlling the economy.

OSITA (2004:1) defines tax as the compulsory levy by government through the various agencies in the income, capital consumption of its subjects.

ONAOLAPO (1988:3) defines taxation generally as hew process or machinery by which communication or group of persons are made to contributes part of their income in some agreed quantum or method for the purpose of the administration and development at the society as a whole.

AGYEI (1983:2) defines taxation as transfer of resource from the private sector in order to accomplish some of the nations economics and social goal.

TYPES OF FRAUD

TYPES OF FRAUD

The following are the different types of fraud:

1. False Accounting

Some of the most dramatic corporate failures over the years have been characterized by false accounting.

I. The main aim of false accounting is to present the results and affairs of the organization in a better light than the reality.

II. This is often done by overstating assets or understanding liabilities to reflect a financially strong; the reasons for doing this are varied and include obtaining financing, supporting the share price, and attracting customers and investors.

Asset misappropriation:

Any business asset can be stolen by employees or third parties, or by employees and third parties acting in collusion. Example of common employees and management fraud includes:

I. Direct theft of cash or realizable assets, such as stock or intellectual property, such as price or customer lists.

II. Make false expenses claim.

III. Payroll fraud diverting payments or creating fictitious employees.

Computer fraud:

There is no such thing as “computer fraud” rather, a computer can be the object, subject or tool of a fraud. As technology evolves, so we see new of perpetrating fraud through computers such frauds have included:

I. Diverting funds from one bank account to another, having gained unauthorized access to the bank, perhaps by hacking.

II. Holding out to be legitimate business on the internet and obtaining payment for goods that are not delivered or a lower specification than that advertise.

III. Manipulating the share price of a company by publicizing invalid news items or claims on bulleting boards.

Each of these frauds could have been carried out without the use of computer. What computer and the internet in particular, have provide is access by connected parties, where previously an insider would need to have been involved. Computer also allow processing of large amount of data to be performed quickly, enabling the creating of password.

Insurance Fraud:

Insurance fraud covers a number of areas are varies widely in its nature; it includes but is not limited to:

I. Overstated claims

II. False claims losses that never occurred

III. Multiple claims

IV. Obtaining property fraud Intellectual Property Fraud

Intellectual property includes items such as patents, design rights and customer lists, and is just as much a business assets as plant a machinery or stock like any other asset, intellectual property is therefore, susceptible to theft by staff and third parties, although it is not always apparent intellectual property right are being misappropriated or infringed.

Employee and management fraud could include direct theft of intellectual property, for example by departing employees using critical business information to set up in competition or through the sale of price lists or it by existing employees.

Theft or Infringement by Third Parties:
I. Deliberate under reporting of royalties by a party selling or manufacturing the product under license.

II. Knowingly developing competing products and infringing design rights that have already been registered and protected by the creator.

III. Passing off fake product as the genuine article, e.g. branded luxury goods, perfumes, CDs and computer software. Corruption:

General, bribery and corruption are off book frauds that occur in the form of:
I. Kicking back or commission

II. Bid rigging

III. Gifts or gratuities. Investment Scheme Fraud:

Investment scheme fraud can also be thought of as third party asset misappropriation. It involves taking money from customers on the promise of spectacular returns but using the cash from one‟s own purpose.

Such frauds result from a combination of motivational and situation factors in which the crucial element is the presence of both opportunity and motivation. Effective control structures, whether preventive or detection based, can serve to reduce or deny the opportunity to a potential fraudster.

Others includes;

Financial Fraud: Cross-border fraud, charities frauds, Romance schemes, debt elimination Nigerian “4-1-9” scams.

It is not the auditor‟s purpose in carrying out an audit to determine whether or not frauds. Or any kinds have been perpetrated by servants of his clients. Kingston cotton mill (2005) he auditor does not guarantee the discovery of all fraud.

The auditor‟s duty is to assess whether or not the published accounts accurately represent the true state of his client‟s business and to produce report addressed to the owner‟s in which he expresses his opinion of the truth and fairness, and sometime other aspects of the financial statements. The phrase “true and fair” does not imply that the accounts are corrects in every detail and the presence of minor in accuracy would not invalidate the auditor‟s opinion. It is however, obvious that if a material frauds has been perpetrated and is not reflecting the true state of the client‟s business.

REFERENCE

Anyanwu, A.(2004): Data Collected and Analysis Okwe, Auan Global Publication

Alvin, A.S & James, K.L (2002): Auditing and Investigation Approach. Longman Group Limited, London.

Ephramin, E.U (2006): Principle of Auditing, Ibandon, Clean Hands production.

Horby, A.S (2001): Oxford Advance Learning Dictionary London, Special Price Edition Oxford University Press

Howlard, R (2001) Auditing Served Edition, Macdonald and Evans Limited, London.

DEVELOPMENT BANKS

DEVELOPMENT BANKS

Development banks are specialized financial institutions providing medium and long – term credit for the creation or expansion of agriculture, commercial and industrial enterprises in developing countries such as Nigeria. They are mostly established by government.

The main objective of development banks is the promotion of economic development in the economy. The idea of setting up development banks in Nigeria was mooted after the establishment of the CBN.

It became apparent that there was an urgent need for banking institutions capable of providing medium and long-term finances, to fill the gaps in the economy which the merchant banks at that time were not well – equipped to service.

The development banks operating in Nigeria includes the Nigeria Bank for Commerce and Industries (NBCI), the Nigeria Agricultural, Co-operation and Rural Development Bank (NACRDB), the Federal Mortgage Bank of Nigeria (FMBN), and the Nigerian Industrial Development Bank (NIDB).

Functions of Development Banks

Development Banks are specialized banks which are established for specified purposes in the economy. Their functions are therefore aimed at developing those sectors which they are established for. However, they perform two broad functions which include the banking functions and the development functions.

1. Banking Functions

i. Development Banks Provide long-term and medium-term finance / loans for commerce, industry and agriculture as well as general development projects.

ii. Development Banks make funds available in the form of equity to development projects.

iii. They raise bilateral and multilateral loans from international aid agencies like the United States Agencies for International Development (USAID), from international donor agencies like the World Bank and from their own governments.

2. Development Functions

i. Development banks provide promotional activities such as identifying and properly articulating investment proposals.

ii. Development Bank facilitates the establishment of institutions and enterprises which fill specific gaps in the financial system.

iii. They help to stimulate their nations’ capital markets (Market for long-term loans) by selling their own stocks and bonds and / or selling and using the proceeds to invest in new enterprises.

iv. Development Banks provide their clients with technical skill and advice at the preparatory and implementation stages of projects.

v. They provide managerial assistance to their clients in project preparation and
evaluation.

vi. Development Banks ensure that allocations to projects are in line with the defined economic, social and political priorities of the government.

vii. Development banks ensure efficient allocation to scarce financial resources in the development planning projects.

viii. They thus help to quicken the pace of economic development.

The Objectives of Banking Regulations

The Objectives of Banking Regulations

Banking regulation is a form of government regulation which subjects banks to certain requirements, restrictions and guidelines, designed to create market transparency between banking institutions and the individuals and corporations with whom they conduct business, among other things.

The following were the objectives of Banking Regulation:

(a) Confidence of Depositors

One of the primary objectives of the bank regulations enacted following the Great Depression was to ensure the confidence of depositors. One of the catalysts of the Great Depression was fear over the security of money deposited in banks. The lack of confidence led to runs on banks, which quickly ran out of financial reserves. By regulating the management of bank finances and the level of reserves a bank has on hand, the government seeks to ensure depositor confidence, avoid similar runs on banks and encourage active participation in the national financial system.

(b) Prevention of Risky Behaviors

Banks make money by investing deposited funds in various activities, typically loans to businesses and individuals. Every loan carries some level of risk. The more risk involved in a financial transaction, the greater the potential reward. Those rewards can be very tempting for banks, and one objective of banking regulations is to restrict the level of risk to which a bank may expose itself. If a bank were to become involved in too many risky investments, it would endanger the money of depositors.

(c) Prevention of Criminal Activity

Many banking regulation require banks to notify the government of deposits over a certain dollar amount or of any suspicious banking activity by the bank’s customers. Money is a means and an end to many criminal activities, such as drug trafficking and international terrorism. By restricting the financial freedom of criminal and terrorist organizations, the government seeks to reduce the strength of such groups. Regulating banks (banking regulation) to ensure they are not knowingly or unknowingly helping criminal groups hide or distribute money is one way of doing this.

(d) Directing Credit

Many bank regulations require or encourage extension of credit to certain industries or classes of loans that are deemed socially desirable. For example, a bank regulation (banking regulation) might provide incentives to encourage loans to minority-owned businesses or students pursuing higher education. Just as the tax code promotes social policy with preferential tax treatment of certain activities, bank regulations promote social policies that have certain requirements and incentives.

References

Pandey, I. M. (2005): Financial Management, Vikas publishing house ltd, New Delhi, pp 517 – 555, helpline@vikaspublishing.com

Central Bank of Nigeria (2004): Guidelines and incentive on the consolidation in the Nigeria banking industry. Abuja.

Douglas, G. (2010): Capital Regulation and Risk Sharing, International Journal of Central Banking, Volume 6, Nunber 4.

Llewellyn, D, T (1986): Regulation and supervision of financial institution, the institute of bankers laundry review.

Audit Objectives with respect to government organization

Audit Objectives with respect to government organization

The following are the general objective of auditing with respect to government organization.

(a) To know whether the resources of the government organization such as funds proportions and personnel are perfectly utilized and controlled in an effective economical and efficient manner.

(b) To ascertain whether all receipt and revenue arising from their operations which are under examination are collected properly accounted for.

(c) To know whether the organizations are carrying out the authorized activities or duties of the government in a way it has been arranged or organized.

(d) To ascertain whether proper internal control system being maintained by the organization and if any, effective is it.

(e) To confirm it the accounting system complies with the principle, standards and related requirements as prescribed by the government or accounting body.

(f) To ascertain if the specification of returns, required to be filed by various, portions, their contents, frequency, number of copies destination and the deadlines for submission are duly followed.

(g) Description of financial procedures and systems for safeguarding of assets (e.g the banking of cash, payment of way).

(h) To know the procedures for reporting and investigating lessons on fraud etc

TECHNIQUES OF INVENTORY CONTROL

TECHNIQUES OF INVENTORY CONTROL

The Techniques of Inventory control are as follows:

• Economic purchase order quantity (how much to order)

• Re-order level[when to order]

• Minimum inventory or safety stock

ECONOMIC PURCHASE ORDER QUANTITY

In order to control the inventory a decision model has been to determine the optimum quantity of material to be purchased on each purchase order.

The model determines the optimum working stock level to be maintained. Each time a purchased order is placed, the company incurred certain cost.

In order to minimize the cost of placing purchase order, the company could increase the order quantity to meet the company’s needs for the year at one time, incurring only the cost of one purchase order.

However, such a practice will lead to having a large average inventory of working stock, resulting increased carrying cost.

The cost of ordering and the cost of any inventory may be summarized as follows:

COST OF ODERING:

i. Preparing purchase or production orders, receiving and preparing and processing of related document.

ii. Incremental cost of purchasing or transportation for frequent order (purchase in small lots is often costlier and transportation cost also increase).

iii. Out of pocket cost of postage, telephones, telegrams, cost of stationary, travelling etc.

iv. Extra cost of numerous small production runs. Overtime, setups, training etc

COST OF CARRYING

I. Interest of investment

II. Losses from obsolesce and deteriorations, spoilage.

III. Storage space cost including rent, rate, tax, electricity etc

IV. Insurance, in addition- fixed cost in form of salaries, wages etc of employees connected with work in-stores and material handling departments.

RE-ORDER LEVEL

Lead time is the time interval between placing an order and receiving delivery. If the lead time and the quantity of demand during lead time are known with certainty the recorder point may be determined.

If in the above example, lead time is 2 weeks and the average usage is 18 per week, the re-order point will be 18 × 2 = 36 units. The day the level of stock falls to 36 units, an order for 173 units will be placed.

By the time these are delivered, the stock will be nil and on the day of delivering it will shoot up again to 173 units and so on.

MINIMUM INVENTORY OR SAFETY STOCK

In our previous paragraph, we had assumed with certainty that 18 units would be used per week. In practice, we seldom come across such a situation and demand cannot be forecast accurately. Actually the demand may fluctuate from period to period.

If, therefore the usage per week at any time goes beyond 18 units per week, the company will be out of stock for sometime hence arise the need for providing for some safety i.e some minimum or buffer as inventory as a cushion against such stock outs.

The re-order point is inter-related with the safety stocks because as the re-order point is moved upward, the amount of the cushion is increased.

Thus the re-order point is the resultant of the demand during lead time plus safety stock. By increasing the safety allowance the re-order point is increased by the same amount. It should be noted that the economic order quantity does not come into the picture and is independent of safety stock analysis.

Key words: Techniques of Inventory control

REFERENCE

Adeniyi.A.(2010). Cost accounting: A managerial approach. Lagos: El-Today venture limited.

Ama. G. A. N. (2006). Management and cost accounting. Nigeria:Amason
publication venture.

Atkison.c.(2005). Inventory Management Review. London: Heinemann
publisher.

Chukwuma.C.U. (2010).Management Accounting. Enugu:Dikasinma
publisher.

Drury.C. (2009).Management and Cost Accounting. Fifth edition; London:
Thomson publisher.

INVENTORY VALUATION METHOD

INVENTORY VALUATION METHOD

According to Enekwe (2010), stock valuation is a means of valuing materials which involve the determination of the cost of materials on hand at the end of a particular accounting period. When inventory are issued, it is pertinent that the firm assigns cost stocks issued for production. There are different valuation methods used by the firm which affect their profit differently.

There are various methods used to value stock and eventually ascertain the value of stock received, issued and the balance after issuing stock out.

Some of the methods are:
I. First-in-first-out (FIFO)

II. Last-in-first-out (LIFO)

III. Specific identification

IV. Weighted average.

V. Based stock

VI. Standard price

VII. Replacement price

VIII. Simple average price

A. FIRST-IN-FIRST-OUT (FIFO)

In fifo method, the units issued or sold at a given period are assumed to be first units that were placed in inventory materials are issued from oldest supply in stock and units, issued are placed at the oldest cost listed on the stock ledger sheet with materials on hand being the most recent purchase.

It s mainly used for food that are subject to deterioration or obsolesces, FIFO if method yield the greatest amount of profit during inflationary period because the cost of units sold is assumed to be the order in which they were incurred.

One advantage of FIFO is that it matches cost with revenue, it is inexpensive to operate, it is systematic and objective and less prone to movement manipulation than other inventory cost assumptions, especially LIFO.

However, during the period of rising prices, FIFO result in very bad matching on the final account as the closing stock and reported profit are overstated.

B. LAST-IN-FIRST-OUT (LIFO) METHOD

This is the opposite of FIFO in that the cost of material issued out for production or goods sold are based on the last unit placed in inventory while the remaining inventory consist of first good placed. This assumes that the most current cost of goods is to be charged to the cost of goods sold.

The cost of unit remaining in inventory represents the oldest cost available, and the issues are cost at the latest available. One advantage of LIFO is that it matches the most recently increased inventory cost against sale revenue.

During inflationary period, reported profit is most likely to be approximately the amount that really is available for distribution to owners whom tax is considered, LIFO provides the greatest tax deductibility and thus it result in the lowest tax burden.

C. SPECIFIC IDENTIFICATION METHOD

Under this method of inventory valuation a unique cost is attached to each item in inventory. When an item is sold inventory value is reduced by that specific amount. Specific identification method is used in term of stock such as automobile and heavy machinery in determining the cost off inventories under the historical cost concept. SAS4 recommends specific identification method for use.

D. WEIGHTED AVARAGE METHOD

The weighted average method involves the computation of the weighted average unity cost of goods available for sales from inventory and this average cost is the applied to the goods or material sold. All good sold are at their weighted average price. The weighted average method is unique in that issue price are calculated on receipts of inventories and not on their selves or issue.

Under this method, the cost of goods sold and the value of closing inventory fall somewhere been the ones obtained by the FIFO and LIFO methods, this will give a more realistic inventory value in the balance sheet and will lead to near accurate method is recommended by a SAS4 for determining of the historical inventory cost.

E. BASE STOCK METHOD

Though this method is conditionally recommended by IAS2, it is obvious that is not independent methods under this method a minimum level of stock, carried at the historical cost of acquisition is held at all time (SAS5 1986). Any addition to or excesses over the base stock are carried at different based such as FIFO, LIFO etc

F. STANDARD PRICE METHOD

Standard price method uses a predetermined price for pricing every method issued out. The standard price may be set over a given period of time say one year, after all factor, which may affect the price had been taken into consideration.

The use of standard price may result in profit the actual material price is less than the standard price or loss if the reverse is the case. The main aim of standard price system is to ensure efficiency purchase of materials the price variance that normally exist between standard and actual prices are usually written off to material price variance account

G. REPLACEMENT OF PRICE METHOD

This method of inventory valuation is a method whereby materials issues are price based on the current market prices that is, the time the issues or sales were made. This method of valuation is no longer regarded as acceptable the advantages are the issues are at current market value and calculations are simple. On the other hand it is different to be up to date with replacement prices. It is not easily practicable and it is not a traditional casting method.

H. SIMPLE AVERAGE METHOD

In the simple average price, stocks are issued at a price which is calculated by dividing the total prices of the materials in the stock from which the material to be priced could be drawn by the number of price used in total. The merit of the method is that it is simple to operate and in period of price fluctuation.