BUDGETING AND ITS IMPACT ON PERFORMANCE OF

COMMERCIAL BANK (A CASE STUDY ON WOLDIA

BRANCH

WOLDIA UNIVERSTY
FACULTY OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE
A Research Proposal Submitted in Partial Fulfillment of the Course Student
Project for Requirement of Bachelor Art Degree in Accounting Education to
Accounting Department

PREPARED BY: Abatbaye getaw……..WDU100677

Elias Tasew…………WDU100850
Woynshet Mulugeta.....WDU101066
A..DVISOR:-Nersidn. M
January,2012
WOLDIA, ETHIOPIA
 TABLE OF CONTENTS
Title Page

TABLE OF CONTENTS....................................................................................................ii
CHAPTER ONE..................................................................................................................1
INTRODUCTION...............................................................................................................1
1.1 Background of the organization............................................................................1
1.2. Background of the study...........................................................................................2
1.3 Objective of the Study...............................................................................................5
1.5. Significance of the Study..........................................................................................5
1.6 Scope of the Study.....................................................................................................6
1.7. Limitation of the study..............................................................................................6
CHAPTER TWO.................................................................................................................7
2. LITERATURE REVIEW................................................................................................7
2.1 Origin of the budget...................................................................................................7
2.2. Definition of Budget and Budgeting.........................................................................7
2.3 The objective and role of budgeting..........................................................................8
2.4 Budgeting procedures................................................................................................9
2.5. Relationship Between planning and Budgeting......................................................10
2.6. Performance measurement......................................................................................11
2.6.1. Performance evolution concepts......................................................................11
2.6.2. Performance reports and communication........................................................12
2.6.3. Using performance measurement to impalement corporate strategy..............12
2.7. Budget Classification..............................................................................................13
2.8. Types of Budget......................................................................................................14
2.8.1. Program Budgeting..........................................................................................14
2.8.2. Zero Base Budgeting (ZBB)............................................................................14
2.8.3. Activity Based Budgeting................................................................................15
2.8.4. Incremental Budgeting.....................................................................................16
2.8.5. Master Budget..................................................................................................16
2.8.6. Variable Budget...............................................................................................16
2.8.7. Fixed Values flexible Budget..........................................................................17
2.9. Government Budget................................................................................................17
2.10. International control systems................................................................................17

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CHAPTER THREE...........................................................................................................19
3. RESEARCH METHODOLOGY..................................................................................19
3.1 Introduction..................................................................................................................19
3.2 Research Design..........................................................................................................19
3.3 The Study Population..................................................................................................19
3.4 Sample Size and Sampling Technique.................................................................20
3.5 Study Area.............................................................................................................20
3.6 Type of data and sources...........................................................................................20
3.6.1 Method of data collection.....................................................................................20
3.7 Data analysis and present....................................................................................21
3.8 Time Schedule.......................................................................................................22
3.9 Budget Schedule...................................................................................................22

CHAPTER ONE

INTRODUCTION

1.1 Background of the organization

The state bank of Ethiopia was found in 1942 with on objectives forming the
duties of both commercial and central bank in 1963 established as share company
to take over the commercial banking activities of the state bank of Ethiopia.In the
1974 revolution commercial bank of Ethiopia got its strength by emerging with
privately owned Addis Ababa bank.

The commercial bank of Ethiopia which is striving to embark into world class
commercial bank, rendering state of the art and reliable service to its million of
customers both locally and abroad. The business strategy of the bank was focus
on the stakeholders serves. The number of branches now a day reached 1560 and
stretched across the length breadth of the country. Commercial bank of Ethiopia
combines a wide capital base with more than 36,800 talented and committed
employees. In 2011 whom it regard as it key assets fro banking development. The
state owned commercial bank of Ethiopia still dominates the market interms of
asset deposit, capital and customers base and branch network, deposit the growing

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competition from private bank over the last 15 years. This make it one of the most
reliable and strong commercial bank in the country and the region. Its strong
capital base above 67 years of rich experience in the market and large branch
network through out the country on able the bank to accommodate large demand
for banking service, bank from private and public companies and to increase its
over all revenue on sustainable base.

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VISION
To become world class c commercial bank. The term world class presumes
efficiency good cooperate with governance and move toward best international
banking practices.
MISSION
We are committed to maximizing shareholders value through enhanced financial
intermediation and up parallel customer satisfaction.we strongly believe that
reliability and public confidence are the base of our success. The fundamental
component of our mission statement include
- Customer:- our customers are our most important assets.
- Shareholders:- In order to optimally meet the need of our customers and
efficiently manage our business.
- Employees:- Quality customer service is possible only through motivated
and skilled employees for the well being of its employees it tries to develop
a work force that enjoys working for and prides it self in association with
the bank.

1.2. Background of the study

The purpose of this paper was to show the budgeting and its impact on
performance measurement of the commercial bank of Ethiopia on Woldia branch .
To assess the proper goals of the bank the employee in the budgetary processes
participants can give employees the feeling that “this is our budget”.

Budgeting is a quantitative expression for a given time period of a proposed

future plan of accomplishment. It covers both financial and non financial
expression of the plans and acts as an outline for an entity to follow in the future
period. Budgets are one of the regularly used devices for planning and controlling
resources by organizations. Budgeting procedures direct managers towards
proactive looking and enables it to be a position force the problems and take

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measures to eliminate or reduce their severity. A budget can cover both financial
and non financial aspects of these plan and acts as a blue print for the corporation
to follow in the coming period of time.Budgeting is a process for preparation of
budget which determines the target for budgets and it includes preparation of
plans, implementations and evaluation. (Hilton, Mahar, selto 20002:pp603).
Budget performance measures can over come two key limitations of past
performance as a basis for judging actual results, the first the past results in
corporate past miscues and substandard performance and the second is the future
may be expected to be very different from the past. Performance feedback must be
sufficient rapid those employees can adjust their performance in timely base.
Rapid feedback should allow employees to take compensatory actions to try to get
over all period performance inline with budget. The concept and techniques of
planning and control have been under application individual business planning,
governmental units, banks and virtual all groups endeavor even though many
effective service oriented business managers have clearly explained specific and
observable goals and objectivesm

1.3 Statement of the Problem

A budgeting is a plan that out lines organizations financial goals. So it can be vehicle for
addressing objectives, goals and problems in the most careful way. It also defined as the
formal expression of the plan objectives of management of the bank which covers all
phases of operation for a specific period of time. Budgeting is a plan it helps to allocate
resources, evaluate performance.

It is a financial document used to project future in come of expense. The budgeting

process may be carried out by individuals or by companies to estimate whether the
person/company can continue to operate with its project. Should not be regarded as
expression wish full thinking but it cans a description of an attainable objective.

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The Main Problem is to study about the challenge in the preparation and implementation
of budget and the variance that has impact on the performance.This is the real fact that
motivate we to study the problem that attach with budgeting control and evaluation
activities that take place in commercial bank of Ethiopia on Woldia branch. In order to
achieve the target activity, effectively and properly budget is a crucial instrument for the
bank. Almost all organization, be governmental or not use budget for different projects
and programs to enhance efficient and effective utilization of the scarce resources.
However, many of the organizations would not prepare budget according to their plan
and thus, faces a series budget variance.

The real purpose of budgeting should have several advantages. It guides (monitoring) the
flow of the banks activity at all. It also enhances the quality of the service that was
rendered by the bank, control and accountability each participant through internal and
external relations of managers to its employees, customers, suppliers, creditors and the
concerned parties at a whole.

Commercial bank was one of the widest governmental organizations, which are series
and successive budget variance. Related factors that are behind preparation of budget and
the challenges faced in the implementation of the planned activities their consequence
creates great impact on the bank. Problem of budgeting is not the only preparation. But
also on implementation. In the current global market environment customer is a key
concern to be raised in order to continue in the market. In this regard as ordinary
customer is always come across long customer guenon our service rendering branches.

From this point of view the researcher wants to investigate. Thus them of my
questioner involves on concepts of the following.
 How the organizations is employee the budget
 How was the performance evaluation to address customers problem
 Which would be attribute for financial service rendering business as a
whole.

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  What were the bases for preparation of budget?
 What type of budget was used by the bank?
 What are the challenges in the preparation and implementation of budget?
 Who are responsible to prepare budget?
 Does the bank effectively implant its budget?
 Does the variance has impact on the banks performance.

1.3 Objective of the Study

1.4.1.General objective
The general objective of the study was to investigate the budgeting processes and
factors that affect the effective and efficient utilization of budget in commercial
bank of Ethiopia in Woldia branch

1.4.2. The Specific Objectives of this paper

- To investigate the budget execution of the bank between 2011 and 2012
G.C.
- To identify the budget preparation processes or system established by the
bank.
- To investigate any variance for the questioners 2 years of the budgeted
amount and actual performance of the bank and the reason for variance
between the budget and actual one.
- To examine factors that hinder the effective and efficient utilization
of budget.
- To sum up with conclusion and some possible and necessary
recommendations based up on the result of the study.

1.4.3. RESEARCH QUESTION

_ How is performance evaluation to address customers problem?

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_ What are the base for preparation of budget?
_ Does varians has implant on the Bank performance?
_ Does the organization is effectively and efficiently implant it's budget?
_ Does the organization have budget control mechanism?
1.5. Significance of the Study
The significance of the study would be helps to makes the reliable decisions by
managers of the bank, to create aware of active participation of all workers.
- The study would be monitoring the manager to manage its responsibility
- They used the findings of the study feedback on the budget process,
implementation, preparation and changes.
- It helps to take corrective action by the manager
- The study would be laid down a starting point for other researchers in order
to incentive study on the budgeting and its impact.

1.6 Scope of the Study

The scope of the study had been restricted to assess budgeting and its impact on
performance measurement on commercial bank of Ethiopia on Woldia branch.The
scope of the study is mainly focused on budgetary affecting factors particularly
commercial bank of Ethiopia. To come up with effective research, it would be
better to limited the Ethiopia of the study. If the research has been conducted over
all branch of the bank, it is better. However, because of different situation this
finding would be conducted only one branch. It also better if the research would be
touch all passed years, but it is tried to touch only two years of them.

1.7. Limitation of the study

This work has many problem, especially in the case of data collection there are
some respondents are not interesting to give true information that is needed for the
study. The reason might be due to the confident of the information. In addition to
this, the study has financial and time constraint, experience on the study of the
research.

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 CHAPTER TWO
2. LITERATURE REVIEW

2.1 Origin of the budget

The word budget is originated from “The old French baguette, meaning a small
bag or pouch” This term was first used in England to describe the summons
leather bag in which the chancellor carried to the parliament, the statement which
was contained in the bag. The practice of budgets was also originated in 1217 in
England as means of asserting parliamentary control over the crown. During this
time parliament was aware of the fact that the financial control should be under its
own hands or control but not under the crown. Hence forth parliament secured the
power of controlling the financial matters of the country. (Alan pizzey
1973:pp:112)

2.2. Definition of Budget and Budgeting

There is no consensus on the definition the term Budget. (Alan Pizzey 1973:
pp:179) defines it as ‘a plan quantified in monetary terms, prepared and approved
prior to a defined period of time showing the planned income to the generated and
expenditure to be incurred during the period and the capital to be employed to
attain a given objective’. It is detailed plan expressed in quantities terms that
specifies how resources will be acquired and used during a specified period of
time. (Rounald W. Hilton: 1979:366).

Alan pizza, page: 180 Writes:

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‘Budgeting is a coordinating process since all the disparate department and cost
centers which make up the business are filled in to one plan ’. It is also an
imperative process. Since by a series of small steps comprising a process of a
continual review and revision, the original estimates be come firm plans’.

Budget is an expression of a firms plan conversing all phases of operations in

financial form for a definite period of time in future. Budget spells out the policies,
plans, goals and objectives laid down in advance by top management for the
organization and for each sub- division of the same. It predicts income for a given
period as well as estimates costs and expenses, with the objective of earning a
desired profit (Man Mohan, page: 957). It forces management to give early
consideration to what they plan to do in the future period.

Budgeting involves as a great rang of interests and concerns. It is difficult to

conceive any public policy that can be carried out with out money, and hence with
out becoming subject to budgetary process. All countries, whether developed or
developing would be engaged budgeting and operate on a budget recognizes its
invaluable aid in planning and form waiting economic policy as well as check on
its execution. Budget is used not only by government but also used by private
firms, business and various organizations, because it enables them to achieve their
goals. Nevertheless, budget had not been developed uniformity among countries
and the approaches to budgetary procedures are not the same in all countries.

2.3 The objective and role of budgeting

Given that limited availability of resources as compared with competing demand,
the process of budget making assumes a critical role in decision making process of
government in order to optimize the use of existing resources. The paper of
monetary of finance in Amharic vision of Ministry of Finance and Economic
Development (MoFED) states that the objective of the budget in three aspects.

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These are allocation of resource, distribution of resources and stabilization of
economy

The first objective consists of allocating resources between the various function
consumption and investment that between the pubic and private sector. The
distributional sector (objective) necessitates the consideration of public
expenditure and the income groups that are anticipated to be served. It is the policy
maker or government that decides who will be benefited how much from the
available resources among the society. This may by achieved by expenditure
policies such as, subsidies, pension or social welfare schemes as much as taxation
on income and capital

Concerning the stabilizing role of budget, HL Bhatia (1980:pp246) states that

"budget plays very important role in the flow of funds in the economy. It also has
important affection in the economy not only through the flow of funds but also
through various fiscal polices and measures. "As a result, budget can be used to
control the danger of inflation by adjusting the amount of governmental taxation
and expenditure. Finally, budget plays an important role as a tool of
accountability, a means of management and instrument of plan of implementation

2.4 Budgeting procedures

There are several approaches of budgeting of which the following three are among
the common ones to be mentioned. The first one is incremental budgeting
approach. Here, the existing budget is taken as starting point (or base) for
developing the next budget .This may be the easier but not necessarily the best.
The second approach is Zero based approach (budgeting). This approach puts
much less emphasis on the past budget and focuses on what must be done to
achieve specific objectives. ZBB starts as new each year and therefore it is a more
time consuming process. Fressant J. Iydon and Ensert G. Miller (1978:pp255 )
strengthen this notion by saying 'I ZBB usually involves more managers and takes
more management time than the traditional budgeting procedures". However, this

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approach has been appreciated for it gets rid of unnecessary activities that
budgeting often perpetuates.

The third one is program budgeting / master budgeting program!. It is plan

oriented and consists of three stages that include developing alternative for the
future, analyzing what the outcome of the alternative program might be, and
relating the programs and policies on the future costs and benefits, and lastly the
actual performance of the chosen program must evaluated.

Therefore, master budgeting is a means that government expenditures are managed

through the comparative attempt of the program proposals of all government
agencies. David N. Hyman (1969: pp190) clarifies the benefit of master budgeting
as it possesses potential to permit budget managers to compromise issues that are
not immediately unaware when the agency budgets are viewed in isolation.

2.5. Relationship Between planning and Budgeting

Planning signifies the strategies elements for selecting flows of action by a logical
consideration of resources to achieve policy objectives. It establishes program, set
goals, objectives and makes fundamental policy decisions for the economy.
Mosher, Frederick (1954: 489) puts plans as conceiving of goals and the
development of alternative courses of future action to achieve the goals. For him
planning also involves the reduction of these alternatives from a very number to a
smaller one and finally to an approval course of action.

(Slalim Hamid, 1998) writes:

Budgeting analysis in detail, the many functions of activities that the economy
must perform the implementation of each program, analysis the alternative with
in each activity to achieve the end product and identifies the achievements of the
established goals and the associated costs’

Since budgeting is a crucial instrument for plan accomplishment, they should be

harmonized for proper plan implementation.

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‘To harmonize the budget with the plan, there must be a plan in existence, there
should be on annual plan with which budget could be harmonized, ….and there
must exist at least a set of short term targets and goals towards the attainment of
which the budgetary decisions could be oriented.
According to preme Hand (1989:pp 188) budgeting with out planning could to be
a plan of action and plans with out realistic detection of budgetary restraints have
little chance of implementation. Thus any appropriate plan can be meaningless and
the result my become paradox unless it is reelected in the budget.

Therefore, budget and plans are concerned with policy analysis and allocation fo
resources. The difference is that, in planning the economic aspects dominate,
where as, in budgeting more attention is paid for financial aspects.

2.6. Performance measurement

2.6.1. Performance evolution concepts
Performance reporting for internal management use in an important part of a
comprehensive profit planning and control system. To indicate the extensive
reporting requirements a business requires and to focus on performance reporting.
The following are an overview of financial reports.

The first one is special external reports. Here, reports are submitted to government
agencies such as regulatory commissions, creditors, investigative agencies and
other external groups. These reports are extensive and comprise a considerable
portion of the over all reporting. The next one is reports to owners. It refers to the
traditional annual report to the owners (to stock holders in the case of a business)
and other special reports got ready fro the owners. These reports based on
generally accepted accounting principles.

The last category, the internal reports are those secret reports are prepared in the
corporation for intrnal use only. They do not have to meet the needs of external
groups, nor the test of “Generally accepted accounting principle”. This category of

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reports is subdivided in to three different sub qualifications. These are statistical
report, special report and performance reports.

All companies regardless of their size; have reporting requirements for all the
categories listed above. In small companies, most the basic reporting needs may be
accomplished by using a single general propose report; we are concerned
specifically with performance reports. This particular phase or reporting is an
internal part of a comprehensive budget program. (Ginna Welsch and etal 1997)

2.6.2. Performance reports and communication

Performance reporting is a crucial phase of the regulatory process. The control
process can be recapped as:
1. Approved plan (Tactical and strategic)
2. Feed forward (Planned objective and goals communicated)
3. Current controls (supervision, inspection, performance reports)
4. Feed back (Communication of different between actual performance causes
identified)
5. Correction action (designed to reduce any unfavorable differences in
routine results0. (David. N. Hyuman 1996: pp 69).
In most business, management depends to a great extent upon information
contained in reports that serve as an important means of accounting information.

Communication involves that a person receiving the information understands the

nature and meaning of material in the report Accordingly, clear communication
leads to effective management action and decisions that are likely to base on the
facts. Reports the communicate effectively to all levels of management stimulate
action and influence decisions (Ginna, Welsch 1976). However, some times
reports were not understood, recipients lacked time required to grasp the meaning,
or the content of reports was not relevant to problems facing the persons who
received them. (NAA Bulletin, Accounting practice report, No. 9, sec 3).

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2.6.3. Using performance measurement to impalement corporate strategy
Well-developed, coherent strategies merit well developed, coherent performance
measurement system. There are integrated sets of performance indicatory that
links strategic objective to functional tasks by focusing attention on the critical out
puts required by the strategy.

Traditionally, firms have oriented themselves around either a low cost or

differentiation strategy. Firms that focus on cost usually focus on mass production
technologies, attempting to stamp out variance and to attain efficiency through
constancy. Conversely. Firms following differentiation strategies, tend to
concentrate on developing flexibility, promoting rapid adaptation to changing
customer’s needs. Nationally, they will experience tension when cost and
differentiation priorities conflict
All companies ought to be aware of the performance levels of their rivals both in
absolute and incremental terms. Bench marketing systems that compare
internal performance with industry best practice can provide not only important
information for strategic planning but also a valid insight for change. (Michael
vitale and Salah C. Mavernae).

2.7. Budget Classification

Budget categorization refers to the systematic ways of organizing budgetary data
of both revenues and expenditures. It offers the form and structure of the
budgetary information that help analysis and inference. Budget classification is
one of the essential points to be beard in mind for the budget to attain its goals
more efficiently and effectively. Three general importance’s can be gained if
proper budget classification is intended. These include:
1. Budget classification play’s a significant role to maintain accountability and
fix responsibility to specific organization and even persons in a unit it the
account define responsibility accurately and precisely.

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 2. It offers a means of evaluating performance by alleviating comparison
between actual result and the level of funding found in the budget.
3. It provides means of controlling resources because authorized spending
limits are established in the budget. (Codinald Axelred, 1989).
2.8. Types of Budget
Budget as a process and a system has different features and applications. Even
through many of them have common feature, they also manifest significant
differences. Since budget express plan and an organization may have a large
verity of plans: there are many type of budget. The classification of budget based
on their nature, coverage of function, characteristics of activity, period and
flexibility.

2.8.1. Program Budgeting

Program budgeting does not have a standardized definition because of its
encompassing nature. Its many aspects include concepts, systems and process,
technique and format, and in some cases almost a management philosophy.
Essentially, it is a management decision making system that tries together strategic
and long range planning with conventional budgeting and supporting analysis so
that an organization can most effectively assign resources to achieve both its short
and long range objectives. It utilizes a planning and budgeting process in an output
oriented program format, which is oriented to its objective to facilitate developing
and evaluating alternative. This process ultimately leads to an allocation of
resources over a planning period. This is then a basic for constructing a resources
(man power), materials, facilities (including equipment), and capital, which
operate together to achieve a set of common objectives with in a planning period.
(Anthony Robert 2004: PP 366).

2.8.2. Zero Base Budgeting (ZBB)

This type of budgeting is similar to planning programming and budgeting. The
most basic concept behind ZBB is that all programs and expenditure are evaluated

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every year. Another zero base budgeting is that the responsibility, to present and
defend program. The principals advantage of zero base budgeting is that each type
of cost incurred in every budget period will be justified.

Its advantage falls in to the hands of mangers of respective institutions. More over
according to the method of zero base budgeting “decision packages; have to be
developed. They key to be zero base budgeting lies in the identification and
evaluation of alternative. This is favorable by ranking of decision package, the
most crucial stage in the application of this method. despite the obvious advantage
of ZBB, it has disadvantages.
- Given enough time and man power, there would not be controversy on the
application of zero base budgeting.
- How ever, if such problems exist, reviewing all programs every year would
be bulky and sometimes important.
- Another more serious problem is the ranking of problems.
- If there is in to way to continue with that inefficiency
- Activity in the future. (Anthony Robert 2004: PP 300)

2.8.3. Activity Based Budgeting

If focus on the cost of activities necessary to produced and sell product and
services. It separate indirect cost in to separate homogeneous activity cost pool.
Management uses the cause and effect criterion, to identify the cost driver for
each of these indirect cost pools comes up with the following merits of activity
based budgeting.
1. Ability to set more realistic budgets,
2. better identification of research needs,
3. Clear or linking of costs with staff responsibility and
4. Linking of cost to out put.

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Conversely, it is tiresome and time consuming to determine the demand for each
individual activity based on output budgeted, production, new product
development (Anthony Robert 2004: PP 309)
2.8.4. Incremental Budgeting
In this case the previous budget is considered as a base. The former budget figures
can be increased or reduced based on situations, particularly on the volume of
activity of the organization planned to be preformed. These types of budgeting
simplify the preparation of the budget because it needs adjustment of data from the
budget that had already been prepared. However, incremental budgeting is not
without drawbacks, particularly because the past period budget may include in
efficiency. (Anthony Robert 2004: PP 321).

2.8.5. Master Budget

It is a budget that summarizes the financial estimates of the entire organization ’s
individuals budget. It helps achievement of long range plans year by year steps)

The guidance is more specific for the coming year than it is for more distant year.
The plan for the coming years is called master budget. The master budget is also
known as the static budget, the budget plan or the planning budget. The master
budget indicates the sales level, production and cost level. here, income and cash
flows that are anticipated fro coming year. However, it has its Owen limitations
that arise from its comprehensiveness which may result in wrong formulation of
the budget. (IAIN, Maritaland, 1997: PP 119).

2.8.6. Variable Budget

The primary purpose of this type of budgeting is to accelerate control. (Glevene,
Weish 1978:218) identifies three specific benefits of variable budgeting.
- To help development of departmental expense budget for insertion in the
profit plans.
- To give examples, goals for the managers of responsibility center during
the period covered by profit pan and

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 - To offer adjusted budget allowances fro comparison intention in the
monthly report.
2.8.7. Fixed Values flexible Budget
Fixed budget is a budget fro a specific or fixed total amount that many not be
exceeded due to changes in the demand for goods and services. Being prepared for
a particular planned action, it is suitable for activities whose resources utilization
does not materially vary in due course. It is most appropriate when changes in the
amount of goods and services obtainable directly affect availability of resources
and expenditure needs. (IAIN, Maritaland, 1997: PP 301).

2.9. Government Budget

In governmental entities, budget services as a tools of managing resources to attain
programmed objectives. It serves as instrument fro the legislative body to ensure
whether actual expenditures are corresponding to budgeted amounts and that the
objective and levels of activity envisaged in the budget are attained or not. As
well, to obtain a share in government resources allocation, preparing and
submitting budget proposal is expected from each government entity. Moreover,
governmental budgets are legally binding upon the executive body and once fixed
by law, they are usually unalterable with out much effort.

2.10. International control systems

The council of minister’s finical regulation No. 17/1997 defines internal control
systems as:
“The plan of organizational and all the coordinated methods and measures
adopted by management to safeguarded assets ensure the lines, accuracy and
reliability of accounting data, promote operational efficiency and maintain
adherence to regulation and directives.”

The two main constituents of internal control system are the administrative and the
financial (Accounting: control

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The administrative control comprises the procedures and records that are
concerned with decision making process leading to management ’s authorization of
events . on the other hand, the financial control consists of the plan of an entity,
producers; and records that deal with protection of assets and the consistency of
financial records ascertains logical plan of an entity, new designed and accounting
configuration, an internal audit function, and quality and training of personnel ’s as
among the indispensable factor to reinforce internal control arrangement.

Strong system of internal control is very essential in achieving certain goals of an

organization. internal control includes all the procedures and actions taken by an
organization in order to manage the expiating assets, ensure conformity with
organizations policy and governmental rules, evaluate operating efficiency and
ensure precise and reliable operating data and accounting records.

CHAPTER THREE
3. RESEARCH METHODOLOGY

3.1 Introduction
In order to conduct this research, methodology is one of the important parts.
This is because without research methodology research cannot be done. In
addition to this research is contained important points such as population,
sampling method, research design and data collection procedures.

3.2 Research Design

The research will be use both qualitative and quantitative techniques to
analysis collected data. Because to describe the collected data about the
budgeting and its impact on perforformance in commercial bank of Ethiopia

20
this techniques are suitable. Why because mixed type of research; provides
strength that offset the weakness of both type of research, can be easy to
develop and test a new instrument (phenomena) and used to adders questions
at different level (Black, 2010).

3.3 The Study Population

In conducting this research, the research will be use the managers,
accountants and the economists of the Commercial Bank of Ethiopia
workers who are voluntary to give available and reliable information about
budgeting and its impact on performance of Commercial bank of
Ethiopia.Currently, the bank has 60 staff members of total works. There are
one managers, three line managers ,one auditor, three line auditor fifty two
accountant, and customer service render get population for study will
employed available of Commercial Bank Ethiopia in Woldia Branch.

3.4 Sample Size and Sampling Technique.

The sampling technique that is going to be implemented for the study is non-probability
judgemental sampling. This technique of sampling is selected, because it enables to get
accurate and sufficient information from concerned bodies. From a total population of
sixty employees of CBE 38 employees was selected as sample size by using judgmental
sampling techniques. Because of this 38 employees are engaged in the area of budgeting
and its impact on performance practice.
n = N /1+N(e)2
Where: N = Tota population
n=Total sample size.
e = Margin error with 10%
n = 60/1+60(0.1)2
n=37.5~38

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So, From these ; we select 38 sample size from the total population.

3.5 Study Area

This study was would be conducted on commercial bank of Ethiopia on Woldia
branch.

3.6 Type of data and sources

The researcher has been used two types of data. This are primary and secondary
data and unstructured interview.

3. 6.1 Method of Data Collection

In the data collection process different data collection method has been used in the
study. According to the source of data that has been collected to conducted the
research we would have been collected firstly primary data. It have two different
types of data collection procedures has been used. This are questionnaires and
unstructured interview.

The secondary data has been collected from different sources, such as the banks
pamphlets, manuals, reference books and other research materials, magazines,
personal documents, public and official documents:- such as records, journals and
magazines and news papers reports with exchange rate and interest rates. Among
personal documents letters, memories and diaries are an important secondary
datas.

3.8 Data analysis and present

The researcher had been used for data analysis is different systems among them
editing. Coding and tabulation. Editing is used to involves the inspection of
questionnaires on a raw data and necessary for each questions and defecting the
most glaring omission in accuracy detail.

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Coding is a technical procedures by which data are categorized through coding the
raw data to transferred in to symbolic usually numerals. They may be tabulated
and counted. This can by specifying the categorizes in to which regains to be
place. The number would be depend up on the number of question on the
questionnaires. Coding is open ended questions. This can be done through
developing consistent set of standards to each questions.

Tabulation can be consists of simply counting the number facts that fall in to
various groups. It communication the result of the study, can be used for several
purpose (i.e to calculate summary statistic). Tabulation can be done by hand, it is
facilitated determining the empirical distribution. Variables and frequencies is
numerate in each table for calculation of various statistics and communicative
distributions would be employed to observer with less than or equal to specify
quantities determined.

3.9 Time Schedule

No WORK ACTIVITIES OCT NOV DEC JAN FEB MAR APR MAY JUN
1 Title selection 1)
2 Draft research proposal 

3 Proposal first draft, 

writing and submission
4 compiling review 
literature
5 Proposal final writing and 
submission
6 Development of -
questionnaire and
interview
7 Data collection 
8 Data analysis 

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9 Report write the research i.
paper
10 Submitting the research 
paper
11 Presentation -

3.10 Budget Schedule

No Items amount of items needed Total price of single item Total Birr

1 Stationary
Binder 1 25 25
Pen 10 5 50
Paper 1 120 120
Binding 4 8 32
Writing and printing 50pages 5 250
Ruler 1 15 15
Flash 1 230 150
2 Other cost
Transport 15 5 75
Mobil card 50
Internet service 100
Contingency 100
Total ETB. Stn 967

REFERENCE

- Robert G.finney 1993

- Charges Tahaizn green 1997
- Glenna Awtsha 1976
- David N. Hyman 1961
- By m: chael Vital and sarcah C.Haverance
- Micael Grand of 2007
- Ronald W.Hilton Managerial Accounting 4th edition
- Hilton Mahar, Salto, (2002) Cost Management Strategies for Business Decision,
MegrailPpublication, (2002) New York.
- Alan Pizzey, Cost and Management Accounting 3rd edition

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