1.1 BACKGROUND OF THE STUDY
Expenditure control or cost control is part of management control process, in every organisation. This process is very important to any organisation be it profit making organisation or non-profit making organisation. Thus, lack of this practice in any organisation will cause misapplication of cash in cash disbursement process and this will create a very big problem leading the organisation into deficit and at an extreme case, the organisation might wind up. Many researches have been conducted in the reason for winding up of companies and organisation in which lack of expenditure control process had found responsible.
Expenditure control has been defined as the process by which managers utilize effectively and efficiently, the scarce resource in the achievement of the organisational goals. At this juncture, let us look at expenditure and control from separate perspective.
Expenditure is the total amount spent on the process of trying to achieve a particular organisational goal. Control means to order, limit, instruct or rule something or someone’s actions. It is used by either government officials or organisation managers to make restrictions on wages increases, immigrate credit and so on (which are all expenditure).
Hospital as a category of profit making organisation. Non-profit making organisations are characterized by the following:
a) There is neither a conscious profit motive nor an expectation of earning net income.
b) No profit of any excess of revenue over expenditure is distributed to those who contributed support through taxes and voluntary donations.
In profit making organisations, the reverse of these characteristics is the case in the sense that their major objective is to maximize profit and excess of revenue over expenditure are given to the owners of the organisation.
Government owned hospitals pay more attention to services they render to the public, as their major objectives is to provide services that fulfil a social needs for those who do not have the purchasing power to acquire these services themselves. Irrespective of the fact that privately owned hospitals try to render good and quality services to the public, they pay more attention to maximize of profit which their major objective.
Comparative study of expenditure control in Government and privately owned Hospital which is major research question in this research work has to with the different ways and methods by which expenditure is being controlled in each of the hospitals so that they will not run into deficit or liquidations.
According to Johnson (2006), the management control concept which imbibes the expenditure control are the same both in profit oriented and non-profit oriented organisations, but the implication of these concepts differ in important respect. We will want to find out if also the expenditure control methods are the same or differ in the two hospitals under study, owning to the fact that one is profit oriented and the other is non-profit oriented.
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