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ACCOUNTING INFORMATION AS AN AID TO MANAGEMENT DECISION MAKING

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: ACCOUNTING INFORMATION AS AN AID TO MANAGEMENT DECISION MAKING
: Chapter 1 – 5
: 88 Pages
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Keywords:ACCOUNTING INFORMATION AS AN AID TO MANAGEMENT DECISION MAKING


RESEARCH BODY

CHAPTER ONE

INTRODUCTION

1.1       Background to the Study

Accounting, which is also known as accountancy is a “language of business. It provides financial information about one’s business to the internal and external users such as managers, investors and others. Also, accounting is the means by which information, about an enterprise is communicated; and the primary role of accounting information is to provide useful information for decision making purposes, it is sometimes referred to as a means to an end, with the end being the decision that is helped by the availability of accounting information. (Arneld and Hope,1990)

Accounting has the language of business because it is the basic tool for recording, reporting and evaluating economic events and transaction that affect business enterprise. Accounting processes all document of a business fiancial performance, from payroll cost, capital expenditure and other obligations to sales revenue and owner’s equity. Business can make appropriate financial and strategies decision about their future with the help of accounting information. Conversely, incomplete or inaccurate accounting data can cripple a company, no matter its size or orientation.

Accounting is important as barometer of business navigation, management accounting its goals, objectives and mission, assessing past performance and evaluating and rewarding decision-making performance. Some of the important characteristics of management accounting information are timeless, its relationship to decision making authority, its future orientation, its relationship to measuring efficiency and effectiveness, and the fact that it is a means to an end. Management is the art of making particularly through people, for the achievement of the broad goals of an organization (Ejiofor,1987). In trying to achieve these goals, the manager has to map out strategies to find out the accounting information suitable for the company

Cole (1986), defined management as a process which enables organizations to achieve their objectives by planning, organizing and controlling their resources including gaining the commitment of their employees.

Stoner and Wankel (1986), defined management as the process of planning, organizing, leading, controlling the efforts of organization members and using all other organizational resources (human and materials) to achieve the stated organizational goals and objectives..

Robins and Contler (1989), defined management as the process of coordinating work activities so that they are completed efficiently and effectively with and through other people’s efforts. This implies that, management involves directing, planning, programming, organizing, influencing, time control, financing, regulating, personnel, the conduct of meeting, upward as well as downward communication, and decision making.

Management accounting uses both financial and non-financial information and is generally intended for the use of internal users who use the information to make decision that help achieve the goals and objectives of the organization. Financial information used by management accountants include sale growth, profit, return on capital employed and market shares etc. Non financial information used by management accountants includes customer satisfaction levels, production quality, performance of competing products and customer loyalty. Management accountants use both financial and non-financial information to aid business decision-making (Melissa , 2007)

Decision making is the process of identifying and selecting a course of action to solve a specific problem (Aluko Micheal e tal, 2009). A decision is a choice made from at least two alternatives. It is instructive to note that the purpose of this field of specialisation is to generate information, disseminate the information to the operating managers for the object of effective decision making (Adeniji, 2008). Information produced by management Accountant must be judged in the light of its ultimate effect on the outcome of decisions,  a necessary precedent to an understanding of management accounting is an understanding of the decision making process (Adeniji,2008).

Decision making is the process of choosing alternative courses of action using cognitive processes. Decision making is needed when there is no clear course of action to follow. Accounting systems can aid our decision makers. Accounting systems also provide check for the validity through process of auditing and accountability. (Gray et al 1996)

Some of the organization or industries that were able to achieve their wealth maximization goal always are as a result of effective accounting information plays a central role in management decision making. For example Blessed food and Drinks (Ind.) Nigeria Limited (Makun Sagamu) as the case studies, is able to achieve its wealth maximization goals through efficient and effective use of accounting information in the decision making process of the organization. Therefore accounting information in management decision making of the increment if it is properly and effectively done.

Accounting is the process of recording, classifying, selecting, measuring, interpreting and communicating financial data of an organisation to enable users make decisions. It incorporates measurement and reporting of profit and loss. An accountant must not only be interested in record keeping alone but in the application of his professional competence or knowledge and skills in presenting accounting information to assist management in decision making process (Longe  and Kazeem  2006).

  • Statement of the Problem

The major problem discovered for management is the identification of fundamental concept of accounting information to be implemented by each company which can effect the company positively or negatively, and therefore there is a problem, If a particular concept of accounting information used by the company affect the management decision negatively, and this help us to recognize the reason for the negative effect, which can be as result of adoption of wrong accounting information or uncertified accountant giving wrong information to the company which can lead to wrong information to the company which can lead to wrong decision to the progress of the company.

1.3       Purpose of the Study

The goal of this research is to evaluate the efficacy of the accounting information within an industry and how it aids in management decision making. There must be an objective at the back of every successful study.

Therefore the objectives to be achieved at the end of this study are as follows:

  1. Identify the fundamental concept of accounting information implemented within an industry,.
  2. Identify the perception of the employees about the accounting information of the firm.
  3. Investigate and identify the elements that affect adequate accounting information within the firm..

1.4       Research Questions

On these bases, Questions shall be attempted in finding solution to the problem based on the topic of the research work and all information gathered from the respondent shall be sued to analyze the outcome of the result. In order to throw more lights on this topic the following questions shall be asked on the field.

  1. Does accounting information have any effect on management decisions

2    .Is there any relationship between the perception of the employees and accounting information of the firm.

  1. What are the elements that affect adequate accounting information within the

Firm?

  1. Does accounting information affect the company positively or negatively?

1.5       Research Hypotheses

H1:- Accounting information does not have any effects on management decision.

H02: There is no significant relationship between time factor and accounting information

H03: there is no significant relationship between time factor and accounting information

H04:  Accounting information does not have any effect on the company performance.

1.6       Significance of the Study

The main relevance of this research is to see the need for accounting information in any business organization and how it aids in management decision making. The study is significant in order to provide insightful details on how a firm should manage one of its essential assets which is its financial aspects. Moreover this study will be significant in management/ business particularly for manufacturing industries in a sense that it will broaden their knowledge about managing their capital or financial assets and will help them weigh if the current accounting information are appropriate in Nigeria setting. Furthermore, it will contribute to business research.

1.7       Scope of the Study

The research work is expected to cover Blessed Food and Drinks (Ind.) Nigeria limited, Sagamu a manufacturing Company sited in Makun, Sagamu in Ogun State. The researcher shall examine the various fundamental concept of accounting information implemented by the company.

The study shall also cover how the firm has been able to manage the elements that hinder accounting information, cash flow adequacy, also the perception of the employees about the accounting information of the firm. All what have been mentioned above are to be considered in this research

1.8       Limitation of the Study

For this kind of study the researcher would have used more companies as the case studies who make use of accounting information very well to find out how the accounting information has been effective on management decision making, but because of the limitation on the following terms.

  1. The Limitation of time: The time allocated for the completion of this research project is too short for a wide scope project, as a result of this, it also pose a limitation to the study.
  2. The issue of Finance: the limited financial condition of the researcher still play a major role in the limitation of the study, because the companies (the case studies)  needs to be visited almost every time for necessary information, getting questionnaire prepared, making of photocopies and so on.
  3. Inadequate Information: There is limitation in this study through the inadequate information from the managers of companies who did not give detail information about the companies for fear of disclosing confidential information.

Therefore, for these reasons, this study is limited to only one company as the case study “Blessed Water (Ind.) Nigeria Ltd, Sagamu, Ijebu-ode.

1.9       Operational Definition of Terms

For the purpose of this study, some terms are defined as follows:

Accounting: is the process of recording, classifying, selecting, measuring, interpreting and communication financial data of an organization to enable users make assessments and decision.

 Accountant:  a person whose job is to keep or check financial accounts

Accounting information: It refers to the data that are found in financial statements.

 Decision Making:  This is the process of choosing between alternative courses of action using cognitive process.

Financial Statements: Consist of Balance sheet, profit and loss account or income statement, the notes on the accounts, source and application of funds statement value added statement and historical financial summary.

Fundamental Accounting concepts include:  Entity, going concern, periodicity, realization, matching consistency and historical cost.

Cash Flow:  are inflows and outflows of cashed cash equivalents.

Information:  Information is processed data which could be in form of annual reports, research report.

Management: This coordinates the activities of an organization and relates them to the environment. The management process involving planning, organizing, controlling, communication and decision making.

Timeliness: Good information must be providing at the right time. I.e. it must be compatible with response time needs of the user.

Keywords: ACCOUNTING INFORMATION AS AN AID TO MANAGEMENT DECISION MAKING




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