ABSTRACT
This research work highlights the result of a research carried out to examine the relevance of accounting information to management decision making in First Bank of Nigeria Limited, Abdullahi Fodio Road Branch. A substantial aspect of the study involved collecting data through the instrumentation of questionnaires and interview. The data collected were classified, analysed and the percentages of the findings presented in a table.
The hypothesis was then statistically tested with chi-square in which the calculated value of chi-square equals 14.357 and is greater than the critical value of 5.991. This result showed that accounting information is a tool for management decision making hence, the null hypothesis was rejected and the alternate hypothesis accepted. Based on the findings, it was recommended that managerial decision making in organisations should be an offspring of accounting information.
CHAPTER ONE
INTRODUCTION
BACKGROUND OF STUDY
Accounting is fundamentally a measurement and communication process used to report on the activity of profit and non-profit seeking organizations. In other words, it is concerned with the discipline of summarizing, recording, analysing and interpreting economic events and other financial activities. This process is performed by accountants who furnish management with the relevant information needed for effective and efficient decision making as to contribute to the quest for means of surmounting industrial, commercial, governmental and academic problems inherent in a dynamic and volatile socio-economic and political setting. The chambers 20th century dictionary defines information as “intelligence given-knowledge”. This is because reliable information is necessary before a sound decision involving the allocation of scarce resource (land, labour and capital) can be made, that is why accounting profession is dynamic and there is always the need for an accountant to continually update his/her knowledge of accounting portfolio. Accounting information is valuable because it can be used to predict the financial consequences of each alternative course of action. An organization needs quantitative information to function or make decision. Management uses the best available information system to provide management information which is used primarily to accomplish three broad purposes;
(i) To provide financial statement to the interest of external users,
(ii) To plan the organization activities and operations in both short and long run, and
(iii) To control the result of its operations.
The American Accounting Association (1966) also defined accounting as “the process of identifying, measuring, and communicating economic information to permit informed judgements and decisions by users of the information”. Another definition, which is widely accepted, is by the American Institute of Certified Public Accountants (1970) defined accounting as “the art of recording, classifying and summarizing an event which is in part at least of a financial character and interpreting the result thereof”.
The above definition place emphasis on the use of accounting information for evaluating the results of the past and present activities and making decisions concerning future actions. The information is primarily financial and generally stated in monetary terms. It is the process by which the profitability and solvency of an organization can be measured and also periodic information needed as a basis for making business decision and appropriate control that will enable the management to guide the organisation on a profitable and solvent course. The accounting information is prepared and presented in form of financial statement in accordance with the accounting standard issued by the Nigerian Accounting Standard Board Act (2003) which are the means of conveying to management and interested outsiders a concise picture of the profitability and financial position of the business. The form of preparing and presenting accounting information includes the following; the profit and loss account, balance sheet, income statement etc.
Hence, accounting is divided into three (3), namely;
(i) Financial accounting
(ii) Cost accounting, and
(iii) Management accounting
According to Leopold (1982), he said that, financial accounting “is concerned with providing information on the financial activities of the organization for the benefit of both internal and external users”. It is also the classification, recording of monetary transaction of an entity in accordance with establish concepts, principles, accounting standard and legal requirement and presentation of a view of those translations during and at the end of an accounting period.
While cost accounting on the other hand produce information about cost that are incurred by organization in running the organization so as to achieve the objectives on which it is set up.
Finally, Calvin (1982), stated that management accounting “is concerned with providing information to management for the purpose of planning or provision of information needed at all levels”. Management and creditors use these reports internally.
Stamford (1978) stated that accounting information has played a role as “a tool for management decision making” because it function as “a historical record of contractual obligations between the outsiders with the end product in form of financial statements to report the financial status of an organization at a point in time”.
However, the relevance of accounting information to effective management decision making in many organisation is still not appreciated but with the test to be conducted in this research, the degree of accounting information as a “tool for management decision making” shall be clearly understood.
1.1 STATEMENT OF PROBLEM
Management who takes wrong decision always end up not achieving their set goals and objectives. Many managers who think that they can operate successfully without the use of information provided by their accountants, leads to economic failure such as liquidation of many banks. So, effective decision or management decision cannot be taken by managers if the information provided by their accountants is not properly adhered to. Accounting information answer questions such as;
(i) Arethedisclosuresof accounting information accurate and reliable?
(ii) Is accounting information prepared with General Accepted Accounting Principle (GAAP)?
(iii) Does accounting information as a tool for decision making satisfy the management?