CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
According to Eneje (2005) Accounting is the measurement, processing and communication of financial information about economic entities ). It was developed by the Italian mathematician Luca Pacioli , in the end of the 15th century. Accounting, which has been called the “language of business”, measures the results of an organization’s economic activities and conveys this information to a variety of users includinginvestors , creditors , management and regulators . Practitioners of accounting are known as accountants . The terms accounting and financial reporting are oen used as synonyms. Adeniji (2008) opined that Accounting can be divided into several fields including financial accounting , management accounting , auditing , andtax accounting . Financial accounting focuses on the reporting of an organization’s financial information, including the preparation offinancial statements , to external users of the information, such asinvestors , regulators and suppliers ; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions contains the summaries of the financials that is presented in financial reports, is known as bookkeeping , of which double-entry bookkeeping is the most common system. According to Batty (2009) Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies . Financial statements are usually audited byaccounting firms , and are prepared in accordance with generally accepted accounting principles (GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States] and the Financial Reporting Council in the United Kingdom . As of 2012, “all major economies” have plans to converge ) towards or adopt the International Financial Reporting Standards (IFRS). Without the application of management accounting techniques, no business can succeed in its operations and to attain the set objectives. Moreover, the decision making will not be guided as management accounting techniques provide adequate guide to management decision making. The Chartered Institute of Management Accountants (CIMA) defines management accounting as “an integral part of management concerned with identifying, presenting, and interpreting information used for formulating strategy, planning and controlling activities,decision making, optimizing the use of resource disclosure to shareholders and other external entity, disclosure to employees, safeguarding assets.
Adeniji (2008) defines management accounting as “the application of accounting knowledge, techniques and skills to the provision of information designed to assist all levels of management in planning and controlling the activities of a business enterprise”. According to Chambers dictionary definition, “management accounting is designed for or adopted to the informational needs of various levels of management. Nweze (2013) defines management accounting as multi-disciplinary in nature and concerns itself with advising management on the functional areas of management, namely, planning, organizing, directing and controlling. Management accounting, therefore, is primarily concerned with data gathering, analyzing, processing, interpreting and communicating the resulting information for use within the organization so that management can plan more effectively, make decisions and control operations. Why is management accounting concerned with the provision of management information? Management accounting techniques are concerned with those practices of management accountants which management should adopt to facilitate management decision making.
According to Lucey (2010) management accounting techniques are methods designed to suit the way goods are processed or manufactured or the way the service are rendered. The techniques to be adopted by an organization depend on the purpose for which the organization is formed. Management accounting techniques are concerned with those techniques as marginal costing, absorption costing, standard costing, actual cost ascertainment, variance accounting, budgetary control, differential costing capital budgeting etc. In this study, Nigerian Breweries has been chosen as case study. This company was incorporated on 16thNovember, 1916. In 1990, when the Companies and Allied Matters Act came into force, the name of the company was changed to Nigerian Breweries Plc. With the acquisition of a controlling interest (i.e. 54. 10%) in the equity of Nigeria Breweries within the Heineken group, Nigerian Breweries Plc has become a subsidiary of Heineken group. Currently, Nigerian Breweries Plc has five (5) breweries at Lagos, Aba, Kaduna, Ibadan and Enugu. The principal activity of the company is the brewing and marketing of lager beer, stout and non- alcoholic malt drinks. Over the years, Nigerian Breweries Plc has made tremendous success in its operations and has remained one of the most viable and profitable breweries in Nigeria making based on the information provided by management accounting and the various practices adopted.