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).
1.2
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 financial
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 financial information implemented within an industry,.
2.
Identify the perception of the
employees about the financial information of the firm.
3.
Investigate and identify the
elements that affect adequate financial 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.
- Does financial information have any effect on management
decisions
2 .Is there any
relationship between the perception of the employees and financial information
of the firm.
3. What are the elements
that affect adequate financial information within the
Firm?
4.
Does financial information
affect the company positively or negatively?
1.5 Research Hypotheses
H1:- Financial information does not have any effects on management
decision.
H02: There is no significant relationship between time factor and financial
information
H03: there is no significant relationship between time factor and financial
information
H04: Financial 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 financial 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 Champion Breweries in Uyo. The
researcher shall examine the various fundamental concept of financial information
implemented by the company.
The study shall also cover how the firm has been able to manage the
elements that hinder financial information, cash flow adequacy, also the
perception of the employees about the financial 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 financial 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.
a)
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.
b)
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.
c)
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 “Champion Breweries, Uyo.
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
Financial 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.