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THE IMPACT OF ACCOUNTING INFORMATION ON BANK LENDING DECISION.

 

PROPOSAL

          This study deals with the impact of Accounting Information on Banking Lending Decision, with reference to non Bank PLC Garden Avenue Enugu.  To guide the study for research question.  Four hypothesis were formulated.  A structured questionnaire was used to gather respondents mean and standard deviation were used to research question while t test statistics was used for hypothesis the results were analysed and presented. The results of the findings indicate as significant difference between views of the junior and senior staff of Union Bank.  The research finding are in line with previous findings in both developed and developing countries.  It also collaborated previous research finding in Nigeria.  It was recommended that commercial banks in Nigeria should have virile information and extrerial e

of banks should be established.

 

TABLE OF CONTENTS

CHAPTER ONE

1. Background of the study                                                                   1
2. Statement of problem                                                              5
3. Objective of study                                                                             5
4. Significance of the study                                                                   6
5. The scope of study                                                                            6
6. Definition of terms                                                                            6

Reference                                                                                 8

CHAPTER TWO        

Review of related literature                                                               9

1. Definition of accounting information                                                9
2. Forms of financial accounting information                              11
3. Union bank as users of financial accounting                                     12
4. Union banking lending                                                            13
5. Basic principles and canrons of lending                                  14
6. Lending decision                                                                      16
7. Lending procedures                                                                 17
8. Role of financial accounting information

 in bank lending decision                                                                   20

Reference                                                                                 23

CHAPTER THREE    

Research design and methodology                                                    24

1. Source of data                                                                         24
2. Location of data                                                                      25
3. Method of data collection                                                        25

Reference                                                                                 26

CHAPTER FOUR                

1. Research Finding                                                                     27

Reference                                                                                 29

 

CHAPTER FIVE                  

Conclusion and Recommendation                                           30

1. Conclusion                                                                     31              

Bibliography                                                                  32     

 

CHAPTER ONE

 

1.1                        BACKGROUND OF THE STUDY

 

          All the information necessary in the business are being summarized in the Accounting Records to ascertain the efficing and effectiveness of all the business enterprises though the process of accounting.

          Accounting may be defined as a set of Rules and Methods by which financial and economic data an collected processed and summarized into report for decision making.

          In using data presented to them by customer for the purpose of leveling the bank is interested in financial Accounting Information which enable it reach an initial lean decision and also helps it to monitor progress after the advice has been made.

          These information are those that deal with solvency, liquidity and profitability these means obtaining information that will described the client’s financial stand and long term liability.  Banks need three basic types of Accounting Information namely:

The score keeping information involves liability and investigation of variance for corrective actions.  This is done by campaign expert results with elections implement ex-ante and useful in evolution state of planning.

          It also concerned the control principles function of management by exception.

          Moreover it bring out problems look into for collective actions.

The problem solving information is useful in the implementation shape of planning since it focuses on analyzing and recommending the best course of action among may courses.  It is closely associated with management decision making process and consist of non-routine and ad-loc and special decision.

          The objective of the most banking activity is to ensure effective.

Lending and as such lending has become the most important of banking operation.  However lending forms the major segment to banking operation.  As all known the important of lending in banks activity the needs for a judicious lending cannot be over emphasized.  Loan request has to be properly appraised by considering the necessary financial accounting information required.

          It is easy to issue out loan but not often so easy to recovers to loan.  Banks usually take some risk when lending money.  To ensure the safety of funds committed banks should create a framework.  For dealing to have relevance information to the internal constraints of each bank e.g sectoral performance deposit basis existing exposure risk exposure and so on.

          There are thus three basic principles that serves as guide to commercial bank lending Math. (1972) recommended the use of safety.  Suitability and profitability, these consist of some other sub element known as the CANONS OF LENDING which involves purpose of loan amount, duration, repayment borrower and collateral security to ensure or good lending decision, these principles and canons of lending has to be followed vary strictly by the bank when lending.

          The project will examine the extent to which the Union Bank.  Have applied these accounting information in their lending operation.  By nature of Banking business customers need to be critically scrutinized accessed before granting to them any loan proposals one of the criteria for assessing customer is by looking at the accounting information of the customers.  In utilizing the data presented by the customers for the purposes of lending union banks are interested in accounting information which enables them to reach on initial loan decision and also help than to monitor progress.  After the liquidity and profitability that is obtaining information that will described a firm financial stand and longterm viability.

          Union Banks as users of accounting information would want to satisfy that the company will be able to meet the interest payment accruing during the period of the loan and repayment of capital sun of at the end of loan period other factors like short term loan are also considered by the bank before approving loan proposal to their customers.  Union Bank will be interested in their estimate of their net cash flow over the next for months.

          But for a long term loan or advance the bank will need to be convinced that the client is financially stable and that adequate profit will be earned through out the foreseeable future.  The ability of the borrowers to repay both the capital and interest sum should be the bank is prime consideration.

 

1.2     STATEMENT OF PROBLEM

 

          Lack of proper accounting information from loan applicant had made it difficult for the union bank to ascertain the instability of the applicant for the loan.

1. Reduction in incidence of bad debt many bank loan benefactors had not been able to repay their loans on schedule.
2. Improper accounting records by borrowers.  This had posed problems to the bank and had been used as an index for evaluating bank loan applications.
3. The borrowers had no financial and economic base which the bank would have accepted as collateral for purpose of lending money.

1.3     OBJECTIVE OF THE STUDY

 

1. To determine the extent to which the accounting information presented by loan applicants influence bank lending decision.
2. To ascertain the extent to which adequate use of accounting information has contributed to reduction in incidence of bad debts.
3. To ascertain the extent to which improper accounting records by borrowers have contributed to non-repayment of loan.
4. To ascertain the extent to which no financial and economic base which the bank will accept as collateral has effected the borrowers.