THE ROLE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING
TABLE OF CONTENTS
CHAPTER TWO
LITERATURE REVIEW
DEFINITION OF ACCOUNTING
SCOPE OF ACCOUNTING
OBJECTIVES OF ACCOUNTING
SOURCES OF ACCOUNTING INFORMATION
ACCOUNTING FOR DECISION MAKING
ACCOUNTING INFORMATION
FEATURES OF ACCOUNTING INFORMATION
FINANCIAL STATEMENT AND THEIR INFORMATION, CONTENTS FOR MANAGEMENT DECISION MAKING.
ACCOUNTING CONCEPTS AND CONVENTIONS
MANAGEMENT DECISION
INTRODUCTION
Some organizations have failed woefully due to neglect in the use of accounting information in its decision making process. Managers, therefore should rely more on accounting information in its decision making process since decision making skill is “the key “ to successful planning in an organization.
The statement of accounting standard No. 2 issued by the Nigerian accounting standard Board defines Accounting Information as “the data that are found in financial statement which provides a continuing history qualified in monetary terms of economic resources and obligations of a business enterprises and of economic activities that change these resources and obligations”.
Accounting Information therefore, provides the yardstick for measuring the performance of a business organization and is also an instrument against which management compare actual result with established standards. Thus, this information communicated by accounting records serves as a basis for corrective actions when actual outcomes deviate from pre-determined goals.
Accounting Information is not only needed by managers, other users of accounting information include: shareholders (owners), editors, potential investors, the government and the public who have supplied money to the business or who have other interest in the business that will be served by information about financial position and operating results.
The type of accounting information that a specific type of user will require depends upon the kinds of decision that a person wants to make. For example, managers need detailed information about daily operating cost for the purpose of controlling the business and setting reasonable selling price. Other users on the other hand, usually need summarized information on operating result for the past years to use in making investment decisions, levying income tax, or making regulatory decisions.
Accounting information is conveyed to users in a variety of reports and schedules. Reports to internal user (management) are specifically designed to meet their particular needs, which are usually known at the time the reports are prepared. Reports to external user are more standardized and are often referred to as “financial statement”. According to the statement of accounting standard No. 2, the information to be provided in financial statement are those that are quantitative and qualitative in nature to aid their users in making informed economic decisions. Financial statements are therefore to be simple, clear and easy to understand by all users.
STATEMENT OF PROBLEMS
The topic of this research project is to a large extent, qualitative in nature which may not be easily analyzed in quantitative terms. For example, despite the fact that accounting information to general information for management decisions, there is still mismanagement of resources, which leads to the non-achievement of the profit maximization objective of most organization. Moreso, management is faced with routine organizational problems. In the case of stock valuation, the market value of stock at any point in time would have to be known by management either raw materials, work in progress or finished goods. There would also be the problem of generalizing with the result obtained by this research work since there are some small scale business which do not keep accounting records (or only in complete records), which could be used as a basis for determining the reliance or otherwise of the managers on accounting information. However, the researcher of this project has consciously identified these problems and accordingly enquired into some advanced statistical books in order to be able to analyze objectively the data collected for the purpose.
PURPOSE OF THE STUDY
The overriding objective of this research work is to investigate on the following:
SCOPE OF THE STUDY
The originality and viability of any study or research work lies on the quality and quantity of data available. It is the wish of the researcher to cover a wide range on this topic but due to some constraints, that is naturally faced by the researcher within the time the work is expected to be completed, the scope is narrowed down to a bearable size.
SIGNIFICANCE OF THE STUDY
It is the hope of the researcher that the findings and recommendations of this project work will be of great importance to the management of different business organizations. The significance of the study includes:
LIMITATIONS OF THE STUDY
Certainly, this cannot be ruled out. The researcher was faced with numerous constraints in course of the research work. First, the time frame within which the work is expected to be completed is too short for any meaningful, indebt and extensive study. The time constraints did not also allow the researcher to cover many companies as intended.
There is also lack of necessary information as some of the information required were branded “classified information” by some of the companies used for the study. There is the problem of poor recording system which to a large extent affect the reliability and soundness of the data from such companies. Again, there is problem of relunctancy by some officials to guard audience to the researcher. This also impeded the original intention of indebt analysis of data.
Finally, there is financial constraint coupled with increasing lost of materials which hindered the work to a great extent. Despite the above stated constraints, the researcher believe that the work will be of great benefit to managers and other users of accounting information.
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