The Use Of Accounting Information In Decision Making (A Case Study Of Nigeria National Petroleum Refinery)

Project and Seminar material for Accountancy

Project and Seminar material for Accountancy


Information is the live wire of any organization, it is very vital in good decision making, manufacturing companies takes decisions bordering on production, pricing and marketing. Consequently, it is important that relevant, timely and adequate information needed is made available for managerial decision in order to run the organization effectively and satisfy interested parties.

This study is aimed at finding out the extent to which manufacturers use accounting information and whether there is any positive relationship between the effective use of accounting information and the quality of decision is manufacturing companies.

The study was carried out on one manufacturing company called “Rokana Industries Plc, Owerri, Imo State.
Data collected through the use of personal interview were compiled and analyzed in tables. It is evident from the study that manufacturing companies make use of accounting information in decision making such as production and pricing out this is to a varying extent.

The extent is influenced by factors such as adequacy of accounting records qualified personnel, extent of decentralization of duties and knowledge of accounting. It is hoped that managers of manufacturing organizations will appreciate from this study the need to keep proper accounting records, which is vital for quantitative decisions.

Chapter One


1.1 Background Of The Study

Organization is an integral part of the economy. It is the nerve network through which people (managers) in authority order all actions and obtain information they need to meet their responsibility organizations are broadly divided into two parts.

  1. Non-profit oriented organization and
  2. Profit oriented organizations.

Information is the live wire of an organization, the success of any organization whether profit or non profit oriented organizations depend particularly on how the information needs of the different levels ;of ;management are met.
Information, according to Anthony and Reece (1975 p. 290) is “a fact, datum, observation, perception or any other thing that adds to knowledge”. Also, Cox and Enis (1972) defined information as “any data which the manager (individual) believes will be useful to him in making a particular decision “.

Information can either be quantitative information, or non quantitative and out of many quantitative information, accounting information is one. It is distinguished from other types of information because it is usually expressed in monetary terms. However, non- monetary information is also often contained in accounting reports in order to enhance the understanding of the manager.

This study is about the role of accounting information in making managerial decisions. It seeks to enquire into how monetary and financial information arranged in a professional accounting manner is used in management decision making.

1.2 Statement Of The Problem

The poor performance and failure of manufacturing companies in Imo state may have been as a result of poor application of management accounting information standards.

Managers in most manufacturing companies consciously do not use accounting information as a guide in making production and pricing decisions.

The lack of the use of accounting information will equally hinder the proper allocation of the organization scarce resources.

It should also be noted that the compliance to the management accounting standards by the managers in decision making alone may; not completely rule out the incidence of poor performance and failure in our industries but it will do a great extent.

1.3 Research Questions

  1. What is the relationship between the poor productive performance of imo state business organization and the lack of application of accounting information?
  2. Do the managers in the company apply the accounting information in their decision making process?.
  3. What type of accounting information do they use in making pricing decision?
  4. What classes of quantitative decision are taken by the organization?
  5. What are those management accounting information and techniques to analyze them?
  6. How do these techniques relate to the organizational management decision?
  7. What role does management accounting information play in organizational decision making planning and control.?
  8. Are there management decision organization based on data other than accounting information?
  9. Does the accountant generally furnish the company with the necessary accounting information when needed?

1.4 Objectives Of The Study

From the problems stipulated above, this work has the following objectives.

  1. It seeks to ascertain if there is any positive relationship between the effective use of accounting information and the quality of decision in manufacturing companies.
  2. To determine factors that constrains or promotes the effective use of accounting information.
  3. To make recommendations, which will enhance the employment of information, provided by accounting system.

1.5 Significance Of The Study

It is hoped that from this study, one can appreciate the usefulness of keeping proper accounting reports from which accounting information are drawn which lead managers towards correct decisions either in selection among course of actions or evaluation of performance and general appraisals.

1.6 Scope And Limitation Of The Study

Accounting information could be used in various decisions making viz: price, production, sales, investment, capital acquisition decision e.g.

However, due to the constraint of time and distance of material, the scope of the study is limited to pricing and production decision-making.

Major Constraints
a) Non Response:

The reluctance of managers to disclose information about their operations poses serious constraints to this work.

b) Finance:

A study of the scope contemplated in this work-required commitment of resources for outside the reach of an average students, in fact curtails the scope of the study.

The number of respondents and geographical spread has therefore been scaled down considerably; of course, it may be argued that universal applicability of the findings is consequently jeopardized. While this may be so, it is hoped that the work will prove to be of some value within its scope.

1.7 Statement Of Hypothesis

The following Null (Ho) and Alternative (Hi) Hypothesis are formulated.

  1. Hi: Managers on manufacturing companies make effective use of accounting information in making production and pricing decisions.
    Ho: Managers in manufacturing companies do not make use of accounting information in making production and pricing decisions.
  2. Hi: The use of accounting information has led to a high level of profitability.
    Ho: The use of accounting information has not led to a high level of profitability.
  3. Hi: Accounting information helps managers in proper allocation of scarce resources.

Ho: Accounting information does not help managers in proper allocation of resources.

1.8 Definitions Of Terms

Accounting Service Function

It is that service in which accounting system provides through its techniques and methods of accounting information which aids management in planning, controlling and lacking decision.

Financial Accounting

The prime concern of financial accounting is to report historical information to interested parties within and outside the organization.

However, the information produced and generated are prepared in line with lay down rules and principles as content in company’s act. This information is found in the balance sheet, profit and loss or income statement, and director’s reports.


This means checking or measuring actual performance with predetermine or planned result. This is done with the view of ensuring satisfactory performance and possible producing feedback, which will aid to review plan. It leads to talking action to correct any noticed variance during production.

Management Accounting

According to Anyaogu C.M. (2002:P1) It is described as a process by which system are administered. It is also the application of accounting techniques to the provision of information designed to assist all level of management in planning and controlling the activities of the firm.

Cost Accounting

This is the part of management accounting, which establishes budgets and standards cost and actual cost of operation, processes, department or product and the analysis, variance, profitability or social use of fund.


This is the end towards which activities of any enterprise are aimed, i.e. the end point of management programme.


The use of information supplied by accountants and making decision by which management formulates objectives and chooses a pattern of action in order to achieve those objectives for the further business of those firms.


Alternative line of actions, which are often irrevocable and articulations of long-term organizational goals and objectives.

External Reports

These consist of periodic or annual financial statements, which are prepaid for the benefit of shareholders, potential investors, government and the entire public. These reports are the products of the profit and loss account, the balance sheet and the statement of source and the application ;of funds.

The common feature of these reports is that they conform to the standards stipulated by Generally Accepted Accounting Principles (GAAP).

Though Anthony and Reece and Osisioma classified accounting information differently their opinion do not differ in material particulars.

Chapter Five

5.0 Summary, Conclusion And Recommendation

The aim that the researcher wishes to achieve through this study is to find out the role accounting information plays in decision making, measuring of profitability and allocation of resources after a careful scrutiny and interpretation of data generated in the course of this research, the following finding are made.

It is evident that manufacturing companies make use of accounting information in decision making but this is to a varying extent the extent is largely determined by various factors such as:

  1. Poor keeping of accounting records
  2. Under developed managerial information system (MIS).
  3. Manual method of data processing
  4. Poor communication transmission medium.
  5. Ignorance and unqualified personnel and,
  6. The over profit conscious nature of these companies that believe that the end justifies the means not mining how the profit is arriving at.

As a result of the above listed factors decisions of these companies tend to be done with no rigid adherence to the information denied from accounting data. Consequently, the qualities of the decision are imparted.

The unstable state of the Nigeria economy, which forced companies to source their raw materials locally, also has disruptive influence on the decision making of the companies.

This harsh economic condition affected both conditions and manufacturers. Manufactures have to take advantages of the consumers’ preference for cheaper and low quality products and this is reflected in their production and pricing decision.

5.1 Summary

From this study, the research observed some problems that led to ineffective use of accounting information in the managerial decision making in the manufacturing companies and these are enumerated below:

  1. Lack of proper Accounting Records: The accounting records of the companies are not properly kept moreover, the security system and safeguarding facilities for such records are not up to standards, files are kept haphazardly. This lead to difficulty in retrieving information in the future of even total loss of such records.
  2. Poor organization structure: The companies are not structure in a way to give especially the lower managers the free hand to take decisions. The evidence of over centralization of power on the top management could be seen leading to unnecessary delays in decision making while the middle or lower class managers who might be directly involved in a particular situation or acquainted with a particular problem were not allowed to use their own initiatives.
  3. Lack of Qualified personnel: Most of the managers are not professionals in their various fields of endeavour, especially they accounts department which ordinarily should have at least a professional account who should be able to develop an accounting system line with the changing business environment and exhibit enough proficiency in his analysis of accounting data for management use. The other managers are left out, there are some who are ignorant of the impact of making decision subjectively.
  4. Lack of Developed Management Information System: The activities of the companies are not computerized. Most of the leading to waste of time and errors in data analysis. Also information is not treated as resources such as the traditional resources of money materials, facilities and people.

5.2 Conclusion

Accounting information is found to be indispensable to organizations, timely, relevant, concise and clear accounting information enables management at various concerning current and future operations.

Various relevant literatures on accounting information were surveyed and its usefulness to different levels in decision-making. Personal interviews were used in collecting primary data while secondary data were drawn from existing literature.

The data collection was presented and analyzed and it was found out that the extent to which manufacturing companies utilize accounting information varies and is also dependent on the economic climate experience and the resources of the companies.

Sequel to the findings, best of the recommendations is that companies should be able to keep proper accounting records, which is the founding of quantitative decision.

5.3 Recommendation

Sequel to the findings of this study, the following recommendations are necessary in order to enhance the effective use of accounting information and the quality of management decisions.

  1. There will be evidence of tasks performed by the employees of the companies.
  2. The decisions taken will be based on objectives factors not necessary on the owners’ lunch borne out of years of experience in that business highly subjective factor. Optimal decisions are not usually arbitrary rather they involves from a structure rigors analysis of accounting about the product.
  3. By keeping good accounts, management will be able to prepare budget statements and variance analysis statements, so that management could employ management by objectives and exceptions rather than management by reactions.
  4. Managers generate and present financial information as objectives measures of their stewardship from the keeping of good accounting records. This notwithstanding, there are other uninterested parties employers, government, creditors and other who will like to know the financial soundness of these companies on order to be assured that their interests are adequately protected.
Development Of Management Information System.

The information system of the companies should be characterized by the function performed by the computer. In this case information should be treated as a resource such as traditional resource of money, materials, facilities and people.

However, in a competitive business management information system should be powered by sophiscated computer software and hardware with ease access to information and rule out delays and also difficulties or retrieve it.
The head of MIS should also be elevated to the same level as managers of other equivalent resources with this development, data processing will be computerized, corrected analyzed and enhance effective communicated transmission medium.

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