Impact Of Accounting Information On Decision Making Processes In An Organization (A Case Study Of Dangote Nig. Ltd)

Project and Seminar Material for Accountancy / Accounting

Impact Of Accounting Information On Decision Making Processes In An Organization (A Case Study Of Dangote Nig. Ltd)


Table of Contents


  • Title page
  • Certification
  • Dedication
  • Acknowledgement
  • Table of Contents

Chapter One:

Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Research Question
  • 1.4 Objective of the study
  • 1.5 Research hypothesis
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Limitation of the study
  • 1.9 Operational definition of terms

Chapter Two:

Literature Review

  • 2.1 Preamble / Preview / Introduction
  • 2.2 Conceptual Issues / Framework
  • 2.3 Theoretical Framework
  • 2.4 Empirical Review

Chapter Three:

Methodology

  • 3.1 Area of study / Introduction / Preamble
  • 3.2 Research design
  • 3.3 Sources of data
  • 3.4 Population of the study
  • 3.5 Sample size and sampling techniques
  • 3.6 Research instrument
  • 3.7 Method of data analysis
  • 3.8 Model specification

Chapter Four:

Data Analysis and Discussion

  • 4.1 Preamble / Introduction and Preview
  • 4.2 Demographic characteristics of respondent
  • 4.3 Statistical result
  • 4.4 Test of hypothesis

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • Bibliography
  • Appendix

Chapter One


Introduction

In recent years the advancement in information system modules all over the world has made business organizations to exert resources in this area if they are to compete favourably among their local and foreign counterparts. Gone were the days when business organizations were simply required to make profit, survive and provide a fair return to investors’ on their interest. The modern business organizations find itself in the atmosphere of global uncertainties, cut throat competition locally and internationally and unprecedented change in the economy. Hence, a great demand is often placed on the managers of these organizations to make pragmatic and informed decisions if the organization is to move forward as the success or otherwise of any organization is often a function of the sum of the decisions taken in the past. However, the quality of decisions taken by managers rests upon the substance and accuracy of information provided by systems available to them. An accounting system is one of the most effective decision making tools of management as it provides an orderly method of gathering and organizing information about the various business transactions so that it may be used as an aid to management in operating the business (Copeland and Dascher, 1978). Accounting information also may help managers understand their tasks more clearly and reduce uncertainty before making their decisions (Chong, 1996). Thus, Accounting Information system is vital to all organizations and perhaps, every organization either profit or non- profit oriented need to maintain an Accounting Information System as no organization is exempted from decision making in their operations.

Accounting system, in recent times, has tended to be a system of information that does not stop at limits of data and financial information, but also it includes data and descriptive and quantitative information which is useful in decision making for users distinct with plurality and diversity. Such users include current and potential investors, lenders, suppliers, creditors, customers, governments and the public in addition to the administration, which is its responsibility to prepare the accounting programs and displaying it, that information must be capable of achieving the goal that it has been prepared for. Hence the role of Accounting Information System for effective decision making cannot be over emphasized. It is noteworthy to say here that Accounting Information System derives its source from accounting data.

Accounting Information Systems produce results which enhances decision making. Hence, it can safely be concluded that Accounting Information System is not an end in itself but a means to an end i.e. decision making to improve corporate performance. Accounting Information System produces detailed and comprehensible accounting information which are invaluable basis for decision making.


1.1 Background of the Study

At independence, Nigeria joined the committee of nation with the hope for a better tomorrow. We were able to feed ourselves and were of course almost self-sufficient. Subsequently our hopes seemed unattainable. We seem to be going deeper and deeper into the woods. The consensus is that it has been bad for Nigeria. Due to the adverse economic condition prevailing in the country many businesses have closed, shops and even financial institutions are being declared distressed at alarming rate. Businesses that are yet to be submerged or that want to stay afloat employ all kind of strategies. Some increase price, adopt promotional tools, engage in aggressive marketing etc. whereas others goes for an odd combination of activities and even undergo different kind of small business to survive. Any business or individual that wants to survive must make the right decision. The era of mile of thumb is gone; employing it is a sure way to fail absurdly. The price of any conceivable item from garri and bread to radio and book not to mention petrol has been soaring in geometric proportions over the year. The economy is truly in distress. These compounds and complicates intricate are the problem of the organization vis-à-vis effective planning and decision making processes. Other factors such as stagflation, taxation, economic and political problem are the major problem which affects information and decision making. The future orientation is what most company and bank get from making accounting decision .the computation and interpretation of analytical ratios from financial statement enable bank to determine their operation trends and provide a basis for management decision making. Other users of financial analysis are used in making financial decision and achieving the goal of sustainability determines compliance with regulatory requirements. Financial analysis is an investment that has positive return in the future on how decision will be made, how to manage the finances to achieve the strategic goals of the institution through decision making.

Many people think that accounting as a highly technical field which can be understood only by professional accountants actually nearly everyone practices accounting in one form or the other. In modern times, management require a wide variety of information to successfully accomplish its aim and objectives. This information is mainly determined by the element of uncertainty about the future and lack of knowledge about the present. Some of these decisions are of strategic importance having a large impact on the business, others are routine operating decision. Therefore accounting information is based on laws and regulations governing the handling of accounting report contained in the financial reports of organisation.

Making the right decision depends on the possession of appropriate, accurate and up to date information provided and presented in a meaningful way. This study set out to examine the contribution of sound accounting system in providing the management with financial and other information basis for dealing with decision problems that arises from their organizational operations.


1.2 Statement of the Problem

Basically, the nature of manufacturing business compels it to carry out a great deal of book-keeping records based on accounting principles and information provided with the perpetual increase in the number of consumer of manufactured products, it has become necessary to devise a systematic mean in handling the resultant book-keeping and accounting activities. A lot criticism has always been made about the service of the organisation, consumers complain of low quality product while employers complain of lack of promotion inadequate salaries, lack of training etc. Furthermore, the major challenge facing every financial institution \ business, organisation of today is market relevance. On-going fundament at changes in the global politics, economy and emerging competitions particularly challenges proper and adequate contemporal accounting information for management decision making.

The company itself tries to coordinate all these challenge effectively and efficiently so as to minimize any anticipated and unanticipated pitfalls. If a sound and effective accounting system is applied property by the manufacturing organisation, the difference will be clear.

Improper attention to the accounting system and handling of accounting information has given birth to the under mentioned problems.

  1. Poor planning
  2. Result to poor decision making
  3. Poor organization and control of business activities and unsatisfactory service to its customers.
  4. Poor decision making in administrative activities of the organization

1.3 Research Questions

  1. Are there problem in generating and utilizing accounting information necessary for management decision making process?
  2. To what extent does accounting information generated by accounts department contributed in decision in making process?
  3. To what extent does accounting information has improved effectively performed or fulfil the basic roles of cost minimization, proper allocation of scare resource and improvement in the production?

1.4 Objective of the Study

The purpose of our paper is to find out which accounting tools are used in Wexiödisk and to
inform the reader about how those affects the decisions made by the company. In order to contribute to the attainment of the purpose the paper will pursue the following structure. As a start, the methodology will provide the reader with an insight into the process of how the study was conducted. Afterwards, the chosen theories are introduced, which include ideas of various accounting tools as well as decision-making. Fieldwork data, collected during our study, will be eventually presented and then compared with the theories in use. This allows for drawing conclusions that will be shown in the final section.


1.5 Research Hypothesis

Number One
  • Ho There are problem in generating and utilizing accounting information necessary for management decision making.
  • H1 There are no problems in generating and utilizing accounting information necessary for management decision making.
Number Two
  • Ho accounting information generated by accounts department has not contributed in decision making process.
  • H1 Accounting information generated by accounts department has contributed in decision process.
Number Three
  • Ho Accounting information has not improved effectively performed or fulfil the basic roles of cost minimization, proper allocation of scare resource and improvement in the production.
  • H1 Accounting information has improved effectively performed or fulfil the basic roles of cost minimization, proper allocation of scare resource and improvement in the production?

1.6 Significance of the Study

This research study will help to maximise the beneficial impact of accounting information on the decision making process of an organization. This boosts the profitability of the organization as well as ensuring its continuity as a business entity. It will help in the efficient allocation of scare resources that have alternative being use as well as increase productivity thereby uplifting the standard of living. It will review the improvement in the organization or company handling the accounting information and show equally the ways through which improvement could be accomplished. In fact, all interested groups like shareholders, employers, investors, creditors, government etc will benefit immensely. This project will equally serve as a reference to student who may be interested to embark on a research of this nature.


1.7 Scope of the Study

The research cannot treat all aspect and kind of accounting information because the field is simply too wide. So only those relevant to these studies were dealt with as per need- ratio analysis, cost-volume- profit analysis, absorption and marginal costing, the contribution margin standard costing and variance analysis, linear program.

The availability of correct and up to data is not easy, even when available; one still encounters wholly unnecessary bottlenecks due to our socio – cultural background vice versa disclosure of information and bureaucracy. So this constituted an impediment to this research work.


1.8 Limitation of the Study

Due to a lack of time for our research, we could not conduct this study as deep as we wanted and so some questions that we had did not find any answer. The most of the information we got come from interviews and questionnaires. During the interview we had sometimes the feeling that the interviewees are used to employ other words and vocabulary than we do. We couldn’t choose other methods in addition as the research participant’s time was very limited. Indeed, such methods required more time than just a few months. There are limitations on resources for reference purposes especially responses on collection of data, many respondents give bias responses probably because of job protection, officer’s name and image protection, personal reluctance, unnecessary fear of legal implication and so forth.


1.9 Operational Definition of Terms

Effectiveness:

The total or actual interest paid or earned in a year, expressed as a percentage of the principal amount at the beginning of the period.

Efficiency:

A measurement of the ability of an organization to produce and distribute its product. In accounting terms it is qualified by a communism of the standard hours allowed for a given level of production and actual hour taken.

Accounting Information:

This is a system designed to obtain the financial position of an organization as at the end of the period.

Information:

Is a processed data used in obtaining detailed data about a particular person, thing or place.

Leverages:

They are used by companies of its limited assets to guarantee substantial loans to finance its business.

Financial Information:

This is information summarized by a company’s activities over the last year. They consist of the profit and loss account, the cash flow statement etc.

Analysis:

In standard costing and budgetary control, analysis of various in order to seek their causes. The total profit of various is analysed into sub – variance indicating the major reasons for budged figures.

Debt:

A sum owned by one person or organization to a person showing that the debt to be required to be settled within one accounting period.

Ratio:

To put company’s performance in percentage. The use of accounting ratio to evaluate a company’s operating performance and financial stability.

Decision Making:

This is the end of deciding between alternative courses of action. Running of a business, accounting information and techniques are used to facilitate decision models such as discounted cash flow.

Impact:

This means the duties responsibilities and functions. As it has to do with work, it is that fundamental obligation incumbent on the public relations for the attainment of democratic order in the organization policy.

Accounting: Is the process of producing needed information regarding primarily the financial activities of economic entities by Bartho N. Kezee 1996.

The wide scope of accounting can be recognized when one considers the diversity of economic entity which cut across sizes and bounders.

Accounting is the language used to cover the result of the entity’s endeavours, to the interested parties inform of financial statement and the financial statement has been identified as follows:

  • Statement of accounting policy.
  • Balance sheet.
  • Profit and loss account (income statements).
  • Notes on the accounts.
  • Statements of source and application of funds.
  • Value added statement.
Information on Decision Making Process

Information consists of data that have been retrieved processed or used for information purposes and as a basic for forecasting and decision making process.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

The major aim of this research was to find out to what extent does managements of some select manufacturing firm makes use of accounting information in decision making process. After a careful analysis and interpretation of data generated in the course of this research work, the following findings were made in order to confirm the null or alternative hypothesis stated in this study. Firstly, there are problem in generating and utilizing accounting information necessary for management decision making processes. Secondly, accounting information generated by accounts department has contribution in decision making process. Furthermore, accounting information has improved effectively, the basic roles of cost minimization, proper allocation of scare resource and the improvement of production. Finally the research also discovered that the selected manufacturing firms made use of cash flow statement, profit and loss account etc. in the planning of the operations and extending credit to other company.


5.2 Conclusion

The objectives of the firm differ from one organisation to another. Based on the statement of the problem stated in chapter one, the research concluded that the application of accounting information makes the difference between failed banks, enterprises, corporate bodies on one side and the successful one on the other side. For the improvement in the application of accounting information to be sustained, adequate understanding of the difficulty in the application of accounting information is very essential. If this is applied as at when due failure in business both private and public sectors will be highly minimised. Accounting information on decision making process has helped in the proper allocation of resource such as material, money, machinery and man. In conclusion, the failure of firms may not be due to non- generation of accounting information but they will be used effectively, efficiently and appropriately utilized in the accounting information generated in an organization.


5.3 Recommendation

Accounting information is very essential to the users’ for their development, especially when it extends to decision making. In view of the above the following recommendations were deemed necessary.

  1. Efforts should be made at employing professional staff with transparent honest ways of performance and also, due punishment should be given to fraudulent staff.
  2. Seminar/ training should be given to staff of accounting department to enable them specialized more on the field of accounting.
  3. The stakeholder, investors and other user should be meeting at interval so as to assist the management in the achievement of the organisation goals.
  4. Use of modern devices like computer should be introduced to the staff to enhance efficiency and effectiveness in decision making.
  5. Special panel or auditor should be introduced to ensure the accuracy of the accounting information so that the user should not be deceived.
  6. The accounting information generated should be readily available for decision making. The qualities of accounting information which include timeliness, clarity, relevance and accessibility of the information should be a guild in providing accounting information

Finally accounting information should be seen as an important tool for decision making process in an organization and more encouragement should be given to staff in the performance of their duties. This will enhance efficiency and effectiveness of the accounting information in the manufacturing firms.


Impact Of Accounting Information On Decision Making Processes In An Organization (A Case Study Of Dangote Nig. Ltd)


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