ASSESSMENT OF THE EFFECTIVENESS OF ACCOUNTING INFORMATION AS A TOOL FOR MANAGEMENT DECISION (A CASE STUDY OF PZ CALABAR).
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EFFECTIVENESS OF ACCOUNTING INFORMATION ON MANAGEMENT DECISION MAKING IN MANUFACTURING COMPANIES IN NIGERIA

 

CHAPTER ONE

INTRODUCTION

1.1       Background of the Study

For any organization of any type, be it small, medium or large, service or manufacturing, to survive in this dynamic and global world, there is need for proper management of information. Therefore, information is the backbone of any business. However, there is need for information to be well process, and the means to process information is through an integrated set of component called an information system. Thus, information system is the combination of different component to perform a specific function and basically it can be sourced from both internal and external. According to Elvisa and Erkan (2015), the most important part of management information system is the one that is concern with data processing, known as Accounting Information System (AIS). AIS involved identifying, recording, analyzing, summarizing and communication of economic information to its end user for decision making.

Decision making has been described as a purposeful choosing, from a number of alternative causes of action. AIS provide managers with the necessary information they need. Management decision is one of the most important facets that pervade all organization and constitute its progress and/or failure in actualization of pre-determined goals and objectives (Clinton, Matuszewski & Tidrick, 2011). Interestingly, both financial and non-financial information are used by Management accounting and is generally intended for the use of internal users who use the information to make decisions that help achieve the goals and objectives of the organization. Financial information used by management accountants include sale growth, profits, return on capital employed and market shares, non-financial information include customer satisfaction level, production quality, performance of competing products and customer loyalty. Melissa Bushman (2007) opined that management accountants use both financial and non-financial information to aid business decision-making, in other words, business decision making is predicated on AIS. AIS is a set-up, or system that is primarily concerned with financial data gathering from internal and external sources, analyzing, processing, interpreting and communicating the result (information) for use within the organization so that management can make more effective and efficient plan, decisions and control operations.

Planning, decision making and control operations according to Priyia and Longnathan (2016), are challenges constantly confronted by management in running the affairs of the organization, especially knowing that resources are relatively scarce and limited. So, the need for good AIS must be made available for proper and accurate decision making. In making a sound decision, the management needs valuable and accurate information from its accountant. The accountant is at the services of the management by providing them with the necessary information they need for decision making. In recent times, it was observed that cases of mismanagement, fraud and irregularities prevail in the organization.

Green Wood and Hinings (2012) opined that there is evidence that reveal the influence of accounting information in decision making process. It emphasizes the importance of a holistic context and which, led to the integration of other institutional influence and multiple logics. The essence of using AIS is to enable managers make wise decision. AIS is also used to setup system of internal control to increase efficiency and prevent fraud in companies. AIS aid in profit making, budgeting and cost control. In a company, it is the duty of the management accountant to see that his company keeps good records and prepare proper financial regulations. Management accountants also need to keep up with the latest development in the use of computers and in computer system design. Accountants provide many special reports for management’s decision making. This function requires the gathering of both historical and projected data.

 

1.2       Statement of the Problem

Information is indispensable for decision making in any business organization. The problem however lies in the quality and validity of the information, that is, if it is timely, adequate, and clear. The major purpose of the use of accounting information is to minimize risk, failure and uncertainties and also stay ahead of competitors. Notwithstanding the immense benefit of use of accounting information, it is generally acknowledged that most unqualified accountants generate inaccurate information and so result in failure of organizations to achieve desired goal. These problems largely contribute to the failure of the use of accounting information in business with the result that inaccurate decisions are made to the detriment of the organization. It is only through accounting information that managers and external users get a picture of the organization as a total entity. Managers who fail to realize this do not appreciate an accountant’s analysis in respect of financial accounting information generated. This may lead to poor decision being taken and it may affect the profitability & performance of the organization. Some organization due to low financial layout causes the effect & importance on decision to be taken not to be noticed or gained by the organization.

Generally, the use of accounting information will become critical factor in changing competitive environment, for the manufacturer to effectively and efficiently make decision. The major problem discovered for management is the identification of fundamental concept of accounting information to be implemented by each company which can affect 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 helps us to recognize the reason for the negative effect, which can be as a result of adoption of wrong accounting information or uncertified accountant giving wrong information to the company which can lead to wrong decision to the progress of the company.

1.3       Objectives of the Study

The study sought to know the effectiveness of accounting information on management decision making in manufacturing companies in Nigeria. Specifically, the study sought to;

1.      ascertain the relationship between effective use of accounting information and management decision making in manufacturing companies.

2.      identify the frequency of using accounting information in decision making in manufacturing industries in Nigeria.

3.      identify the problems in generating accounting information in manufacturing companies in Nigeria.

1.4       Research Questions

1.      What is the relationship between effective use of accounting information and management decision making in manufacturing companies?

2.      What is the frequency of using accounting information in decision making in manufacturing industries in Nigeria?

3.      What are the problems in generating accounting information in manufacturing companies in Nigeria.

1.5       Research Hypotheses

Ho1: There is no relationship between effective use of accounting information and management decision making in manufacturing companies.

1.6       Significance of the Study

This study will be of immense benefit to other researchers who intend to know more on this study and can also be used by non-researchers to build more on their research work. This study contributes to knowledge and could serve as a guide for other study.

1.7       Scope/Limitations of the Study

This study is on effectiveness of accounting information on management decision making in manufacturing companies in Nigeria.

Limitations of study

1.               Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

2.               Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.8       Definition of Terms

Accounting: This is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information.

Information: This is a complete set of processed data that has a meaning

Accounting information: These are processed data used by an organization to make financial decision.

Financial Accounting: It is the process of collecting, classifying, recording, summarizing and communicating data in respect of event, which can be expressed in terms of money for the purpose of making decisions.

Management: This means a group of decision makers or managers in an organization who see to the smooth running of the affairs of the business.

 

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