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THE IMPACT OF ACCOUNTING INFORMATION IN ANALYSING THE FINANCIAL POSITION OF A FIRM..

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

According to Harison (1995) Accounting information is a financial data about business transaction expressed in terms of money. Transaction refers to both internal and external transactions that constitute the inputs of the accounting information system. Accounting uses words and symbols to communicate financial information to manager, investors, creditors and other decision makers, accounting information is not limited to those engaged directly in business. In fact, most adults deal with their financial thereby giving accounting a significance in society.

Business managers need information provided by the accounting system to plan and control their business activities, in addition investors, creditors and government agencies need financial information to make investing, handing, regulatory and tax related decision, if accounting information is to be useful, it must be expressed in terms of a common denominator, so that the effect of transaction can be combined.

Every business entity should provide information about its activity because the stakeholders, such as shareholder, brand holders, barkers, lenders, suppliers, employees, management, trade contacts, government, financial analyst and advisor all need to monitor how well their interest are being served. They rely on the periodic financial statement of business enterprises to provide the basic information on the profitability of the business. The financial position of a firm is very important to know, if they are making expected turnover. It is also important in achieving attractive returns and sustainable growth on shareholders investments.

Virtually all profit. Seeking organization and most non- profits organization maintain extensive accounting records one reasons is that these records are often required by law. A more basic reason is that, even in a very small organization, a  manager is confronted with a multitude of complex variables. Not even the most brilliant manager can be sufficiently informed just by observing daily operations. Instead, he or she must depend on the accounting process to convert business transactions into useful statically data that can be abstracted and summarized in accounting reports.

In every sense, thin process is essential to the co-ordinate and rational management of most organizations-regardless of their size. Thus, a large portion of the information that a business manager requires is derived from accounting data. The ability to analyses and use the data helps managers accomplish you discover the types of business achieve that can be accounted for usefully, the method used to collect accounting data and the implications of the resulting information. Furthermore and often just as important  you will become aware of the limitation of accounting reports.

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