THE EFFECT OF FINANCIAL ACCOUNTING REPORTING IN THE MANAGEMENT OF A BUSINESS. (A CASE STUDY OF EMENTTE LTD)

CHAPTER ONE

 

1.0              INTRODUCTION 

1.1              BACKGROUND OF THE STUDY

This project is one that studies the effect of finical accounting reporting  of the management of a business. Financial accounting covers those activities that relates to the preparation ofcertain reports which are known as financial statement

These statement report the financial status of a firm at a particular time.

The practice of accounting stated since organized life evolved. The early man lived in caves from where he developed into living in communities. Later arose the concept of  specialization. That is each person  went  about doing those   activities  of life for which he was most  gifted. This gave rise to individuals producing certain goods in quantities in excess of what they needed while there were other goods which they need but they did not produce them selves the result was exchange. the first system of exchange was by barter. Later money evolved and replaced barter.

During the stage of barter   recording were done but only the quantities of good exchanged   were recorded. For example in things fall apart,  used white marks drawn on the  walls as record of his indebtedness to others. However as soon as money  evolved all recording were done  in  montary terms.  Another perspective worthy of note about the history of accounting is the impact of the different stage of organized business on accounting. At the stage of specialized in using their skills in creaft and developed the quid system. Here the job was done by one man at most with the aid of members of his family. The guilds system grew and outsiders were employed to work for the owner.

The industrial revolution expanded thee output and gave rise to the factory system of working. As the size of these factories grew it became impossible for one person to set up a factory alone. This gave rise to partnership and of course the joint stock companies. The joint stock act of 1844 is a very important landmark in  the evolution of accounting. It marked the evolution of accounting. It marked the beginning of auditing.

The result of this act is what is known to day as limited liability or public limited liability companies.

The essential feature of the limited liability companies is that ownership is separate from management. Large numbers of owner (shareholder) across the globe invest in companies while a few directors are elected to mange these companies.

This partiarlar development gave impetus to the evolution of auditing as an aspect of accounting. Also the size of these companies and the stiff  competition for funds, markets, new ideas and products gave rise to more rigorous accounting techniques like cost and management accounting to aid management in decision making.

Taxation is another branch of accounting  required to  and management in decision  making. Tax has a lot of implication for management decision on one hand and is an important source of revenue on the other. 

Even in the public sector it has been observed that accounting is indispensable as a result government public sector accounting has now evolved to take care of this information need.

One can not do a comprehensive review of the history or evolution of accounting with has  that have been in use.  They are the change and discharge system, and the double entry system.

 In the charge and discharge system, the change is made up of the balance held at the beginning of a period to which is added any receipts from the owner discharge is the on flays made to or on behalf of the owner.

It has been cleaned that the double entry system evolved in the  14th century. 

However, it was in the book written by a monk, Luca Pacioli in 1494 titled summa de arithmetic geometric, proportion et proportion that the double entry system was first documented.

 

1.2              STATEMENT OF THE PROBLEM

An effective information system is  very important for the functioning of any business. The financial accounting system in most business do not portray fully the principles of accounting systems.

Financial accounting  information involves technicalities such as quantitative analysis adequate recording reporting etc. Some business organization may unknowingly employ incompetent and unskilled manpower and as such the financial accounting information  prepared may not show a true and fair  view of the financial strength profitability and future prospects of the organization.

Some organization have to realism that accounting information is the only medium through which both the management and external users get a clear picture of an organization. If they fail to realizes appreciate an accountants analysis inrespect of the accounting information  generated, this  often leads to poor management decision which will have negative effects on the performance of business organization.

 

1. 3      OBJECTIVE OF THE STUDY

The main objective of this study is to determine the effect of financial accounting reporting on the management of a business. Apart from this major aim the study will also find out the following:

  1. To ascertain whether there is a direct relationship between the performance of emenite and effective use of financial accounting information.
  2. To ascertain whether there is a direct relationship between financial  accounting information and the decision making in Emenite.
  3. To ascertain whether there is a direct relationship between financial  accounting information and profit planning in Emenite.

1.4       RESEARCH QUESTION HYPOTHESIS

(i)                 What are the relationship between the performance of emenite and effective use of financial accounting information

(ii)               What are the relationship between financial accounting information and decision making.

(iii)             What are the relationship between financial accounting information and profit planning.

NULL HYPOTHESIS

Ho, There are no relationship between performance of Emerite and effective use of financial accounting information.

Ho2 There  are no relationship between financial accounting information and decision making.

Ho3 There are no relationship between financial accounting information and profit planning.

 

1.5         SCOPE OF THE STUDY

The focus of this study will be on emenite with reference to the effect of financial reporting on its management

1.6        SIGNIFICANT OF THE STUDY

The research will be significant in

(a)                Examining the effect of financial accounting as an information system.

(b)               Directing the business person to such effect.

(c)                Warning not only business person but all person from the neglect of financial accounting information.

(d)               Encouraging all to obey heed the warning of financial accounting information.

The beneficiary of this research are as follows:

(a)                Maangers of companies and corporation

(b)               Practising accountants

(c)                Customers

(d)               Owners and shareholders

(e)                Government

(f)                Research students.

 

 

 

1.7      DEFINITION OF TERMS

Effect – The advanced learners dictionary defined effect as the degree or extent of the result or out come.

Financial accounting – It can be defined as the process of identify, classify and summarizing systematically in terms of money transitions and events which have financial character and then interpreting the result. The above definition is given by (AICA American Institute of chartered accountants.

Information (Report) – This can be  defined as fact needed or received by a person or group of persons which  will be useful to him. This information can be spoken or written.

Mangement – This can be defined as working with and through others, the process of thinking and doing, the process of using both human and material resources to achieve the set goal and objectives and that mangement may be seen as the act and science of achievering the objective of a business in the most efficient way.

Business – This is a  process of using both human and material  and capital resource are conbined to satisfy human needs and wants. Advanced learners dictionary defined it as buying and selling.

1.8     LIMITATION OF THE STUDY

            The constraints that will be encountered in carrying out this research are as follows

(a)                Time constraint – Time apportioned for this study is not enough for the  researcher to  seek for all the needed information.

(b)               Financial constraint – due to limitation by the scarcity of fund, all the data that to be used will be collected in Enugu state.

(c)                Lack of co-operation – The workers usually don’t co-operate with the researcher during interview.