Accounting Information and Its Role in the Management of Organisation
OBJECTIVES OF THE STUDY
The purpose of the study of this research is to examine critically and of course objectively:
- The content of the term “Accounting information”
- The role of accounting information in the management of an organization.
- The problem and difficulties hindering accounting information from achieving desirable goals.
- To make some useful suggestions towards the achievement of the set objective.
Accounting plays a significant role within the concept of generating and communicating wealth of the companies. Financial statements still remain the most important source of externally possible information on companies.
Number of previous studies discovered that accounting information decreased their relevance over the period of time. (Francis and Schipper, 2001). At the same time a number of researchers claim that accounting information has not lost its relevance. (Oyerinde 2009).
There is need for financial reporting to be effective, accounting information to be relevant, complete and reliable. The primary purpose of the financial statements is to provide information about a company in order to make better decisions for users particularly the investors. (Germon and Meek 2001). It should also increase the knowledge of the users and give a decision maker the capacity to predict future actions.
Therefore, relevance accounting information can be described as an essential requirement for stock market growth. ( Oyerinde 2009)
According to the previous studies many researchers used relationship between Market price per share as the dependent variable and a set of independent variables.
WHAT IS ACCOUNTING?
Accounting is the collection and aggregation of information for decision makers – including managers, investors, regulators, lenders, and the public. (Ronen 2000).
Accounting systems affect behavior and management and have affects across departments, organizations, and even countries. Information contained within an accounting system has the power to influence actions. Accounting information systems are particularly strong behavioral drivers within an organization – where profits and the bottom line are daily concerns. In order for environmental concerns to be important criteria in everyday business management decisions, they need to be summarized within the accounting systems of the organization.
WHAT IS ACCOUNTING INFORMATION?
The primary objective of accounting is to provide information that is useful for decision-making purposes. The final product of accounting information is the decision that is enhanced by the use of that information, whether the decision is made by owners, management, creditors, governmental regulatory bodies, labor unions, or the many other groups that have an interest in the financial performance of a company.
Accounting information is defined as the information used to prepare financial statements which report the results and financial position of a business to the decision makers. (Dung 2010),
Accounting information is seen as a set of information which describes an account for a utility.
Accounting information can be classified into two categories: financial accounting or public information and managerial accounting or private information. Financial accounting includes information circulated to parties that are not part of the enterprise proper, such as stockholders, creditors, customers, suppliers, regulatory commissions, financial analysts, and trade associations. Such information relates to the financial position, liquidity (that is, ability to convert to cash), and profitability of an enterprise. (Hendrick 2000).
To be able to obtain accounting information that is used for decision making, it has a process it usually undergoes. This process is known as accounting process; this accounting process is shown in the diagram below:
RESEARCH DESIGN AND METHODOLOGY
This chapter described the Design of the study, Area of the study, population of the study, sample of the study, instrument for data collection, validation of the instrument, distribution and retrieval of the instrument and method of data analysis.
DESIGN OF THE STUDY
The research is designed to obtain data as validly, accurately, objectively and economically as possible. The survey research method was used where a set of questionnaire were constructed, accompanied with an introduction.
POPULATION OF THE STUDY
This population of this research work consists of 70 staff in premier Breweries Plc. They are made up of 10 senior staff, 20 junior staff 40 casual workers.
DATA PRESENTATION AND ANALYSIS
In this chapter, the data generated from the field would be presented and analyzed. Questionnaires were produced and taken to the field for completion. A total number of fifty (50) questionnaires were retuned from the field study. The table below shows the distribution and return of the questionnaires. A simple percentage is used for the calculation. The formula is as follows:
Number of Positive respondent X 100
Total Number of Respondents 1
Number of Negative Respondent X 100
Total Number of Respondents 1
SUMMARY, CONCLUSION AND RECOMMENDATION
SUMMARY OF FINDING
Based on the data presented and analyzed in chapter four, the researcher observed some of the following findings:
- It was observed that there is a significant relationship between accounting information and decision making in an organization
- It was also established that reliable accounting information will enhance users’ confidence in investment decision making process.
- The decision of the investors to invest in stock depends on the accuracy of the available accounting information.
- The available Accounting Information in premier Breweries Plc are so reliable in such a way that investors will have confidence in it when making investment decision.
- Without confidence in the available accounting information, investors in the Nigerian stock market will not invest in stocks.
Listed companies use financial statements as one of the major medium of communication with their stakeholders. Therefore, stock market regulators and accounting standards setters try to improve the quality of financial statements in order to increase the transparency level in financial reporting.
Accounting plays a significant role within the concept of generating and communicating wealth of the companies. Financial statements still remain the most important source of externally possible information on companies
Financial information is essential in making sound investment decisions and it will reduce the informational irregularity problem between the firm’s managers and the investors.
Recent experimental work suggested that Accounting Information (AI) have lost their relevance to investors significantly over the past few decades. Accounting Information contained in financial statements has to be accurate and transparent enough to provide an indication of a business performance and financial condition to decision makers including investors. According to the present empirical evidence, investors tend to focus on information other than the published accounting information such as non financial information, short term capital gains and tend to be speculative or irrational for unusual events.
This study has endeavored to establish the value and relevance of financial information of premier Breweries Plc. Therefore, investors react according to the aggregate of accounting information which are published in financial statements. Accounting information has the ability to explain the share prices of the banking sector. Based on this fact and findings, I therefore recommend that managements in banking sector have to be diligent in formulating accounting information to ensure accuracy in the information. This is basically because; without confidence in accounting information, investors will not take their investment decisions. Therefore, accounting information providers should enhance the quality of the financial reporting in order to increase the value and relevance of financial statements.
I also recommend that the government and her agents should create awareness on what accounting information is and it relevance in banking sector and in our society at large.
The banking sector should also make sure that the available accounting information is reliable so as to enhance investors’ confidence in it.
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