The Role of Accounting Information in Management Decision Making
CHAPTER ONE
Objective of the study
The primary objective of this study is to investigate the role of accounting information in management decision-making within contemporary organizational contexts. Specifically, the study aims to:
- Evaluate the influence of information technology on the quality, accessibility, and reliability of accounting information for managerial decision-making purposes.
- Investigate the incorporation of non-financial performance measures into accounting information systems and their impact on managerial decision-making processes.
- Evaluate the responsiveness of accounting information systems to changes in the business environment
CHAPTER TWO
REVIEWED OF RELATED LITERATURE
This chapter forms the bedrock of the study as it viewed past studies necessary to draw objective conclusions of the study. According to the American Institute of Certified Public Accountants(1970) which defined accounting as “the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least of a financial character and interpreting the result.
ACCOUNTING INFORMATION
However, in a broader view, American Institute of Certified Public Accountants
(1970) stated the function of accounting is to provide quantitative information, primarily financial in nature, about economic entities that is needed in making economic decision” (an economic entity is a unit such as a business that has an independent existence). Etuk-Udo (2003) stated that the “modern accountants are concern not only on record keeping but also with a whole range of activities involving planning and problem solving, control and attention, directing and evaluation, review and auditing”. The present day accounting information on the ultimate needs those who use accounting information, whether these users are inside the business itself.
Stanford (1978) stated “an information system that measures, processes and communicates financial information allows the users to make reasonable choice among alternative of scarce resources in the conduct of business and economic activities”.
A distinction is traditionally made between accounting information that is provided for those people within the business and that which is provided for those outside the business (internal and external users). James (1979) stated that “management accounting concerns accounting information used mainly by those within the business organization (internal or management). And that it gives answers to;
(i) How income is being created?
(ii) What are the available resources in the firm?
(iii) How much does the company owe to the outside?
James (1979) also stated “financial accounting information report is used by the outsider (external or shareholders) of the organization”. However, Robert (1979) said “whether management or financial accounting information, the both are very essential to the management in making decision to achieve business goals”. Furthermore, he said “accounting system creates information by recording business events as they occur and summarizing the data into accounting reports designed to meet the information needs of decision makers”.
The ultimate justification of accounting information therefore is its usefulness in certain objective. Robert (1979) stated these objectives and specified as follows;
(i) Report of financial information to proprietors, and other interested parties; such reports may include the preparation of annual reports and statements of source and application of funds.
(ii) Provision of information for planning and decision making to management, through analysis of data about past transactions and events and projection of future economic events.
(iii) Measurement of financial data by means of proper recording, analysing and interpreting in accordance with Generally Accepted Accounting Principle (GAAP).
(iv) Internal control, including the safe guarding of organization’s money and other properties, the regular collection and payment of money owing to and by it, and the prevention and detection of errors and frauds by employees of the organization.
BOOKKEEPING: AN ACCOUNTING PROCESS
Bookkeeping as a process of accounting is the means of recording transaction and keeping records. Mechanical and repetitive bookkeeping is only a small simple part of accounting. Accounting on the other hand, includes the design of an information system that meets users’ needs, as described earlier. The major goals of accounting are the analysis, interpretation and the use of information. Chris (1990) said “Accountants look for important relationships in the figure they produce and are interested in finding trends and studying the effects of different alternatives.” Accounting includes system design, budgeting, cost analysis and income tax preparation or planning.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain the role of accounting information in management decision making. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the role of accounting information in management decision making.
Summary
This study was on the role of accounting information in management decision making. Three objectives were raised which included: Evaluate the influence of information technology on the quality, accessibility, and reliability of accounting information for managerial decision-making purposes, investigate the incorporation of non-financial performance measures into accounting information systems and their impact on managerial decision-making processes and evaluate the responsiveness of accounting information systems to changes in the business environment. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from first bank in Uyo. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In conclusion, this study has shed light on the critical role of accounting information in management decision-making processes within contemporary organizational contexts. Through an examination of various factors such as information technology, integration of non-financial measures, adaptability to dynamic business environments, strategic alignment, and decision-making biases, several key insights have been gleaned:
Firstly, accounting information technology plays a pivotal role in enhancing the quality, accessibility, and reliability of financial data for managerial decision-making. Organizations need to leverage technological advancements effectively to ensure that accounting systems provide timely and relevant information to support strategic decision-making processes.
Secondly, the integration of non-financial measures into accounting information systems is essential for providing a comprehensive view of organizational performance. By incorporating qualitative and quantitative metrics beyond financial indicators, managers can make more informed decisions that align with organizational goals and objectives.
Thirdly, accounting information systems must be adaptable to dynamic business environments characterized by rapid change and uncertainty. Organizations need agile systems capable of providing real-time data and insights to support decision-making amidst evolving market conditions, regulatory requirements, and competitive landscapes.
Furthermore, strategic alignment between accounting information systems and organizational objectives is crucial for driving informed decision-making at all levels of the organization. Accounting systems must be designed and implemented in such a way that they reflect the strategic priorities of the organization and contribute to achieving desired outcomes.
Lastly, addressing decision-making biases and cognitive limitations is paramount for ensuring the effectiveness and rationality of managerial decisions facilitated by accounting information systems. Organizations should implement strategies to mitigate biases and promote evidence-based decision-making among managers.
Recommendations:
Based on the findings of this study, the following recommendations are proposed:
Organizations should prioritize investments in information technology infrastructure and systems to enhance the quality, accessibility, and reliability of accounting information for managerial decision-making purposes. This includes adopting advanced analytics tools, cloud-based solutions, and integrated software platforms to streamline data processing and analysis.
Organizations should expand the scope of accounting information systems to incorporate non-financial performance measures that provide a holistic view of organizational performance. This entails identifying relevant non-financial indicators and integrating them into reporting frameworks and decision-making processes.
Accounting information systems should be designed to adapt to dynamic business environments by leveraging agile methodologies and flexible architectures. Organizations should prioritize the development of systems capable of capturing real-time data and insights to support decision-making amidst changing market conditions.
Organizations should ensure that accounting information systems are strategically aligned with organizational objectives and priorities. This involves regularly reviewing and updating accounting systems to reflect changes in strategic direction and ensuring that they provide the necessary information to support decision-making at all levels of the organization.
Organizations should provide training and education to managers and accounting professionals to enhance their understanding of decision-making biases and cognitive limitations. This includes raising awareness of common biases, providing tools and techniques for mitigating bias, and promoting a culture of evidence-based decision-making within the organization.
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