The Use of Accounting Information is Indispensable for Decision Making in Any Business Organization
Objective of the studies
The main objective of this research study is to examine the Use of Accounting Information as a management tool for decision-making in the context of Dangote Group Plc. However, the specific objectives of the study are to:
- Assess if accounting information has any effect on management decisions.
- Examine if there is any relationship between the perception of the employees and the accounting information of the firm.
- Evaluate whether accounting information affects the company’s performance positively or negatively.
REVIEW OF LITERATURE AND THEORETICAL FRAMEWORK
This chapter review relevant literature on the same thematic areas in order to identify areas of convergence and divergence views of renowned authors, researchers and writers. This chapter also covers conceptual review, empirical studies and theoretical framework of the topic under study.
Conceptual Clarifications on Accounting & Accounting Information System
Management is constantly confronted with the problem of alternative decision making especially knowing that resources are relatively scarce and limited. It is therefore pertinent that good accounting information be made available for proper and accurate decision making, maximization of profitability and optimal utilization of scarce resource. Accounting is defined by Webster’s ninth new collegiate dictionary, as “the system of recording and summarizing business and financial transactions and analyzing, verifying and reporting the results. Accounting in view of this study can be defined ordinarily as the means by which managers are informed of both the process and financial status of a business concern.
Warren, Reeve, and Fess (2005) defined accounting as information system that produces reports to the interesting parties about economic activities and company’s condition. The primary objective of accounting is to provide information that is useful for decision making purposes. It means that accounting is an information providing activity.
Hodggett (2012), conceptualize accounting information as the financial information about economic activities. All economic entities (e.g. businesses, government agencies, families, charitable entities) need such information because it is used for making economic decisions about those entities. An economic event of an entity is referred to as a transaction. Transactions are of two types: external and internal.
Mbanefo, (2007) conceptualize accounting as a measurement and communication system to provide economic and social information about an identifiable entity to permit users to make informed judgments and decisions leading to an optimum allocation of resources and the accomplishment of the organizations objectives.
Edwards (2012), defines Accounting has been defined as the process of identifying, measuring, recording and communicating economic information to permit informed judgments and economic decisions. The primary purpose of accounting is to help persons make economic decisions. In our society resources must be allocated among and within all kinds of entities. Accounting information provides the basis for making decisions about resource allocation. To be useful, data must be identified, measured, recorded, classified, summarized and communicated to potential users. These are the critical elements of accounting.
According to Fess and Niswonger (2008), accounting is the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. Accounting information is a food for management planning and decision making. It refers to report of relevant financial information regarding the economic activities of an organization or business venture.
Concept of Accounting Information
Warren, Reeve, and Fess (2005) defined accounting as information system that produces reports to the interesting parties about economic activities and company’s condition. The primary objective of accounting is to provide information that is useful for decision making purposes. It means that accounting is an information providing activity. Warren, et al. (2005) also stated that the objective of accounting is simply to produce information used by managers to run company’s operation. Accounting also gives information to the interesting parties about economic performance and company’s condition. According to Considine et al. (2010), accountings role is to gather data about a business’s activities, provide a means for the data’s storage and processing, and then convert those data into useful information. An accounting system consists of the personnel, procedures, technology, and records used by an organization (1) to develop accounting information and (2) to communicate this information to decision makers (Williams, Haka, Bettner, & Carcello, 2008). Accounting information is raw data concerning transactions that have been transformed into financial numbers that can be used by economic decision makers (Jones, Price, Werner, & Doran, 1996). Jones et al. (1996) also stated that accounting information is knowledge or news about a reckoning of financial matters. Accounting information is central to many different activities within and beyond an organization (Considine et al., 2010). Accounting information is essential to business operations. According to Williams et al. (2008), the types of accounting information that a company develops vary with such factors as the size of the organization, whether it is publicly owned, and the information needs of management. The types of accounting information required depend on the types of business decision made by management. It means that the role of accounting information is assist manager in making business decisions. Fiorelli, Zifaro (2008) in Handayani (2011), classified accounting information in to three different types according to the benefits for the users:
- Statutory Accounting Informationis the information shall be prepared in accordance with existing regulations.
- Budgetary Informationis the accounting information presented in the form of budget that is useful for internal planning, assessment, and decision making.
- Additional Accounting Information is other accounting information prepared by the company in order to increase the effectiveness of decision.
The research methodology, which present the techniques and procedures used for this study sets out by considering the design, population, sample size and sampling methods, research questions as well as the analytical tools employed in the analysis and interpretation of data obtained from this study.
The research design is mainly concerned with providing a plan study that permits accurate assessment of cause and effect relationship between independent and dependent variable. Research design is a plan, structure and strategy of investigation conceived so as to obtain answer to research questions and to control variances. Among other advantages, research design serves to provide answers on how the research questions and problems are determined, as well as control extraneous variable(s) and the errors that would be expected from randomness or measurements.Asika (2006) defined research design as the process of structuring investigation aimed at identifying variables and their relationship to one another. The design adopted for the study is survey design. This design is a process of examining the effect of the use of accounting information as a tool for management decision making, case study of Dangote Nigeria Plc. Without any attempt to manipulate or control them. In this study, Accounting Information is the independent variable, while Management decision making is the dependent variables. The survey research technique aimed at assessing the positive and negative effects the use of accounting information has on management decision making.
Re-statement of Research Question
- Does accounting information have any effect on management decisions?
- Is there any relationship between the perception of the employees and accounting information of the firm?
- Does accounting information affect the performance of the company positively or negatively?
Re-statement of research Hypothesis
Ho: Accounting information does not have any effect on management decision making
Ho: There is no significant relationship between the perception of employees and accounting information
Ho: Accounting information does not have any effect on the company’s performance.
Population of the Study
A population is made up of all conceivable elements, subjects or observation relating to a particular phenomenon of interest to the researcher. (Asika 2000).
Population is also an aggregation of all elements that share common characteristic. Synonyms of population are universe, census, set etc. (Asika 2000).
However, this study was carried out among the employees of Dangote Nigeria Plc, which serves as a representative of the Manufacturing Industry. Dangote Nigeria plc. Has over 20 branches with two thousand three hundred and fourteen (2314) employees (Dangote Nigeria Plc. Annual Report, 2012). The study is restricted to Dangote in Lagos and Ogun state Nigeria. The study covers branches of Dangote plc in ewekoro local government and Isolo in Ogun and Lagos state respectively.
Data Presentation, Analysis and Interpretation
This chapter focused on data presentation, analysis and interpretation of the findings relating to this research topic, based on the data generated from the field survey. Out of the 110 questionnaires distributed to respondents, 101 were returned and found useful for this analysis, as such, analysis was based on this 101 responses. The data from the questionnaire were coded and presented on excel spread sheet for further analysis. The data were then exported into a Statistical Package for Social Scientists (SPSS) software version 17.0.
Furthermore, the formulated hypotheses are subjected to inferential test using one –way analysis of variance (ANOVA). The chapter also discusses the findings of the analysis.
Summary, Conclusion and Recommendation
This chapter covers the summary of the research topic, conclusion based on the findings of the research and recommendations for further research.
Accounting information is aimed at information system that produces reports to the interesting parties about economic activities and company’s condition. The primary objective of accounting is to provide information that is useful for decision making purposes. It means that accounting is an information providing activity. The objective of accounting is simply to produce information used by managers to run company’s operation. Accounting also gives information to the interesting parties about economic performance and company’s condition. Accountings role is to gather data about a business’s activities, provide a means for the data’s storage and processing, and then convert those data into useful information. An accounting system consists of the personnel, procedures, technology, and records used by an organization (1) to develop accounting information and (2) to communicate this information to decision makers. Accounting information is raw data concerning transactions that have been transformed into financial numbers that can be used by economic decision makers. However, accounting information is knowledge or news about a reckoning of financial matters. Accounting information is central to many different activities within and beyond an organization. Accounting information is essential to business operations. The types of accounting information that a company develops vary with such factors as the size of the organization, whether it is publicly owned, and the information needs of management. The types of accounting information required depend on the types of business decision made by management. It means that the role of accounting information is assist manager in making business decisions. Accounting information is classified in to three different types according to the benefits for the users: 1. Statutory Accounting Information is the information shall be prepared in accordance with existing regulations. 2. Budgetary Information is the accounting information presented in the form of budget that is useful for internal planning, assessment, and decision making. 3. Additional Accounting Information is other accounting information prepared by the company in order to increase the effectiveness of decision making. The study tried to address the problem with the improper use of accounting information by managers and employees which serves as a major shackles hindering the effectiveness of management decision making.
The primary aim of this study is to asses and evaluates the effect of the use of accounting information on management decision making of Dangote Nigeria Plc. The method employed in the study is that of survey, and also both primary and secondary sources of data were used. Statistical presentation of data was employed using basically the statistical package for social scientist (SPSS). The test of hypothesis saw that the alternative hypothesis was accepted while rejecting null hypothesis.
- The study revealed that accounting information has significant effect on management decision making at a statistical significant level.
- The study also revealed that the manufacturing industry needs informed financial decisions that would enhance overall performance.
- The study revealed further that most workers in Dangote Nigeria are single within the age bracket of 21-30. This shows that the industry is highly populated with young brains with vibrant skills.
- The study revealed that accounting information obviate the necessity of remembering various transactions in Dangote Nigeria Plc.
- Furthermore, it was also revealed that there is a relationship between the perception of employees and accounting information as a result of the fact that employees and their representative are interested in the information which enables them to assess the ability of the enterprise to provide remuneration, retirement benefits etc.
- The study shows that accounting information depends on the perception of the quality of information by the user.
- Besides the result of the study disclosed that there is a significant relationship between time factor and accounting information as supported by the findings of Choe (1998) who posited that accounting information improve efficiency of operation.
- Findings of the study revealed that time factor is very important in the case of periodicity concept which defines a specific interval of time for which an entity’s reports are prepared.
- Consequent on the above, the findings of the study shows that the timing can be a fiscal year, natural year, quarterly or monthly.
- The study also revealed through the result of the last hypotheses that accounting information has effects on company’s performance via profitability, productivity and effectiveness.
Based on the statement of problem, the objective of the study and the result of the findings, the following recommendations are made.
- Companies should consult professional accountants when starting a business to learn about the various laws that affect them also to familiarize themselves with the variety of financial records that they will need to maintain.
- Clear-cut definition of long term corporate objective, within which the accounting information system will operate should be provided.
- Decision making should be administered in flexible and variable rigid adherences to accounting information, which are clearly appropriated for current conditions. This will cause the whole accounting system to gain credibility and effectiveness.
- The company should always keep records of past events in case of future purpose, this can be possible with the use of computer or by fully automating the company’s operation.
- A professional accountant should be employed by the company in order to keep valuable information and keep accurate records of the company’s account.
- Employees should be encouraged to develop themselves by becoming professionals in their chosen career, this will affect the company to grow positively.
- Effective communication and information flow is important for a good accounting system, and organizations should provide communication channels between top and lower levels of management regarding long and short term objectives and the practical problems of implementing those objectives.
- Efforts should be made to measure the effects of currently employed accounting concept on management decision making.
- Regular meeting with staff should be organized to disseminate information about the company and also elicit feedback that help to improve the company.
- Co-ordination from the top management will ensure proper interpretation and implementation of the accounting information in decision making. Therefore, every personnel should know where he/she belongs in the entire organization and also see himself as part of the corporate whole. These individuals must take part in decision making process at least at the functional level.
Suggestions for Further Research
Further research on the study abounds in this study area like;
- Relationship between accounting information management and Organization Effectiveness.
- Accounting Information for Business Performance Assessment in Small and Medium Enterprises (SMEs).
- The study failed to critically examine the relationship between accounting information and employee’s commitment.
- The study was unable to look at the framework for analyzing accounting information in the manufacturing industry, so further study can embark on this.
- Further research can also involve a replication of the present study in other industry to know whether the findings of this study can pass the test of generalizability.
The research study revealed that accounting information performs a crucial role on management decisions and organization performances, which has been shown to be major force in decision making. This is achieved by implementing the best fundamental concepts of accounting suitable for each company. The company used as case study made the researcher to understand that, for any company to be successful, it should endeavor to make use of accounting information because accounting itself is a language of business, and before venturing into any business, one must know the right method to achieve the stated goals and objectives. Also, studies have shown that successful utilization of accounting information requires a fit between three factors. First, a fit must be achieved with dominant view in the organization or perception of the situation. Second, the accounting system must fit when problems are normally solved, i.e. the technology of the organization.
Thirdly, the accounting information must fit with the culture of the organization i.e. the norms and value system that characterizes the organization. Finally, there is also a high level of awareness pertaining the role of accounting information and managerial efficiency. There is also a high level of awareness pertaining the role of accounting information system which is not limited to senior and management staffs alone but also cut across intermediate and junior staffs whose operations are also governed by the accounting information system. It is evident that the accounting information factors looms large among factors, which contribute to the overall corporate efficiency.
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