CHAPTER ONE
INTRODUCTION
Financial accounting covers those activities related to the preparation of certain reports which are known as financial statement. These statements reports the financial status of a firm at a particular time the firms activities and resulting profit or losses during the most recent period and the flow of resources occurring within the firm during the same period. This statement made by A. THOPSON MONTAOMERY gives us an idea on the meaning of financial accounting. However the question arises what are the efforts of these financial account reports in the management of business? The answer poses a problem which the paper will seek to solve. Not all business persons understand the impact of financial accounting information on the management of their business, some manages business intuitively. Other, like traffic defaulters who disobey road signs, disobey the warning of communicated by financial accounting information and end up in a “Business Accident”.
There are other sources of information which have impact on the management of Business and the combination of these sources give an information system in the complex nature. As FARM WOOD puts it, “it must not be thought that accounting of any form is the management control system. Instead it is part of it”. But accounting information is the only system through which both mangers and external users get a picture of the organization as a total entity.
Moreover, financial accounting information usually comes in the disguised form by “wearing” the cloak of technicalities. Such technicalities include calculation which need expert knowledge in its interpretation. But when some business because of low financial layout, cannot employ such experts hands, they tend to ignore financial accounting information system which has an effect on the management of any business concern. The problem is: Do all businessmen know this? This is the question that the researcher seeks to answer also.
1.1 STATEMENT OF THE PROBLEM.
Is very important for the functioning of any business. The finacial accounting system in most business organization do not potrary fully the principles of accounting systems. The flow of information, the cost of collecting any information and the internal control procedures have some loops holes. In reality, it would be impossible for the researcher to study all the information system in all or even one of the organization. The study therefore involves a study of some typical financial accounting reporting on the management of a business. The researcher will carry out an empirical study and appraisal of a business financial accounting and see whether there is room for improvement to be made. It will therefore involve a review of the financial accounting and its related procedures.
1.2 PURPOSE OF STUDY
The goal of every business is profit optimization. The management of most business exist primarily for this purpose. Whether the business ownership is separated from the management, the rules for profit optimization (or maximization as some books may choose to call it) are still the same. Profit optimization is used rather than maximization. In this paper because optimization has a social effect.
The mangement is able to do this as long as they are able to use their financial resources profitably they must know the effect which financial accounting information has on the management of the business. Financial accounting measures, by means of the reports they prepare the extent to which management has succeeded in their goals of profit optimization.
The report which serves as financial information of the accounting period has an impact on the future achievement of the business. This effect now becomes the goal of this research. The researcher seeks to know more about this effect (ie the financial accounting effect on the management of business) and also advices all business persons on the effect.
1.3 SIGNIFICANCE OF THE STUDY
The research will be significant or useful in
a. Examining the effect of financial accounting as information system.
b. Directing the business person to such effect
c. Warning, not only business persons but all person’s from neglect of financial accounting.
d. Encouraging all to obey head the warning of financial accounting information.
The following classes of people will find the work as useful references.
a. Managers of companies, corporations and any other firm business whether such business are owned by management or not.
b. Actual and potential leaders of money to business.
c. Customers
d. Owners and shareholders
e. Government
f. Other researchers.
1.4 STATEMENT OF HYPOTHESIS.
Hypothesis is defined by the Encyclopedia Americana as “ a proposition assumed to be true merely for purpose of argument or a proposition/theory put forward to account for under a body of facts” The hypothesis of this research work are: this will be used.
a. Financial accounting information has both positive and negative impact on the management of a business and as such there is a common need for accounting to supply to its owners information about the business.
HYPOTHESIS I
THE NULL HYPOTHESIS HO: Financial accounting information has negative impact on the management of a business.
THE ALTERNATIVE HYPOTHESIS H1: Financial accounting information has a positive impact on the management of a business.
HYPOTHESIS II
THE NULL HYPOTHESIS HO: Neglect of financial accounting information will not have any effect on the business.
THE ALTERNATIVE HYPOTHESIS H1:Neglect of financial accounting information will have effect on the business
1.5 SCOPE OF THE STUDY
No research work is purely original. Something’s have to be drawn from work of others. With acknowledgement and appreciation, the researcher will include textbooks in all forms or branches of accounting. Textbooks in management, finance and marketing, magazines and encyclopedia will be used extensively. Apart from extensive use of literature, other method of research will include.
a. Interview with business / staff
b. Questionnaires will be design and distributed to some businessmen. The questionnaires will be designed for officers in management of public and private companies, shareholders, pertness and owners in sole proprietorship.
c. A look into the document of some business and drawing heavily from such records is intended. Financial accounting information is often regarded as “figure” information and the method used in this research is the “transformation” of the data into information such be useful to both those who have knowledge of accounting and those who do not.
1.6 LIMITATION OF STUDY
A voluminous work would result, as it were in all research work done on all parts of account information generally (since this might lead to researching into all the different branches of accounting ie cost accounting financial accounting, Auditing etc. still voluminous would be a research into the financial accounting information since this would include what it is, how it can be prepared its usefulness effect, historical information interpretation, analysis and most of others.
Bearing this in mind this research work shall then be limited to THE EFFECT OF FINACIAL ACCOUNTING INFORMATION TO THE MANAGEMENT OF A BUSINESS.
The researcher is aware of the fact that other types of information play a part in management of a business but this research is based on the question. If those where types of information are readily available and only financial accounting information is lacky.
1.7 DEFINITION OF TERMS
The following are defined in this section
a. EFFECT: The oxford Adrancer learners Dictionary of English dexntes effect as “ Influence one effect has on another” it can therefore be good or bad.
b. FINANCIAL ACCOUNTING: Financial accounting “is concerned with the recording of transactions for a business enterprises or other economic units and the periodic preparation of various reports from such records”. Financial accounting then can be said to be a systematic gathering, summarizing and reporting of business transaction in monetary terms such that it provide information which permits informed judgment by the users of such information
c. INFORMATION OR REPORT: These can be thought of as being facts needed or received by a person or group of persons which is or will be useful to him/her. These information or reports may be spoken / written programmed or teleprinted.
d. MANAGEMENT: Management can be defined as the rational selection of courses of action to optimize the interrelationship of man, materials and money for the survival and growth of the organization. It can be regarded as the “process of getting things done through people” A person who manages is called a manager.
e. BUSINESS: Business is a process whereby human materials amd capital resources are combined to earn/satisfy human needs and wants. An entity which carries on such organized efforts is known as a business entity.
