ASSESSMENT OF EFFECTIVENESS OF ACCOUNTING INFORMATION AS A TOOL FOR MANAGEMENT DECISION

CHAPTER ONE

1.0 INTRODUCTION

An organization needs qualitative information to function or make decision; the available of such information make the organization to function in the most effective and efficient manner. This information is provided by the accounting system to the management, which uses it primarily to accomplish three (3) broad purposes, viz: 1. To provide financial statement to interested external users 2. To plan the operations of the organization in both the short and long run. 3. To control the result of its operations In financial accounting, the responsibilities of the accountant ranges from recording and analysis, summarizing and reporting the result of the activities of the organization to creditors, stock holders and prospective investors, government, labour, environmental organization and others. In the case of reports to external users, they are classified for general purpose; they are financial statement, the income statement, the retained earnings, the balance sheet and the statement of financial position. People who protest or enhance their investment in the organization as by other who have a special interest in it use this statement. In management accounting, accountants provide information for use by office within the organization (the managers) rather than for use by other outside the organisation, such information are mainly decision making concerning the internal function organization.

Management accounting also provides information to the decision makes for the following purpose: 1. Formulation of policies 2. Planning and controlling the activities of the enterprises 3. Safeguard the assets of the organization 4. Disclosure of employee’s area of specialization 5. Decision taken alternative cause by action. Management and financial accounting may be understood by considering the basic goals of financial accounting is to direct forms of operations to maximize income the period measure net income used by the management in making decision to avoid what may be considered as an unwise decision to external user or vice versa. However, the relevance accounting information effective decision making in this research work, the degree of the relationship shall be clearly spelt out and identified.

BACKGROUND OF THE STUDY

The choice of the topic “Accounting information as a tool for management decision making” has been motivated by the fact that whatever accounting on information is presented to the has been collected, classified and analysis will determine the extent to which it is to be relied upon by the management in order to formulate a favorable decision in the organization. The project therefore examines the relevance of accounting information to managerial decision making manufacturing companies with a view to highlighting the area of weakness and making necessary recommendations. It is infact in the light of the above that attempt be made to appraise the essence of accounting information in making decision concerning he use of limited resources, including the identification of the overall organization objectives.

STATEMENT OF PROBLEMS

Management who thinks that they operate successfully without the use of the information provided by the accountings and up being economic failure to their respective industries, and some times course embarrassment to the organization. Take for instance, the accountant of an organization provide his manager with the information that there is no fund for any programme execution in the company. Despite this information, the manager went ahead an instructed the accountant to draw a cheque payable to a contractor who supplied some materials to the organization for settlement. Due to this action of the manager, the following condition is bound to happen.

This cheque is going to bounce because there is no money in the company’s account If care is not taken, the contractor may sue the organization (company) There are many different types of decision for which managers need accounting information, listed below are four (4) examples of typical question that regularly confront managers, they include:- 1. What product line is to be produced? 2. What price should be set for a product line? 3. Should old equipments be replaced with new ones? 4. Should a product line be dropped? 5. Has an employee performed well enough to warrant a bonus? 6. Should short-term borrowing be arranged to finance current operation? For managers to make the best decision to resolve each of these questions the management accountant must provide quantitative information that is timely and relevant, it is with this information that managers can properly plan and control the organization operations. And these are some of the question and problems this research work intend to prepare solution to: In conclusion, managers cannot take effective decision if the information provided to them but their accountants are not properly adhered to. It is this kind of problem that form the basis of this research work in which the relevant of accounting information in management decision making will be examined.

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