THE ROLE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING – Complete Project Material

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THE ROLE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING (A CASE STUDY OF MAX ALUMINIUM COMPANY LIMITED PLC IN OWERRI, IMO STATE)

ABSTRACT

Information as a life wire of any organization is very vital decision making manufacturing companies take decision concerning Production, pricing and marketing. Consequently, it is vital that relevant, timely, reliable, consistent and adequate information needed is available for managerial decision in order to run the organization effectively and satisfy interested parties.

This study is aimed at finding out the extent to which manufacturers use accounting information and whether there is any positive relationship between the effective use of accounting information and the quality of decision in manufacturing companies.

This study was carried out on one of the manufacturing companies called “max aluminum PLC, OWERRI, IMO STATE.”

Data collected through the use of personal interview and questionnaires were sourced primary from field work. The sample size of this study was 38 using the best of judgment method. However, 35 questionnaires were returned.

Data collected were compiled and analyzed in tables using simple percentage method, while chi – square was used for calculation and test of hypothesis. From the study, it was observed that manufacturing companies make use of accounting information in decision making which has positive relationship with the quality of decision of the firms. Finally, a proper keeping of accounting records should be encouraged from which accounting information will be drawn for decision making process.

TABLE OF CONTENT

Title page……………………………………………………………………………………….i
Approval page…………………………………………………………………………………ii
Certification……………………………………………………………………………………iii
Dedication……………………………………………………………………………………….iv
Acknowledgement……………………………………………………………………………v
Abstract…………………………………………………………………………………………vi-vii
Table of content…………………………………………………………………………….ix-xi

CHAPTER ONE
1.0 Introduction…………………………………………………………………………….1
1.1 Background of the study
1.2 Statement of the problems
1.3 Objective of the study
1.3 Objective of the study

1.4 Research questions
1.5 Research hypothesis
1.6 Significant of the/justification of the study
1.7 Scopes/Delimitation of the study
1.8 Limitation of the study
1.9 Definition of terms

CHAPTER TWO
2.0 Literature review
2.1 Historical background of research problem
2.2 Theoretical framework
2.3 Nature of accounting information
2.4 The nature of management decision making
2.41 Types of accounting information
2.4.2 Characteristics of accounting information
2.4.3 Sources of accounting information
2.4.4 Decision making and accounting information
2.4.5 Levels of information in Decision making
2.4.6 Effective decision making
2.4.7 Importance of accounting information in decision making
2.4.8 Application of accounting information in managerial decision making
2.4.9 Financial ratio analysis

CHAPTER THREE
3.0 Theoretical framework and methodology
3.1 Theoretical frameworks
3.2 Research design
3.3 method of data collection
3.4 Population and sample size
3.5 Validity and reliability on measuring instrument.
3.6 Methods of data analysis

CHAPTER FOUR
4.0 Data presentation and analysis
4.1 Introduction
4.2 Data presentation, classification and calculation.
4.3 Test of hypothesis

CHAPTER FIVE
5.0 Summary, conclusion and recommendation
5.1 Summary
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendices

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Organization is included as part of the whole economy. It is a network through which people (managers) in authority order all action and obtains information they need to meet responsibility. Organization is broadly divided into two (2) parts.

  • Non-profit oriented organization and
  • Profit oriented organization

Information is the life wire of organization, the success of any organization whether profit or non-profit oriented depends particularly on how the information needs of the different levels of management are met. Information according to Anthony and Reece (1975 P290) is a fact, datum, observation, perception or any other thing that adds to knowledge”. Also Cox and Enis (1972) designed information as “any data which the manager believes will be successful to him in making a particular decision” information can either be quantitative or non-quantitative and accounting information happens to be one of the quantitative information. It is distinguished from other types of information because it is usually expressed in monetary terms. However, non-monetary information is also included in accounting reports in order to enhance the understanding of the managers. This study is about the role of accounting information in managerial decision making. It seeks to enquire into how monetary and financial information arranged in a professional accounting manner is used in decision – making.

USERS OF ACCOUNTING INFORMATION

Accounting information has so many users; these users have different decisions to make and their information often differ.

The users of accounting information have been identified to include: B.N Okezie (2008).

  • Individuals financial institutions

Who may require accounting information determine the liquidity, profitability and viability of the enterprises.

  • Managers in an enterprise who may need accounting information to measure performance, plan and control operations.
  • Employees and customers of an enterprise who may need accounting information to assess the ability of the enterprise to produce goods or render services on a continous basis.
  • Government and regulatory bodies need accounting information in order to be able to impose and collect taxes, to regulate certain business activities and to plan, execute, and evaluate performance, project and policies.
  • Quasi – government establishments and agencies need accounting information in order to meet their statutory obligation (SAS P.4)

It can be seen from the above that accounting carters for a variety of interests and need, hence it must respond to the environment and accommodate the any of the environmental factors. These users constitute importantly to the stakeholders in any enterprise.

ACCOUNTING INFORMATION AND MANAGEMENT

  • Decision making is the prime job of managers.
  • It is convenient to classify management decision into two categories:
  • Planning decision
  • Control decision

These decisions could be routine or non-routine in nature

PLANNING DECISION

These decisions could be made at all levels of management. The objectives of finding a course of action which is feasible and also accomplished organizational objectives. A plan cannot be said to exist unless decision commitment of resources has been made since a major set of organization resource accounting information is useful in determining the feasibility of plan, cash budget, capital budget and project balance sheet are example of contributions which accounting can make to resources planning.

Planning involves an important concept of management, method of management by objective (MOB) which simple means those managers and their sub-ordinates will set objectives and aim at achieving these objectives.

CONTROL DECISIONS

Managers perform their control operations by adopting an information and control technique called management by exception this is as a result of the managers concentrating on aspects of operations that are not operative as planned. Management by exception is a means of setting standards to measure performance. According to Anyaogu C.M (2002 P18) the management accounting firm such as statistics on the state of economy, which are as useful in forecasting sales, study of population growth on a particular geographical area which is useful in deciding where to locate new stores, warehouse and statistics on the state of the industry or industries in which it operates.

For this study, emphasis is laid on the role played by accounting information during decision making at top management special attention is paid to manufacturing companies particularly at this time of structural adjustment and instability of public policy, where manufacturers will have to depend on local raw material sourcing.

Although accounting information does not provides automatic answers to the problem facing manager few, if any of the business problem can be solved solely be collected and analysis of number. This is because people making decision begin to bear on their decisions, experience, value and knowledge which often cannot be subject to quantitative analysis.

STATEMENT OF THE PROBLEMS

Statement of the problems is problem to be faced in the affairs of management decision making. Since accounting is a system of reporting management activities and it will help to facilitate control process in business activities so as to provide means of making efficient management decision.

In view of this, the study intends finding out the essence of accounting information.

  • Planning and controlling the affairs of the organization
  • Management decision making of the organization
  • Determining the financial status of the firm

STATEMENT OF THE PROBLEM

IT is hoped that from this study, one can appreciate the usefulness of keeping proper accounting records from which accounting information are draw which lead managers towards correct decision either in selection among course of action or evaluation of performance and general appraisals

OBJECTIVE OF THE STUDY

From the problems stipulate above, this work has the following objectives:

  1. To ascertain if there is any positive relationship between the effective use of accounting information and the quality of decision in manufacturing and the quality of decision in manufacturing companies.
  2. To determine factors that promotes effective use of accounting information.
  3. To determine a convenient means of transferring accounting information i.e. (means of communication).

RESEARCH QUESTIONS

In carrying out this study effectively, the objectives and some of the problem associated with the study gave rise to the subsequent research questions.

  1. It there any positive relationship between the effective use of accounting information and the quality of decision in manufacturing companies?
  2. Do factors promote the effective use of the accounting information?
  3. Is there any convenient means of communication accounting information?

The following null (H0) and alternative (H1) are formulated from the research questions.

1.5    HYPOTHESIS 1

H0:    There is no positive relationship between the effective use of accounting information and the quality of decision in manufacturing companies.

H1:    There is positive relationship between the effective of accounting information and the quality of decision in manufacturing companies.

1.6    HYPOTHESIS 2

H0:    Factors o not promote effective use of accounting information.

H1:    Factors promotes effective use of accounting information.

1.7    HYPOTHESIS 3

H0:    There is no convenient means of transferring communicating accounting information.

H1:    There is convenient means of transferring/communicating accounting information.

1.8    LIMITATION OF THE STUDY

  1. NON RESPONSE. The reluctant of managers to disclose information about their operations poses a serious constraint to this work.
  2. FINANCE. A study of the scope contemplated in this work require commitment of resources for outside reach of an average students, in fact curtails the scope of the study. The number of respondent and geographical spread has therefore been scaled down considerably of course, it may be agreed that universal applicability of the findings is consequently jeopardized. While this may be so, it is hoped that the work will prove to be of some value with its scope.

1.9    DEFINITION OF TERMS

OBJECTIVES: This is the end towards which activities of an enterprise are aimed, is the end point of management programmers.

DECISIONS: This is an alternative course or line of actions which are often irrevocable.

MANAGEMENT ACCOUNTING: This is a process by which systems are administered. It is also the application of accounting techniques to the provision of information designed to assist all levels of management in planning and controlling the activities of the firm.

CONTROL: This means checking, supervising or measuring actual performances with predetermined or planned results. This is done with the view of ensuring satisfactory performance and possible feedbacks, which will aid review of plan it leads to taking action to correct any noticed variance during production.

ACCOUNTING SERVICE FUNCTION: This is the services in which accounting systems provide through its techniques and methods of accounting information which aids management in planning, controlling and taking decision.

ACCOUNTING INFORMATION: This is a set of information which describes an account for a utility.

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