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THE USE OF FINANCIAL ACCOUNTING INFORMATION SYSTEM FOR MANAGEMENT DECISION MAKING

CHAPTER ONE

1.1         BACKGROUND OF THE STUDY

Within the later part of 1990’s Nigerian economy has been characterized my instability.  This might be caused by not making good use of accounting information system for their management decision making.  Accounting information is the provision of relevant economic information system to permit informed judgment and  decision by user of the information”

Many companies are now closed  down rendering many people jobless. This led a lot of instability in the society the surviving companies are on the verge   of collapse.

Financial accounting covers those activates related to the preparation of certain report which are know as financial statements. These statements report the financial states of the firm at a particular the financial states of the firm at a particular period or time. The essence of this information system is for management and other users to make decision. The accuracy of the   decision made depends on the design of the management information system (M.I .S) which calls for the management concerned to prepare the financial accounting information system for the guidance of the users.

Decision making can be described  as the art of choosing among possible managerial actions. The art of decision making is to enable management of a business to choose from among a range of already analyzed and evaluated alternatives.  Good management would certainly choose those alternatives which would give the company maximum profit and at the same time reduce their expected loses.  there  are two classes of decision makers namely the internal and external user.  They can be identified in respect of the use of financial accounting information. The management are the internal user while the share holders creditors customer employees and trade union and government agencies are the external user.  The management who are the major user of financial accounting information need the financial accounting information to plan. Since not all business persons understand the impact of financial accounting on the management of their respective business they manager their business without taking any note of the importance of financial accounting information system. Whether a business is a sole proprietorship  partnership or co-operation financial accounting as an information system has an effect on the management of any business.

The effect of financial accounting information on the management of any business can be over looked. The  extent of such effect may not be the same for every business. Many schools of thought believe that no business escapes such an effect.

This study on the effect of financial accounting information on management decision sought to know how financial accounting manner influence managerial decision

      1.2           STATEMENT OF THE PROBLEM

The main reason for introducing the use of accounting information system for management decision making is that;

  1. Managers of certain business especially small scale businesses do not have sound accounting system to enable them monitor  operating expenses and revenue
  2. Their ignorance of financial accounting information or lack of its might lead to the non effective and efficient accomplishment of the firms objectives.
  3. Accounting information is the   only system where by management and external user see picture of the organization as a total entity
  4. The managers realized this problem and appreciate the accountants analysis in respect of financial accounting information.

 There are basic  concepts involved in financial accounting such concepts are summarized under calculations and interpretation. In particle accounting conventions seem to be utilitarian. Their degree of acceptance stems form their usefulness the those making decision involving accounting data. Clearly as these factors change over time so must accounting conventions. Some organizations due to low financial layout or lack of adequate planning might not empty expert needed for the job and this might affect the usefulness of financial accounting information in their management decision making.  Accounting makers or managers to enable them monitor operating expenses  and revenues of the companies.

 1.3           OBJECTIVE OF THE STUDY

The purpose of this study were:

  1. To find out the concept of accounting information system.
  2. To determine the various decision area of operation in companies
  3. To identify the relationship between the use of accounting information and the decision made in the companies.
  4. To ascertain hindrances of accounting information to management decision making.
  5. To recommend steps that might enhance the use of information provided by accounting system.

 1.4           RESEARCH QUESTION

The following research question guided the  study

  1. To what extent do these  information guide and regulate management decision making in the companies?
  2. What   are the gains of using financial accounting information system in decision making in companies?
  3. What is the relationship between the use of accounting information and management decision in companies?
  4. What are the hindrance of accounting information system  to management decision making?
  5. What are the steps to be taken to ensure proper use of information provided by accounting system? 

 1.5            SIGNIFICANCE OF THE STUDY

The study would be useful to the following group of people. The manager those planning to establish companies government agencies and the society at large.

  1. Managers of companies: it would enable the management of companies to accept and abide by the rules provided by accounting information as a tool of evaluating their performance.
  2.  Establishment of companies: it would enable those planning to establish companies to avoid the pitfall of other companies
  3. The government: it would enable the   government agencies to establish necessary machinery to supervise public companies so as to avoid the closure of more companies.
  4. The society it would provide insight to the society on how business organization rely on financial accounting information system for decision making  

 1.6     SCOPE OF THE STUDY

The scope of this study lies on the  financial  accounting information system in management decision making in companies. The investigation was on available records of accounts documents and published works on financial accounting information obtained from interview conducted with the top management of companies.  

 1.7         LIMITATIONS OF THE STUDY

The limiting factors to this work were that the information and some of the documents used were based at Enugu State.

Furthermore

(a) Financial constraints emerged due to inadequate finance the researcher cloud not cover as much as possible companies       b. (b) Time constraints: Inadequately of time made the researcher not to gather enough facts that would enable her address the issue exhaustively

 1.8          RESEARCH HYPOTHESIS

Hypothesis as defined by encyclopedia Americana is “ a proposition assumed to be true merely for purposes of arguments or  a proposition or theory but forward to account for and order a body of fact”

Below are the hypothesis tested:

 Accounting information has  a positive impact on management decision in companies.

  1. There is a relationship between performance and effective use of financial accounting information system managers.

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