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

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

(A CASE STUDY OF DANGOTE CEMENT COMPANY, OBAJANA)

ABSTRACT

This research work, “Assessment of the Effectiveness of Accounting Information as a Tool for Management Decision (A case study of Dangote Cement Company, Obajana) with the specific objectives to identify the frequency of using accounting information in decision making in Dangote Cement Company, Obajana; to assess the effectiveness of accounting information in long-term strategic decisions in Dangote Cement Company, to identify the problems in generating accounting information in manufacturing organization and to recommend suggestions to overcome the identified problems. The methods of data collection were primary and secondary data method. The data collected were analyzed by use of simple percentages while chi-square was used to test the hypothesis formulated for validity. Findings show that accounting information is an indispensible tool in the management of  organization and that accounting information has improved effectively the basic roles of cost minimization, proper allocation of scarce resources and improvement of production, the quality of accounting information is relevant to an organization performance, finally the research shows that accounting information is an effective tool for management decision making.  Based on the findings, the researcher concludes that the accountant should put more efforts especially when computing the financial statement since accounts fraud result from ignorant of proper accounting procedures. Since the financial statement are sources of document of accounting information, efforts should be made in generating more relevant, timely, effective and accurate accounting information necessary for management decision making to enhance organization performance and profitability.

CHAPTER ONE: INTRODUCTION

1. Background to the study

Accounting information is a part and parcel of today’s life which is necessary to understand the accurate financial situation of the organization and used as the basis of making any decisions. Since strategic decisions have long-term effect on the business and therefore it is important to analyze accounting information for making strategic decisions. Accounting information helps managers understanding their tasks more clearly and reducing uncertainty before making their decisions (Chong, 1996). Accounting is sometimes referred to as a means to an end, with the ending being the decision that is helped by the availability of accounting information (Arneld and Hope, 1990). Accounting systems can aid in decision making providing information relevant to the decision and to the decision maker (Gray, 1996).

Effective and efficient accounting information plays a central role in management decision making (Tunji, 2012). Accounting information is one type of information recognized as a ‘learning machine’ that can help to evaluate how objectives might be achieved by quantifying the financial impact of each alternative available to the decision (Burchell et al., 1980).

Accounting and financial information are among the most important information widely used in the managerial decisions (Royaee, 2012). Within contemporary economic conditions, a successful manager needs a lot of reliable accounting information in order to be able to make quality business decisions (Miko, 1998). Economical information especially financial and accounting ones are the information which always managers use in short term and strategic decisions and they may have most application among different variables effective in decision-making and in all types of decisions (Royaee, 2012).

Strategic decisions, when the decision maker aims for long periods of time, allocates all or part of the company’s core assets to achieve that goal; such decisions are usually adopted at top management (Eugenia1 and Tiberiu, 2013). Strategic decisions are among the most distinctive decisions in an organization and these are used for determining the goals and direction for long-term company development. Basically top management is involved in these sorts of decisions.

They decide on company policy, long-term and annual business plans and the organizational structure, i.e. anything that is linked to the future of the company. A wrong strategic decision have far-reaching, negative effects on the company, which in turn places a lot of responsibility on the shoulders of the strategic decision maker (Sikavica, et al.1994).

Accounting Information will be useful when information provided by them is used effectively in decision making process by users (Christiansen 1994). Otley (1980) argues that accounting information are important parts of fabric of organisational life & need to be evaluated in their wider managerial, organisational & environmental information not only depends on the purpose of such system but also depends on contingency factors of each organisation.

1. Statement of the problem

Information is indispensable for decision making in any business organization. The problem however lies in the quality and validity of the information, that is, if it is timely, adequate, and clear. The major purpose of the use of accounting information is to minimize risk, failure and uncertainties and also stay ahead of competitors. Notwithstanding the immense benefit of use of accounting information, it is generally acknowledged that most unqualified accountants generate inaccurate information and so result in failure of organizations to achieve desired goal. These problems largely contribute to the failure of the use of accounting information in business with the result that inaccurate decisions are made to the detriment of the organization. It is only through accounting information that managers and external users get a picture of the organization as a total entity. Managers who fail to realise this do not appreciate an accountant’s analysis in respect of financial accounting information generated. This may lead to poor decision being taken and it may affect the profitability & performance of the organisation. Some organisation due to low financial layout causes the effect & importance on decision to be taken not to be noticed or gained by the organisation. The researchers in this study will seek to assess the effectiveness of accounting information as a tool for management decision.

1. Research Questions

The following research questions will guide the researcher towards achieving the objectives of the study:

1. What is the frequency of using accounting information in decision making in Dangote Cement Company, Obajana?
2. How effective is accounting information in long-term strategic decisions in Dangote Cement Company?
3. What are the problems associated in generating accounting information in manufacturing organization?
4. What are the possible solutions to overcome the identified problems?

1. Objectives of the study

The main objective of the study is assess the effectiveness of accounting information as a tool for management decision (A Case Study Of Dangote Cement Company, Obajana)

The specific objectives of the study are:

1. To identify the frequency of using accounting information in decision making in Dangote Cement Company, Obajana.
2. To assess the effectiveness of accounting information in long-term strategic decisions in Dangote Cement Company
3. To identify the problems in generating accounting information in manufacturing organization
4. To recommend suggestions to overcome the identified problems.
   1. Statement of Hypotheses

The following hypothesis serves as a guide to study:

H0: Accounting Information is not an effective tool for management decision making

H1: Accounting Information is not an effective tool for management decision making

1. Significance of the study

Accounting information is very important in the life of any business. It is based on this information that the management will be able to make wise decisions. The accountants present the accounting information in such a way as to assist management in policy and decision making in the day to day operations of the company. The study is very significant because it:

Highlighting the importance of accounting information systems in the Nigeria manufacturing organization and their role in developing administrative efficiency, thus improving organizational performance and profitability.

The result of this study will benefit users of accounting information (internal and external users) and improve their abilities in decision making process, as well as any other groups interested in these organization through using efficient accounting information systems, and provide recommendations that increasing the contribution level for different users to secure achieved precious information to take suitable decisions, through the use of information Accounting systems.

This work will also be of much help to the government in finding out measures to apply in order to curb or reduce the high incidence of losses and risks in the government own agencies and parastals in other to increase the national income and output of the economy.

Finally, this work will be of immense help to students, researchers and scholars as it will open a new area of study for further research and also form a basis for view of related literature.

1. Scope of the study

This research work will specifically focus attention on the assessment of the effectiveness of accounting information as a tool for management decision. The study will be limited to Dangote Cement Company Obajana.

1. Limitations of the study

Research of this nature cannot be complete without a experiencing limitations and problems, in the course of this study the researcher experience the following limitations. However, concerted effort is made reduce its effect on the outcome of the study:

Time factor: This was one of the major problems I encountered in the course of the study since the data collected was partly by personal interviews and persons to be interviewed had limited time to attend to me. Also the researcher has to allocate part of her time to class room work one and other activities.

Finance: Another factor that limited the scope of the study was the financial cost which consisted mostly of travelling expenses, cost of materials to be used for the study, cost of inputting the information collected into the computer, cost of diskette, cost of printing the hard copies and binding of the report.

Uncooperative attitude of the Respondents: The respondents were reluctant and fill insecure in the providing necessary information with respect to the research, however the research make necessary arrangement to convince them that the study is solely for academic purpose and that their contribution will be held confidential. 

1. Definition of Terms

Accounting: This means the act of recording, classifying and summarizing in a significant manner and in terms of money, transaction and events which are in part at least of a financial character and interpreting the result thereof.

Information: Data that has been processed to produce meaning relating to a field.

Accounting information: Those processed information relating to accounting.

Management: This is a group in a business who have overall responsibility for achieving the company’s goals

Decision making: This is a process of choosing specific cause of action from among many possible alternatives. Determine ways and means for accomplishing the line of action decided upon is also a part of the decision making process.

Profit centre: This is a segment of a business that is responsible for both its revenue end expenses, providing information for such an entity.

Planning: The use of information supplied by accountants in making decision by which management formulate objectives for future business of the firm

Control and Coordination: A process of ensuring that the cause of actions is maintained and that the desire aims are achieved. This is done through the use of budgets and actual data.

Cost Decision: This is the application of and cost of principles, methods and techniques in the ascertainment of cost and analysis of savings and or excess as compared with the previous experiences or with standard.

Organization: In organization the managers decide how best to put together the organizations human and other resources in other to carry out establishment.

Cost Accounting: This refers to the determination and control of cost.

General Accounting: This is the overall records keeping preparation of financial statements and reports and control at all business activities.