ENEMS MICROSYSTEMS RESEARCH SPOT: Accounting project

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Saturday 7 January 2023

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

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.

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.

Research Questions

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

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

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:

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
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

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.

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.

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.

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.

ALL COST ARE MANAGEMENT ACCOUNTING DISCUSS

CHAPTER ONE: INTRODUCTION

Background to the study

Management accounting collects data from cost accounting and financial accounting. Thereafter, it analyzes and interprets the data to prepare reports and provide necessary information to the management.On the other hand, cost books are prepared in cost accounting system from data as received from financial accounting at the end of each accounting period.In management accounting or managerial accounting, managers use the provisions of accounting information in order to better inform themselves before they decide matters within their organizations, which aids their management and performance of control functions.

One simple definition of management accounting is the provision of financial and non-financial decision-making information to managers.According to the Institute of Management Accountants (IMA): “Management accounting is a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy”. Management accountants (also called managerial accountants) look at the events that happen in and around a business while considering the needs of the business. From this, data and estimates emerge. Cost accounting is the process of translating these estimates and data into knowledge that will ultimately be used to guide decision-making.

The Chartered Institute of Management Accountants (CIMA), the largest management accounting institute with over 100,000 members describes “Management accounting as analysing information to advise business strategy and drive sustainable business success”.

Cost accounting is an input into management accounting. Cost accounting focuses on understanding and optimizing costs in a complex business environment. Management accounting focuses on the bigger picture of using data to make planning and strategy decisions for the company. Cost accounting tracks and analyzes costs, including material, labor, overhead and time, for every activity performed in producing and delivering goods and services. This information can be used to improve efficiencies and reduce overall cost.

The objective of management accounting is to collecting data to prepare budgets for organizations. The purpose of management accounting system is to properly use the management accounts to achieve the organizational objective. The management control system is very broad term it not only controls the management accounting system but also control the personal and groups issues.

Management accounting control system highly influences the business environment. The role of management accounting control system providing the information to accountant and control managers for planning, controlling and measuring the performance in the organizations. The important changes in the environment are highly influences by management accounting control system. Without effective management accounting control system no organization can be flourishing.

Statement of the Problem

In recent years, the cost of products in Nigeria has been very expensive beyond the reach of common Nigerians. This cost challenges has made many products manufactured in the country unpatronized by the consumers, and as a result of that expires in the hands of the sellers. Management accountants are assigned with managing cost elements of products among other responsibilities. He aligns cost with efficiency; provide required information for cost minimization so that profit could be maximized. In making a sound decision the management needs some valuable and accurate information from the accountant. The accountant is at the services of the management by providing the management with the necessary information which they need for decision making. In recent times, it was observed that cases of mismanagement, fraud and irregularities prevail in the organization.

Research Questions

In attempt to achieve the objective of this study, the research seeks to find answer to the following research question:

Are all cost management accounting?
What is the difference between cost accounting and management accounting?

Objectives of the study

The aim of this research is ascertain whether all costs are management accounting. The specific objectives of this study are;

To determine whether all cost are management accounting.
To identify the difference between cost accounting and management accounting.

Statement of Hypotheses

The following are the hypothesis which this research tries to test:

H0: All cost are management accounting

H1: All cost are not management accounting

Significance of the study

The management accounting makes the necessary information available to the management. The significance of this study is to bring to the notice of the management the exemplary role of the management accounting and the technique used to provide information and also how these would affect the operations and the attainment of the organizational goal if these information provided are not recommended for use by the management. And with such knowledge and information put to use, management would be able to plan and control the organization such that the cost of operating the business will be at a minimum while profit will be maximized.

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.

Scope of the study

The scope of this research is on the examination of cost and management accounting with the sole aim of determining whether all cost accounting are management accounting.

Limitations of the study

In the process of carrying out this research work, the most nagging problem facing the study is how to obtain reference materials. The time to carry out the research is short and insufficient, since it is done alongside with some other courses to contend with so as to present a good result.

Definition of Terms

Accountant: An accountant is a practitioner of accountancy or accounting (referred as an accounting in the united states), which is the measurement, disclosure or provision of assurance about financial information that helps managers, investors, tax authorities and others make decisions about allocating resources.

Management Accountant: are those key officers that provide business data and analysis to managers within organizations to assist in decision making and control.

Profit maximization: A process that companies undergo to determine the best output and price levels in order to maximize its return. The company will usually adjust influential factors such as production costs, price of goods and output level as a way of reaching its profit goal.

Performance; General accomplishment of a given task measured against present standards of accuracy, completeness, cost and speed.

Management: This is defined as the process of dealing with or controlling things or people. It is the responsibility for control of a company or similar organization.

Information: this means data that is accurate and timely, specific and organized for a purpose, presented within a context that gives it meaning and relevance, and can lead to an increase in understanding and decrease in uncertainty. Information is valuable because it can affect a decision or an outcome. For e.g.,if a manager is told, his companys’ net profit decreased in the past month, he may use this information as a reason to cut financial spending for the next month.

Decision making: The thought process of selecting a logical choice from the available option. It is done to achieve a specific objective or solve a specific problem

BENEFIT OF GOOD ACCOUNTING SYSTEM IN ORGANIZATION

CHAPTER ONE: INTRODUCTION

Backgroundto the study

One of the most effective benefits ofaccounting system is decision making. Decision making has being described as apurposeful choosing from a number of alternative causes of action. Theaccounting information or system provides managers with the necessaryinformation they need. In this case, it is the accountants that provide theinformation with which the management uses for its decision making. Managementscan only come up with a good decision if they are able to get correctaccounting information from the accountant. In a situation where the accountantdoes not provide correct information: this is bond to affect the decisionmaking of the management adversely.

Thequestion now is, how business executive know the company is embarking on afavorable decision or unfavorable one. The answer to this question is based onthe management and the accounting system. According to Ray (1996), most top level business executiveshave background in accounting and finance than in any other field. The essenceof using accounting information is to enable managers make wise decision. It isalso used (accounting information) to set up system of internal control toincrease efficiency and prevent fraud in companies.

Accounting system aids in profit making, budgeting and costcontrol. In an organization, it is the duty of the management accountant to seethat the organization keeps good records and prepare proper financialregulations. Management accountants also need to keep up with the latestdevelopment in the use of computers and in the computer system design. Accountantsprovide many special reports for management, decision making. This functionrequires the gathering of both historical and projected data. (Carr etal 1994;woutersan and Verdaasdonk 2002).

Green wood and Hinings (1996) there is evidence which revealthe influence of accounting information in decision making process. itemphasize the important of a holistic context and which led to the integrationof other institutional influence and multiple logics. It is in this contextthat the research wishes to evaluate the effectiveness and uses of accountinginformation for decision making in public sector. In summary, accountinginformation is primarily concerned with data gathering from internal andexternal sources analyzing, processing, interpreting and communicating theresult (information) for use within the organization so that management canmake more effective plan, decisions and control operations.

Statementof the Problem

Thecentral concern of management is decision. In making a sound decision themanagement needs some valuable and accurate information from the accountant.The accountantis at the services of the management by providing the management with thenecessary information which they need for decision making. In recent times, itwas observed that cases of mismanagement, fraud and irregularities prevail inthe organization. Several problems accounts for the need for accurateaccounting information among such problems are malfunctioning and wrong decision making by managersin the management of risks arising from the portfolios, high occurrence offactors that may result to high incidence of losses instead of expected profitswhere proper accounting information on portfolio management is not on hand, inabilityof managers to strike a balance between risk and investment, the negativeeffects which is seen on the low profits derived from the portfolios. It isagainst this background that this study tries to examine the impact oaccounting information in Nigeria public sector.

ResearchQuestions

The purposeof the study is to highlight the benefit of accounting system in anorganization. This therefore propels the following research question for thisstudy:

Howdoes accounting system help in fraud control, mismanagement and irregularities?
Howuseful and effective is accounting systems to decision making in organizations?
Whatare the benefits of accounting system in an organization?

Objectivesof the study

Thisresearch is aimed at examining the benefit of accounting system in organization.

Thespecific objectives of this study are;

To identify how accounting system help infraud controls, mismanagement and irregularities.
To determine how useful and effective accounting system todecision making in an organization.
To examine the benefits of accounting system in anorganization.

Statementof Hypotheses

The following are the hypothesis which this researchtries to test:

Ho: Accounting system does notcontrol fraud, mismanagement and irregularities.

H1: Accounting system controls fraud,mismanagement and irregularities.

Ho: Accounting system is noteffective in decision making in public sector organizations.

H1: Accounting system is effective indecision making in public sector organizations.

Significanceof the study

Accountinginformation is very important in the life of any business. It is based on thisinformation that the management will be able to make wise decisions. Theaccountants present the accounting information in such a way as to assistmanagement in policy and decision making in the day to day operations of the organization.

Based onthe information produced, the management will have the benefits on using it toplan and control their current and future operations. Based on it also theywill come up with their management decision and information of long term plans.The information also will help the management report historical information tooutsiders

This work will also be of much help to the government in findingout measures to apply in order to curb or reduce the high incidence of lossesand risks in an organization in other to increase the national income andoutput of the economy.

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

Scopeof the study

This research work will specifically focus attention on the benefitof accounting system in an organization.

Limitationsof the study

Timefactor: This wasone of the major problems I encountered in the course of the study since thedata collected was partly by personal interviews and persons to be interviewedhad limited time to attend to me. Also the researcher has to allocate part ofher time to class room work one and other activities.

Finance: Another factor thatlimited the scope of the study was the financial cost which consisted mostly oftravelling expenses, cost of materials to be used for the study, cost ofinputting the information collected into the computer, cost of diskette, costof printing the hard copies and binding of the report. This consisted tolimitation of my study.

Definitionof Terms

Decisionmaking: This isa process of choosing specific cause of action from among many possiblealternatives. Determine ways and means for accomplishing the line of actiondecided upon is also a part of the decision making process.

Accounting: This means the act ofrecording, 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 andinterpreting the result thereof.

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

Accounting information: Those processed information relatingto accounting.

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

Planning: The use ofinformation supplied by accountants in making decision by which managementformulate objectives for future business of the firm

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

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

Organization: In organization the managers decide how best to puttogether the organizations human and other resources in other to carry outestablishment.

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

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

(A CASE STUDY OF DANGOTE CEMENT COMPANY, OBAJANA)

ABSTRACT

CHAPTER ONE: INTRODUCTION

Background to the study

Statement of the problem

Research Questions

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

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

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:

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
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

Significance of the study

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.

Scope of the study

Limitations of the study

Definition of Terms