THE IMPORTANCE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING PROCESS (A STUDY OF AKWA IBOM WATER COMPANY LTD, UYO)

THE IMPORTANCE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING PROCESS (A STUDY OF AKWA IBOM WATER COMPANY LTD, UYO)

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ABSTRACT

Information is a life-wire of every business organization. However, it is of various diversities, but accounting information was selected for this study on the grounds that some business organizations do not base their decision on the available accounting information, and therefore lack a controlling power on their incomes and expenditures. It was on this ground that the topic of this study “The Importance of Accounting Information in Management Decision Making Process” was derived and Akwa Ibom Water Company Limited was selected as a study area because of its current need to cover a wider area in Akwa Ibom State. The objectives of the study were to find out the roles of record keeping in decision making. To find out government roles towards the organization’s accounting information. Random sampling technique was used in questionnaire administration. Findings revealed that Akwa Ibom Water Company keeps and maintain accounting information which is the bedrock to which decision are based. The result was analyzed using sample percentage. Conclusion was drawn based on findings of the study. The company had identified the advantages of accounting records to include: performing its reporting function to government, controlling business activities and decision making, recommendations were suggested to include: Generally Accepted Accounting Principles (GAAP). Also, adequate internal control measures of accounting information should be adopted too. Independent reviews by Auditors are also necessary. Seminars, workshops for business owners should be organized to improve their accounting styles for effective decision making.

CHAPTER ONE

INTRODUCTION

1.1      Background Statement

In every business organization be it a profit making or a non- profit making organization, information on the normal day to day activities of a business is of paramount importance. However, a business information comes from various diversities. It could be from:

(a) Internal to external (where the information from internal communicated to the outsiders).

(b)External to internal (where the general reactions of the outsiders are communicated to the internal “that is the business organization”

(c) Within the organization (where business information comes from the top level to the lower level of management, form the lower level to the top level of management and from one department to another department in the same organization.

The various diversities of business information help the business organization in different ways. Information from external to internal, for example from customer to the firm helps the firm to increase or decrease its products, how and when to render certain services to its customers. Information from internal to external helps potential customers to know the existence of such a business organization and also to allocate their income towards the product (goods and services) of such business organization, also in an organization like a limited Liability Company, information on financial position is made available to the public, thus can motivate potential investors to invest into a company if such financial statements create a positive impact on the potential customers this can also retain other investor in the organization. Government also uses the financial statement of an organization to allocate resources available into such organization and also rates such organization appropriately in terms of taxation.

                 According to Storey, R. K and Storey, S. (1998). “The principal role of financial statement is for providing information that is useful in making business and economic decision”. That information facilitates and efficient functioning of capital and other markets thereby promoting the efficient and equitable allocation of scare resources in the economy. Upon the many business information that are available, accounting information was selected for this research as all other business information such as production information, advertising/ sales information, legal information are combined together to bring a more realistic information that indicates the general inflow and outflow of resources in an organization.

                 Finally, it is worth mentioning here that accounting information unites workers as their regular contributions are made known to them and also management is able to improve upon making certain decisions that will match with the available accounting information in such organization

1.2    Statement of the Problem

Most business organizations in our community do not keep records of timely transactions of their business, this result in adverse effect on the organization. Many others do keep records of various transactions but do not base their decision on the available accounting information. However, these organization lack the knowledge of deciding whether to make or buy their products (in the case of manufacturing organization), when and where to buy their goods, whether to employ new workers or maintain old workers, and also whether to borrow money from banks or not.

                 The above problem will dwindle the activities of the organization and hence become the cause of mismanagement of funds, compulsory retirement of workers, inability to pay dividends and salaries, retrenchment of competent workers and some times, a total fold-up of all the activities of such organization. Based on the above problems, the researcher would want to examine the important of accounting information that would be found necessary to develop the decision making process in various organization

1.3    Objectives of the Study

                 The objectives of the study are as follows:

(a)                To find out the problems associated with non-keeping of records of business transaction in Akwa Ibom water Company Limited, Uyo.

(b)                To find out the roles of records keeping in decision making in Akwa Ibom Water company Limited, Uyo.

(c) To examine the method of record keeping in Akwa Ibom Water Company Limited, Uyo.

(d)                To recommend for future research on this study in Akwa Ibom Water Company Limited, Uyo

(e)                To examine the roles of government towards monitoring the mandatory keeping of accounting records in Akwa Ibom Water Company Limited, Uyo.

1.4   Research Questions

(i)    What role does record keeping of business transaction play in the organization?

(ii)   Does government require the company to submit its accounting report at the end of a certain period?

(iii)  What information does accounting report have for decision making in the organization?

(iv)   Could there be any penalty for non submission of accounting report to government at the end of the stated period?

(v)    Is there any roles guiding the preparation of accounting report in the organization?

1.5   Research Hypothesis

        In this study, the following hypotheses were formulated:

(i)          Ho: There is no significant relationship between the structure of accounting information system and cost of operations in Akwa Ibom Water company Limited, Uyo

Hi:   There is a significant relationship between the structure of accounting information and cost of operations in Akwa Ibom Water Company Limited, Uyo.

(ii)         Ho:   There is no significant relationship between the cost of maintaining accounting information system and profits declared by Akwa Ibom Water Company Limited, Uyo.

Hi:    There is a significant relationship between the cost of maintaining accounting information system and profits declared by Akwa Ibom Water Company Limited, Uyo.

1.6   Significance of the study

        The study is on the importance of accounting information in management decision making process has a great impact on organizational existence. The result of this study could benefit the organization involved, employees of such organization, investors, and potential investors of such organization are at the safe side on having understood this study.

        The government is not left out here as the result of this study will awake the concerned government parastatals to implement and make it mandatory for all business organization to keep records of their timely transactions not for the purpose of tax alone but also for the purpose knowing their current level in the business.

        Again too, the study will generate unto future researcher the urge of making further research on the subject matter, this will further change the study to meet with the changing environment.

1.7   Scope of the Study

The scope of the study is limited to the subject topic “The Importance of Accounting Information in Management Decision making process” and the research study area was limited to Akwa Ibom Water Company Limited, Uyo, because of the following factors.

1.8   Limitation of the study

(i)     The outright inability of some respondent to contributes to the limitation of this research work.

(ii)    Time factor: it has been very difficult for the researcher in sharing the limited time lectures, assignments, domestic works, church activities and writing this project

(iii)       The inadequacy of good text books in the library to assist the researcher in further investigation and consultation also count the limitation of this study.

(iv)       None officio-respondent, who could not vividly their accounting information since the organization has a lot to do with economic building of the country.

1.9   Definition of Terms and Acronyms

In order to facilitate the understanding of this study, it is important to define some of the terms used in the study

(a)                Business Information: facts or details about the activities of an organization. Moscove (1997).

(b)                Business Organization: firm or company engaging in activities of making, buying, selling or supplying goods and services for money and to make profit. Moscove (1997).

(c) Decision making: Choice or judgment that an organization makes or the process of choosing an option or opinions from any alternatives. Zimmerman (1990).

(d)                Financial position: The amount of money that a business organization has at a particular time. Needle (1981).

(e)                Financial statement: The written down in words and in figures and also the explanation of series of activities (income and expenditure) of a business organization and a particular date or period. Hermanson (1992).

(f)  Profit making organization:  organization that engages in bus





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