CHAPTER ONE
1.0Introduction:
Accounting information and decision making, the two inseparable twins. For through understanding of the subject matter, the topic of this thesis has to be split into two parts for easy classification and understanding.
Accounting according ,to AKPA (America Institute of certificated Public Accountings) which was advanced in1961, is the act of recording, classifying and summarizing in a systematic manner and in terms of money transaction and events which are in parts at least of a financial character and interpreting the result thereof;
The purpose of accounting may be stated as the provision of potentially useful INFORMA00TION FOR DECISION MAKING capable of enhancing social welfare. INFORMATION is a fact told, heard, or discovered . These information discuss therein are financial in nature which assist managers to make better decision based on the environment one find himself eg G. CAPPA PLC. Physical, human and financial resources that are presently available to the firm. These decision are enable extent by the quality of the firms long and short term decisions such as capital investment which involves purchaser of new plant and machinery for construction activities.
Accountings frequently refers to a business organization as an accounting entity is any business organization, such as hardware store or food store, which exist as an economic unit.
For accounting purpose employees, customers, and other business. This separate existence of the b business organization is known as the BUSINESS ENTITIY CONCEPT. This, in the according records of the entity, the activities of each business should be kept carefully for other future business uses.
Types of business where accounting information are used are: -
PROPRIEORSHIP
A single proprietorship is a business owned by an individual and often managed by that came individual. Single proprietors include physicians, lawyers, electricians and other people who are in business for themselves. Many small service type business and retail establishments are single proprietorships. There are no legal formalities limited in organizing such business and usually only limited investment is required to begin operations.
In single proprietorship the owner is held solely responsible for all debts of the business. For accounting purposes, however, the business is a separate entity. Thus, the financial activities of the public are kept separate example, the owner’s personal house or car payment should not be entered in the financial records of the business.
PARTNERSHIP
A partnership is a business owned by two or more persons associated as partners. The business is often managed by those same persons. Many small retail establishments and professional practices such as dentists, physicians , attorneys and many CPN films are organized as partnerships.
Partnerships are created by a verbal or written agreement. A written agreement is preferred; it provides a permanent records of the terms of the partnership. included in the partnership agreement are terms such as the initial investment of each partner, the duties of each partners, the means of dividing profit or loss between the partners each year and the settlement to be made upon the death or withdrawal of a partner. Each partner may be held liable for the debt of the partnership and for the actions of each partner within the scope of business. However as with the single proprietorship , for accounting purpose the partnership is a separate business entity.
CORPORATIONS
A corporation is a business that may be owned by a few persons or by thousands of persons and is incorporated under the laws 1 of the 50 stated. Almost all-large businesses are corporation and many small businesses are incorporated.
The corporation is unique in that it is a legal business entity. The owners of the corporation are called shareholders. They buy share of stock, which are units of ownership in the corporation. If the corporation fails, the owners would loss only the amount they paid for their stock. The personal assets of the owners are protected from the creditors of the corporation.
FINANCIAL STATEMENTS OF BUSINESS ORGANISATION
Business entities may have many objectives and goals (for example, one of the objectives in owing a physical fitness center may be to get in shape oneself) . however, the two primary objective of every business are solvency and profitability. Solvency is ability to pay debt as they become due. Profitability is desire to generate income. Unless a business can produce satisfactory income and pay its debts as they become due, other objectives a business may have will never be realized simply because the business will not survive.
The financial statement that reflect a company’s solvency is the balance sheet; the financial statement reflects the company’s profitability is the income statement.
The income statement, sometimes called an earning statement, reports the profitability of a business organization for a stated period of time. In accounting, profitability is insured for a period of time, such as a month a year, by comparing the revenue generated with the expenses incurred to produce these revenues. Revenues are the inflows of assets(such as cash) resulting from the sales of products or the rendering of services to customers. Expenses are the cost incurs to produce revenue. Expenses are measured by the assets surrendered or consumed in servicing customers. If the revenues of a period exceed the expenses of the same period, net income results. Net income is often referred to as the earning the company. If expenses exceed revenues, the business has a net6 loss, and it has operated unprofitably.
BALANCE SHEET:
Balance sheet sometimes called the statement of financial position lists the company’s assts and liabilities and owner’s equity as of a specific moment in time. A balance sheet is like a still photography; it captures the financial position of a company at a particular point in time.
MANAGEMENT DECISION MAKING:
Management is not a homogeneous entity. Within a business there will be senior, middle and junior managers, each contributing to the overall objectives of the firm. The main distinction between the levels of management relates to their influence upon the various decision – making processes. It is possible to identify three levels of decision-making with an organization strategic, tactical and operational
STRATEGIC DECISIONS:
These are concerned with controlling the relationship between the business and its environment in order to device overall objectives for the whole firm. These overall objectives framed in general terms provides a structure within which other decision can be taken. Although the need to take or to amend a strategic decision can be perceived at any level with the organization such decision tend to be taken by the board of directors acting upon the device of senior manager’s.
These decisions, having resources implication are often referred to as “Policies” and cost associated with these decision are termed “ Policy cost”. Thus, a policy decision to lease premises rather than to buy, gives rise to Policy Cost in term of rent paid. Where a decision is taken to purchase the premises, the depreciation of the building would be the policy cost .
TACTICAL DECISION:
These are concerned with how the overall objectives are to be met, and they are a function of management control; they ensure that the necessary input are acquired, and that they are used ina way most likely to achieve the firm’s objectives. Broadly, this area of decision making is that of middle management.
In-so far as managerial policies need filling out and controlling this tends to be referred to as administration. The term management is reserved for the establishment of policies and the framing of strategies. In reality, executives carrying out their normal duties will alternate between administering and managing.
OPERATIONAL DECISION:
These have to do with specific tasks. Managements job here is to ensure that the task are carried out effectively and efficiently in accordance with the tactical decisions already taken.
Each of these levels of decision-making reqires information but each will require different information. Because strategic decision-making operates with long-term time horizon, it is accompanied by a high degree of uncertainty. These decisions tend therefore to be based upon informed judgment and experience. The information on relative levels and tends in real costs and prices, volumes, market share cash flow, and demands made generally upon the firms total resources.
On the other hand, operational decisions take place within a very short time horizon, and such decisions can often be made o the basis of simple calculations. Falling somewhere between the two, that is the level of tactical decisions endeavoring to ensure that the day-to-day operational decisions do in fact provide the firms stated objectives. The type of data collected, the way they are recorded and reported will therefore depend upon the purpose for which the data are required, and the level of management which the data are requires them.
According information services several major roles in organization. It enhances decision making, guides strategy development and evaluates existing strategies, and focuses efforts related to improving organisational performance and to evaluating the contribution and performance of organizational units and members.
One of the most important types of accounting information is cost information. Organisations use information about cost to make important product feature and product mix decisions.
Organisatons also use cost information to develop competitive strategies.
FINANCIAL CONTROL
Control refers to the tools an methods that organisations use to keep on track toward achieving their objective. The process of control usually involves setting a performance target, measuring performance, comparing performance against that target, computing the different between measured performance and the target, and taking action, if necessary, in response to the variance.
Although organizations traditionally practiced control in the large, that is overall organisation performance, using financial measures to supplement financial measures. For example, the performance of a manufacturing unit mighty be measured in terms of both cost per unit produced and a number of defects. In reflected an understanding that financial measures of performance are, by their nature.
1.short-run measures of results
2.Neither familiar nor intuitive ways for people to mange operations.
Non-financial measures, such as quality, not only provide an explanation of current sales levels but also potentially a predictor of future sales levels.
DECISION MAKING: Is an important tool in execution of both long and short plans. It is defined as making choice between future uncertain alternatives. This emphasis’s that decision making relates to the future and make choice between alternative in pursuit of an objective. Relevant information for decision making must be expressed in the form of financial or quantitative analysis in order that a rational choice can be made. Decision making is classified into programmed and non-programmed categories and it is my pleasure to state that the case study (G. Cappa Plc) uses programmed decision which are relatively structures with a clearly defined operational areas which are incorporated into a computer such programmed decision include replenishment of decision based on usage and recorded level in an inventory control system. The decision rule is not left out. It includes an expected value maximin rule, maxima rule and minimax regret critrion, but fro the purpose of this study, only the expected value shall be discussed. Expected value makes use of probability of estimated outcome to consider which of the activities should be selected. It is a simple way of bringing some of the effects of uncertainty into appraisal process. From the above statement, it can be viewed that the relationship between accounting information and decision making can be looked at in the following:-
I. RELEVANT COST AND REVENUES: Are those expected future costs and revenues very important to the decision makers. Relevance of cost and revenue lies in the fact that such cost and revenue are indispensable and unavoidable, if a particular decision is to be taken or avoidable ( if dropped) e.g, a heavy machine for carrying equipment was purchase by a G.Cappa Plc. At a cost of N18,000.000 five years ago and is depreciated at 20%. The present cost of the machine is N40,000.000, the machine could be sold now for N12,000.000 in decision making of the company, the cost of N18,000.000 and N40,000.000, are no longer required or needed, it is regarded as sunk-cost. Relevant cost therefore is the price as which it could be sold that is N12,000.000 and it is important in decision making unlike the N40,000.000, which is not relevant
TABLE OF CONTENTS
Title page
Approval page
Dedication
Acknowledgement
Abstract
CHAPTER ONE
1.0 introduction
1.1Historical background and business of the company
1.2Statement of problem
1.3The problems and its background
1.4Purpose of study
1.5Statement of hypothesis
1.6Significance of the study
1.7Scope and limitations
1.8Definition of terms
CHAPTER TWO
2.0 REVIEW OF RELATED LITERATURE AND STUDIES
2.1 WHAT ACCOUNTING INFORMATION IS ALL ABOUT
2.2 THE NEED FOR ACCOUNTING INFORMATION
2.3 SOURCES AND NATURE OF ACCOUNTING INFORMATION
2.4 IMPORTANCE AND FUNCTIONS OF ACCOUNTING INFORMATION
2.5 USES OF ACCOUNTING INFORMATION
2.6 RELEVANT INFORMATION AND DECISION MAKING
2.7 DECISION RULES VIZ PROCEDURES FOR COMPANIES INVESTMENT APPRAISAL ESPECIALLY INVESTMENT CRITERIA.
CHAPTER THREE
3.0 RESEARCH METHODOLOGY
3.1 SOURCES OF DATA USED
3.2 SURVEY INSTRUMENT
3.3 DATA ANALYSIS TECHNIQUE
CHAPTER FOUR
4.1 DATA PRESENTATION AND ANALYSIS
4.2 TESTING OF HYPOTHESIS
CHAPTER FIVE
5.0 FINDING, RECOMMENDATION AND CONCLUSION
5.1 SUMMARY OF FINDINGS
5.2 CONCLUSION/DISCUSSION OF FINDINGS
5.3 RECOMMENDATION
APPENDIX I…………………BIBLIOGRAPHY
APPENDIX II……………….. QUESTIONNAIRE