THE EFFECT OF FINANCIAL ACCOUNTING REPORTING ON THE MANAGEMENT OF BUSINESS

By

ISAH MOHAMMED

Presented To

Department of Accountancy

TABLE OF CONTENT

COVER PAGE I

TITLE PAGE II

APPROVAL PAGE III

ACKNOWLEDGEMENT IV

ABSTRACT V

TABLE OF CONTENT VI

CHAPTER ONE

1.0 Introduction 1

1.1 Background of the study 1

1.2 Statement of problem 5

1.3 Objectives of the study 6

1.4 Significance of the study 7

1.5 Limitation of the study 8

CHAPTER TWO

2.0 Literature review 9

2.1 Accounting as a language of business 9

2.2 The group that are in need of accounting

Reports 11

2.3 Characteristics of good accounting reports. 15

2.4 Information management 17

2.5 Basic accounting concepts 18

2.6 The financial accounting branch 21

2.7 Other branches of accounting. 22

CHAPTER THREE

3.1 Summary of finding 26

3.2 Conclusion 26

3.3 Recommendation 27

BIBLIOGRAPHY 28

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

"Financial accounting covers those activities related to the preparation of certain reports which are known as financial statements. These statements report the financial status of a firm at a particular time, the firms activities and resulting profits possess during the most recent period, and the flow of resources occurring within the same period".

According to section 331, of company and allied matters Decree 1990, (CAMD), every company must keep some certain records that will disclose:

a. The financial position with reasonable accuracy of the company.

b. It will be in a way to enable the directors ensure that the standards established are complied with.

c. It must be kept in a way that all money received and spent by the company are clearly recorded.

"Financial accounting can be defined as the process of (1) Recording (ii) Classifying (iii) Reporting and interpretation of the financial data of an organization".

These are the words of P.H. WALGWNBACH, E.I. HANSON, N.E. DITTPITCH: In trying to define financial accounting.

Going by this definition, financial accounting is faced with three major roles recording, classifying and reporting financial data of an organization or business. In recording, financial accounting report is engaged with the role of taking note of all the financial activities that takes place in the business. Classifying involves the grouping of these activities in uniformity while reporting is concerned with the preparation of reports known as financial statements.

These statements reports the financial status of a business at a particular time, the firms activities and the resulting profit or loss and sources and application of fund of the firm at the most recent period.

However, the question arises: What are the effects of these financial accounting reports on management of business? The answer: these posses a problem which the paper seeks to solve. Not all business person understand the impact of financial accounting information on the management of their business. Some manage business instinctively, others like traffic defaulter who disobey road signs display the warnings communicated by financial accounting information and end up in a "Business accident".

There are to the sources gives on information system in this complex nature. AS FRANK WOOD puts it: "It must not be though that accounting of any form is the management control system. Instead it is part of it".

But accounting information is the only system through which both manager are external users get picture of the organization as a total entity. Moreover, financial accounting information usually comes in a distinguished form by "Wearing" the cloak of technicalities. Such technicalities include calculations which need experts knowledge in its interpretation. But when some business, because of low financial accounting information system which has an effect on the management of any business concern.

The problem is, do all business know this? This is the question that the researchers seek to answer.

1.2 STATEMENT OF PROBLEM

As mentioned, an effective information system is very important for the functioning of any business. The financial account system is most business organization does not portray fully the principles of accounting systems. The flow of information, the cost of collecting any information and the internal control procedures have some loop-holes.

In reality, it would be impossible for the researchers to study all the formation system in all or ever any of the organization. The researchers will carry out an empirical study and appraisal of business financial account and see whether there is room for improvements to be made. It will therefore involve a review of the financial accounting and its related problems.

1.3 OBJECTIVES OF THE STUDY

The aim of carrying out this research work:

i. To know the usefulness (If any) of financial accounting reports to the management of any business.

ii. To know the ways in which management of business uses financial accounting information.

iii. To know the fate of any business firm that its management ignores the information contained in financial accounting reports while taking decisions covering the business.

iv. To recommend and advice the management on business organizations on the goodness of the use of financial reports in the controlling of their business operations.

1.4 SIGNIFICANCE OF THE STUDY

The research will be significant or useful in:

a. Examining the effect of financial accounting as an information system.

b. Directing the business person to such effect.

c. Warning, not only business person but person's from the neglect of financial accounting information.

d. Encouraging all to obey and heed the warning of financial accounting information.

The following classes of people will find the work as a useful references:

i. Managers of companies, corporations and other form of business whether such business are owned by management or not.

ii. Actual and potential lenders of money to be a business.

iii. Customers.

iv. Owners and shareholders.

v. Governments and

vi. Other researchers.

1.5 LIMITATION OF STUDY

A voluminous work would result, as it were, in all research work done once all parts of accounting information generally since this might lead to researching into all the different branches of accounting that is cost accounting, financial into all financial accounting information since this would include: what is, how it can be prepared, its usefulness, effect historical information, interpretation analysis and host lost of others.

Being this in mind, this research works hall then be united to the EFFECT OF FINANCIAL ACCOUNTING INFORMATION TO THE MANAGEMENT OF A BUSINESS.

The researchers are aware of the fact that other types of information play a part in management of a business but the question is if those types of information are readily available and financial accounting information lacking.