ASSESSMENT OF
EFFECTIVENESS OF ACCOUNTING INFORMATION AS A TOOL FOR MANAGEMENT DECISION
(A
CASE STUDY OF ZAKI FLOUR MILLS)
TABLE OF CONTENT
Title
page- – – – – – – – – – i
Declaration – – – – – – – – – ii
Approval
pages – – – – – – – – iii
Dedication – – – – – – – – – iv
Acknowledgement- – – – – – – – v
Abstract- – – – – – – – – – vi
Table
of content – – – – – – – – vii
CHAPTER ONE
1.0 Introduction – – – – – – – 1
1.1 Background of the study – – – – – 3
1.2 Statement of the problems – – – – – 4
1.3 Objective of the study – – – – – – 6
1.4 Research of hypothesis – – – – – – 6
1.5 Significance of the study – – – – – 7
1.6 Scope of the study – – – – – – 8
1.7 Historical background of the case study- – – – 8
1.8 Definition of the terms – – – – – – 10
CHAPTER TWO: Literature
Review
2.0
Introduction- – – – – – – – 13
2.1
Financial accounting – – – – – –
14
2.2 Management accounting – – – – – 15
2.3 Users of accounting information – – – –
17
2.4 Standard for accounting information – – – 20
2.5 The need for accounting information – – – 22
2.6 Presentation of information – – – – – 26
2.7 Over view of external financial statement- – –
27
2.8 Cost calculation – – – – – – – 33
2.9 Ratio and percentage analysis – – – –
35
2.10 Break Even analysis – – – – – –
37
2.11 Financial Decision – – – – – –
37
CHAPTER THREE
3.0
Introduction – – – – – – – 40
3.1
Research design – – – – – – – 41
3.2
Population of study- – – – – – –
42
3.3
Sample of the study – – – – – – 42
3.4
Sampling techniques- – – – – – –
43
3.5
Method of data collection – – – – – 43
3.6
Method of data analysis – – – – – 47
CHAPTER FOUR: Data Presentation,
Analysis and interpretation
4.0
Introduction – – – – – – – 48
4.1
Interview with the finance
department – – – 49
4.2
Interview question with the
management – – 51
4.3
Test of hypothesis – – – – – – 53
CHAPTER FIVE: Summary, Conclusions
and Recommendations
5.0
Introduction – – – – – – – 64
5.1
Summary – – – – – – – – 64
5.2
Conclusion – – – – – – – – 67
5.3
Limitation of the study – – – – – – 68
5.4
Recommendations – – – – – – 69
Bibliography- – – – – – – – 71
Appendix A- – – – – – – – 72
Appendix B- – – – – – – – 73
CHAPTER ONE
1.0 INTRODUCTION
An organization needs qualitative information to function
or make decision; the available of such information make the organization to
function in the most effective and efficient manner. This information is
provided by the accounting system to the management, which uses it primarily to
accomplish three (3) broad purposes, viz:
i.
To provide financial
statement to interested external users
ii.
To plan the operations of
the organization in both the short and long run.
iii.
To control the result of its
operations
In financial accounting, the responsibilities of the
accountant ranges from recording and analysis, summarizing and reporting the
result of the activities of the organization to creditors, stock holders and
prospective investors, government, labour, environmental organization and
others. In the case of reports to external users, they are classified for
general purpose; they are financial statement, the income statement, the
retained earnings, the balance sheet and the statement of financial position.
People who protest or enhance their investment in the organization as by other
who have a special interest in it use this statement. In management accounting,
accountants provide information for use by office within the organization (the
managers) rather than for use by other outside the organistion, such
information are mainly decision making concerning the internal function
organization. Management accounting also provides information to the decision
makes for the following purpose:
i.
Formulation of policies
ii.
Planning and controlling the
activities of the enterprises
iii.
Safeguard the assets of the
organization
iv.
Disclosure of employee’s
area of specialization
v.
Decision taken alternative
cause by action.
Management and financial accounting may be understood by
considering the basic goals of financial accounting is to direct forms of
operations to maximize income the period measure net income used by the
management in making decision to avoid what may be considered as an unwise
decision to external user or vice versa. However, the relevance accounting
information effective decision making in this research work, the degree of the
relationship shall be clearly spelt out and identified.
1.1
BACKGROUND
OF THE STUDY
The choice of the topic “Accounting information as a tool
for management decision making” has been motivated by the fact that whatever
accounting on information is presented to the has been collected, classified
and analysis will determine the extent to which it is to be relied upon by the
management in order to formulate a favourable decision in the organization.
The project therefore examines the relevance of
accounting information to managerial decision making manufacturing companies
with a view to highlighting the area of weakness and making necessary recommendations.
It is infact in the light of the above that attempt be
made to apprais the essence of accounting information in making decision
concerning he use of limited resources, including the identification of the
overall organization objectives.
1.2
STATEMENT
OF PROBLEMS
Management who thinks that they operate successfully
without the use of the information provided by the accountings and up being
economic failure to their respective industries, and some times course
embarrassment to the organization. Take for instance, the accountant of an
organization provide his manager with the information that there is no fund for
any programme execution in the company. Despite this information, the manager
went ahead an instructed the accountant to draw a cheque payable to a
contractor who supplied some materials to the organization for settlement. Due
to this action of the manager, the following condition is bound to happen.
·
This cheque is going to
bounce because there is no money in the company’s account
·
If care is not taken, the
contractor may sue the organization (company)
There are many different types of decision for which
managers need accounting information, listed below are four (4) examples of
typical question that regularly confront managers, they include:-
i.
What product line is to be
produced?
ii.
What price should be set for
a product line?
iii.
Should old equipments be
replaced with new ones?
iv.
Should a product line be
dropped?
v.
Has an employee performed
well enough to warrant a bonus?
vi.
Should short-term borrowing
be arranged to finance current operation?
For managers to make the best decision to resolve each of
these questions the management accountant must provide quantitative information
that is timely and relevant, it is with this information that managers can properly
plan and control the organization operations. And these are some of the
question and problems this research work intend to prepare solution to:
In conclusion, managers cannot take effective decision if
the information provided to them but their accountants are not properly adhered
to. It is this kind of problem that form the basis of this research work in
which the relevant of accounting information in management decision making will
be examined.
1.3
OBJECTIVE
OF THE STUDY
The objective of the study is concerned with established
of the relevance of accounting information to managerial decision-making in
manufacturing concerns. It is to further review and analyze accounting
information in line with modern day techniques of presenting accounting
information and its unique role as aid in decision making by the management.
The purpose of this study therefore include the following.
i.
To known the problem remedied
of getting information for decision making with special reference to Zaki flour
Mill Azare
ii.
To carefully look at the
need for accounting information as a vital tools for managerial decision making
iii.
To know how the management
of the company under view have been using the accounting information given to
them
iv.
To make suggestion as to the
usefulness of accounting information its users in general
1.4
RESEARCH
OF HYPOTHESIS
We research work is complete without a hypothesis with
hypothesis, a research work is consider to be meaningful and with direction
simply, hypothesis show the relation between two or more variable which are in
opposite to one another. In other words, it is in assumption information of a
statement made by the research, which can only be accepted or rejected.
To this end, the researcher advanced the following as the
basic of this research hypothesis.
–
Null hypothesis (H0)
That with good system of the accounting information the
management of Zaki flourmill Azare can make a good decision to promote efficiency
in its operations
1.5
SIGNIFICANCE
OF THE STUDY
The study is of significance in that; the findings will
be of almost important to many establishments and to the business society at
large. This is because it will determine whether accounting information in the
manufacturing concern can serve as a vital tool in managerial decision-making.
Also, the study will serve will as a supply of knowledge
of manager and accountants on how they can improve decision making procedure of
their companies for an effective performance and also to those who wanted to
carry out further research on the same topic in the future.
1.6
SCOPE
OF THE STUDY
This work will cover some aspects of accounting
techniques in operation in the manufacturing organization with reference to
Zaki flour mills Azare and the type of report prepared for decision-making. The
researcher intends to examine the relationship that exist between accounting
information and management decision-making. Some related literature in the
field of study would also be alid on the usefulness fo each of the information
prepared by individual segment of the accounting branches.
1.7
HISTORICAL
BACKGROUND OF THE CASE STUDY
Grains Processing Company (Nigeria) Limited otherwise known by
its brand name Zaki Flour Mills was first commissioned by the former Head of
State General Muhammadu Buhari on the 1st September 1984. the
company is located at Azare in Katagum Local Government of Bauchi State.
The company was the baby of the state government; the
promotion of the company was alter taken over by the Nigerian bank for commerce
and industry (NBCI) in accordance with the bank policy of the Military
Government. The establishment of this company was formed by the need to
increase production by utilizing local materials. The company is a private
Limited Liability Company essentially incorporated to process various grains
into flour human consumption, presently its ownership structure comprises of:-
– Complex
trading company of Hungary 23%
– Nigerian Bank
for commerce and industry 40%
– BauchiState
Government 36.4%
– Other
individuals 0.6%
Total 100%
The major machineries (plant and machinery) which the
company started with include; Rollers, purifiers, plain shifter, servers,
pneumatic system etc. The floor mills is capable of processing 47% of 200
tonners daily and its products comprises Maize grits, maize flour, millet
flour, millets grits, wheat flour, Grains corn flour, grains corn grits etc.
The company markets its product through appointed dealer
and sale officers in some parts of Bauchi, Yobe, Borno, Adamawa, Kano and Jigawa states.
The company provides direct employment to people resulting from its production,
about 170 staff approximately, which comprises have 159 Nigerians and 11
expatriates who are mechanical staff.
1.8
DEFINITION
OF TERMS
Accounting:
Is the art of anlaysis, evaluating and interpreting of Organization financial
activities and position, communicating the results to those who are interested.
It can also be defined as the process of identifying, measuring and
communicating economic information of facilitate informed judgment and decision
by users of the information. It is a system designed to serve organizational
goals.
Management
accounting: Is the application of professional
knowledge and skill in the preparation and presentation of accounting
information in such a way as to assist the management in the formulation of
policies and in the planning and the operation of the understanding.
Financial accounting:
Is concerned with the preparation of general-purpose report for use by person
outside the firm. It involves preparation of profit and loss account and the
balance sheet, they are prepared in general terms suitable for presentation to
shareholder and the general public, and they are also of interest to the
management
Planning:
Is the process of deciding what action should be taken concerning the
organisation in the future.
Information:
Means a complete set of processed data that has a meaning to the decision maker
Control:
This involve overseeing the activities of the employee of the organization of
the manager, they make sure that management policies are strictly adhered to.
Co-ordination:
Is the bringing together of the various units of an organization to work toward
the achievement of this overall objective
Creditor:
An individual or institution that provides part of a company’s resources
lending it money out.
Inventory:
It is referred to as store keeping items and are heated at storage level. Store
keeping items usually consist of raw materials, work-in-progress and finished
and supplies
Company:
Includes any enterprise which comes within the scope of the statement of
standard accounting practices (S.S.A.P).
Assets:
These are the resources owned by the company. It may be tangible such as land,
Building and machineries etc. it may also intangible such as Debtor, cash at
bank etc
Liabilities:
These are debts or obligations of the company. They arise primarily because of
the purchase of goods or services from other credit or through cash borrowing
to finance the business.
Balance sheet:
Is a statement of assets and liabilities of an organization, which shows the
financial position of the organization for a particular accounting period.