CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
This project is one that studies the effect of finical accounting
reporting of the management of a business. Financial accounting covers
those activities that relates to the preparation ofcertain reports which
are known as financial statement
These statement report the financial status of a firm at a particular time.
The practice of accounting stated since organized life evolved. The
early man lived in caves from where he developed into living in
communities. Later arose the concept of specialization. That is each
person went about doing those activities of life for which he was
most gifted. This gave rise to individuals producing certain goods in
quantities in excess of what they needed while there were other goods
which they need but they did not produce them selves the result was
exchange. the first system of exchange was by barter. Later money
evolved and replaced barter.
During the stage of barter recording were done but only the
quantities of good exchanged were recorded. For example in things fall
apart, used white marks drawn on the walls as record of his
indebtedness to others. However as soon as money evolved all recording
were done in montary terms. Another perspective worthy of note about
the history of accounting is the impact of the different stage of
organized business on accounting. At the stage of specialized in using
their skills in creaft and developed the quid system. Here the job was
done by one man at most with the aid of members of his family. The
guilds system grew and outsiders were employed to work for the owner.
The industrial revolution expanded thee output and gave rise to the
factory system of working. As the size of these factories grew it became
impossible for one person to set up a factory alone. This gave rise to
partnership and of course the joint stock companies. The joint stock act
of 1844 is a very important landmark in the evolution of accounting.
It marked the evolution of accounting. It marked the beginning of
auditing.
The result of this act is what is known to day as limited liability or public limited liability companies.
The essential feature of the limited liability companies is that
ownership is separate from management. Large numbers of owner
(shareholder) across the globe invest in companies while a few directors
are elected to mange these companies.
This partiarlar development gave impetus to the evolution of auditing
as an aspect of accounting. Also the size of these companies and the
stiff competition for funds, markets, new ideas and products gave rise
to more rigorous accounting techniques like cost and management
accounting to aid management in decision making.
Taxation is another branch of accounting required to and management
in decision making. Tax has a lot of implication for management
decision on one hand and is an important source of revenue on the other.
Even in the public sector it has been observed that accounting is
indispensable as a result government public sector accounting has now
evolved to take care of this information need.
One can not do a comprehensive review of the history or evolution of
accounting with has that have been in use. They are the change and
discharge system, and the double entry system.
In the charge and discharge system, the change is made up of the
balance held at the beginning of a period to which is added any receipts
from the owner discharge is the on flays made to or on behalf of the
owner.
It has been cleaned that the double entry system evolved in the 14th century.
However, it was in the book written by a monk, Luca Pacioli in 1494
titled summa de arithmetic geometric, proportion et proportion that the
double entry system was first documented.
1.2 STATEMENT OF THE PROBLEM
An effective information system is very important for the
functioning of any business. The financial accounting system in most
business do not portray fully the principles of accounting systems.
Financial accounting information involves technicalities such as
quantitative analysis adequate recording reporting etc. Some business
organization may unknowingly employ incompetent and unskilled manpower
and as such the financial accounting information prepared may not show a
true and fair view of the financial strength profitability and future
prospects of the organization.
Some organization have to realism that accounting information is the
only medium through which both the management and external users get a
clear picture of an organization. If they fail to realizes appreciate an
accountants analysis inrespect of the accounting information
generated, this often leads to poor management decision which will have
negative effects on the performance of business organization.
1. 3 OBJECTIVE OF THE STUDY
The main objective of this study is to determine the effect of
financial accounting reporting on the management of a business. Apart
from this major aim the study will also find out the following:
To ascertain whether there is a direct relationship between the
performance of emenite and effective use of financial accounting
information.
To ascertain whether there is a direct relationship between
financial accounting information and the decision making in Emenite.
To ascertain whether there is a direct relationship between
financial accounting information and profit planning in Emenite.
1.4 RESEARCH QUESTION HYPOTHESIS
(i) What are the relationship between the performance
of emenite and effective use of financial accounting information
(ii) What are the relationship between financial accounting information and decision making.
(iii) What are the relationship between financial accounting information and profit planning.
NULL HYPOTHESIS
Ho, There are no relationship between performance of Emerite and effective use of financial accounting information.
Ho2 There are no relationship between financial accounting information and decision making.
Ho3 There are no relationship between financial accounting information and profit planning.
1.5 SCOPE OF THE STUDY
The focus of this study will be on emenite with reference to the effect of financial reporting on its management
1.6 SIGNIFICANT OF THE STUDY
The research will be significant 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 all person from the neglect of financial accounting information.
(d) Encouraging all to obey heed the warning of financial accounting information.
The beneficiary of this research are as follows:
(a) Maangers of companies and corporation
(b) Practising accountants
(c) Customers
(d) Owners and shareholders
(e) Government
(f) Research students.
1.7 DEFINITION OF TERMS
Effect – The advanced learners dictionary defined effect as the degree or extent of the result or out come.
Financial accounting – It can be defined as the process of identify,
classify and summarizing systematically in terms of money transitions
and events which have financial character and then interpreting the
result. The above definition is given by (AICA American Institute of
chartered accountants.
Information (Report) – This can be defined as fact needed or
received by a person or group of persons which will be useful to him.
This information can be spoken or written.
Mangement – This can be defined as working with and through others,
the process of thinking and doing, the process of using both human and
material resources to achieve the set goal and objectives and that
mangement may be seen as the act and science of achievering the
objective of a business in the most efficient way.
Business – This is a process of using both human and material and
capital resource are conbined to satisfy human needs and wants. Advanced
learners dictionary defined it as buying and selling.
1.8 LIMITATION OF THE STUDY
The constraints that will be encountered in carrying out this research are as follows
(a) Time constraint – Time apportioned for this study
is not enough for the researcher to seek for all the needed
information.
(b) Financial constraint – due to limitation by the
scarcity of fund, all the data that to be used will be collected in
Enugu state.
(c) Lack of co-operation – The workers usually don’t co-operate with the researcher during interview.