CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Management are engaged with different types of activities
that require quality and reliable information. In contrast, managers of a
specific business often times need or desire far more detailed information. This
information must be tailored to specific decision-making tasks of managers, and
its structure becomes more “free formed.” Such managerial accounting
information tends to be focused on products, departments, and activities. In
this context, the management process is intended to be a broad reference to
encompass marketing, finance, and other disciplines. Managerial accounting is
regarded as providing information in support of the inner management processes.
Several organizations check with their internal accounting units as departments
of strategic finance. This title is additional reflective of their wide
selection and scope of duties. Social control accounting is kind of totally
different from money accounting. External reportage rules square measure replaced
by internal specifications on however knowledge square measure to be
accumulated and conferred. Hopefully, these internal specifications square
measure sufficiently logical that they permit sensible economic deciding. As an
example, specific reportage periods could also be replaced with access to
period of time knowledge that changes fast responses to ever changing
conditions. And, forecasted outcomes become additional essential for designing
functions. Likewise, value info ought to be disseminated in an exceedingly
method that managers will target (and be command responsible for) those
business elements (“segments”) below their locus of management. The
effectiveness of accounting data system not solely depends on the needs of such
systems however additionally depends on contingency factors of every
organization. Accounting information systems equally measure aforesaid to be
effective once the knowledge provided by them serves wide the necessities of
the system users. Shoommuang (2011) examined how effective management
accounting implementation affects decision making by analysing the relationship
between corporate strategy and top management. David and Marcel (2006) analysed
the relationship between management style and management accounting system and the
effect on organizational performance and concluded that accounting information
system is designed to transmit information to the decision makers, having
capacity to influence the orientation, direction and formality of the decision
making style. A proactive management style would require an innovative
Management accounting system design to cope with the uncertainty and to
optimise decision making whereas a reactive management style would require
traditional management accounting information system to provide information
suitable for managing routine, regular and programmable activities. Brigitte
and Wolfgang (2013) emphasized the importance of information requirements for
managers in decision making when there is absence of agency conflicts, they
argued that information available to managers in managing business is the same
information available to investors in assessing performance and future
prospects.
Concentration is on two central useful qualitative
characteristics of accounting information: predictive ability and feedback
value. Pfaff (1995) as cited in Brigitte and Wolfgang (2013) explained that
decisions need to be re-evaluated periodically, the decision-maker wants to
decide whether to continue without change or whether to abandon or alter the course
of action in question; for this purpose, performance in the sense of the
progress along the lines of the original plans needs to be determined;
decisions are based on a comparison of projections as well as with the
alternatives hence the need for forward looking information as well as control
information. The focus is on the need for consistency and comparability in the
information flows between financial and management accounting. Their smooth go
must be secured by a reporting organization, corresponding to the strategic
orientation of the enterprise. In this connection, it will be necessary to
carefully approach the development of the accounting policy on the basis of
coherence in the efforts of the chief accounting (or financial) officer and the
executive director. In the absence of such coherence in their actions, the
processing of accounting data for management purposes will be complicated. As a
result, the potential for cost optimization as an important precondition for
successful price competitiveness will be diminished. Following such approach,
the accountability will become part of the tools for strategic management and
the repercussion of strategic solutions on cost management will turn to be one
of the main challenges for managers. Moreover, the evaluation of accountability
in a company will be based on its impact on the implementation of corporate
strategy.
1.2 STATEMENT OF PROBLEM
The success of any organization in decision making, planning
and controlling depends on the availability of the information at her disposal.
It was observed that many organizations have been inefficient as a result of
inadequate, irrelevant, unreliable and untimely information upon which their
actions was based, thereby having overall negative effect in the organization
and putting the organization at a disadvantageous position. Also the going
concern of any organizations depends on its ability to meet its target
objectives to justify its existence, and this objectives can be met when
relevant and accurate information are available, where effective and efficient
accounting systems are lacking, the organization would wind up and its
contribution to the society would be lost, hence this study seeks to uncover
how accounting information system has aided managerial performances and
efficiency of selected Small and Medium Enterprises in Nigeria.
1.3 AIMS OF THE STUDY
The major purpose of this study is to examine management
account information as an aid to organizational managerial function. Other
general objectives of the study are:
1. To examine the roles played by management accounting
information in determining the management efficiency and performance in an
organization.
2. To examine the management accounting information as an
aid to organizational managerial function.
3. To examine the effect of management accounting
information on organizational managerial function.
4. To examine the uses of management accounting information
in Small and Medium Enterprises.
5. To examine the relationship that exists between
management accounting information system and strategic decision making process.
6. To suggest ways in which management of accounting
information will aid in assisting the private firms to achieve their goals and
objectives.
1.4 RESEARCH QUESTIONS
1. What are the roles played by management accounting
information in determining the management efficiency and performance in an
organization?
2. How does management accounting information helps in
organizational managerial function?
3. What are the effects of management accounting information
on organizational managerial function?
4. What are the uses of management accounting information in
Small and Medium Enterprises?
5. What is the relationship that exists between management
accounting information system and strategic decision making process?
6. What are the ways in which management of accounting
information will aid in assisting the private firms to achieve their goals and
objectives?
1.5 RESEARCH HYPOTHESES
H01: There is a significant effect of management accounting
information on organizational managerial function.
H02: There is a significant relationship between management
accounting information system and strategic decision making process.
1.6 SIGNIFICANCE OF THE STUDY
The study findings will be of immense importance in the
sense that they will assist management of small and medium enterprises to
realize how to carry out their managerial responsibilities. Since management
accounting information is dynamic and full of potentials not yet tapped, the
comments and recommendations of this work will, hopefully, assist small and
medium enterprises and all businesses to improve on their managerial functions
and decision making. In essence, the study will be beneficial and add knowledge
to students so as to enlighten them more on management accounting information
and managerial functions. The study shall therefore serve as a reference for
further research.
1.7 SCOPE OF THE
STUDY
The study is based on the application of management
accounting information as an aid to organizational managerial function: case
study of SMEs.
1.8 LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the
efficiency of the researcher in sourcing for the relevant materials, literature
or information and in the process of data collection (internet, questionnaire
and interview).
Time constraint– The researcher will simultaneously engage
in this study with other academic work. This consequently will cut down on the
time devoted for the research work.
1.8 DEFINITION OF TERMS
Management Accounting: The process of preparing management
reports and accounts that provide accurate and timely financial and statistical
information required by managers to make day-to-day and short-term decisions.
Unlike financial accounting, which produces annual reports
mainly for external stakeholders, management accounting generates monthly or
weekly reports for an organization’s internal audiences such as department
managers and the chief executive officer.
Organization: A social unit of people that is structured and
managed to meet a need or to pursue collective goals. All organizations have a
management structure that determines relationships between the different
activities and the members, and subdivides and assigns roles, responsibilities,
and authority to carry out different tasks. Organizations are open systems they
affect and are affected by their environment.
Managerial Function: Managerial functions refer to the
different roles and responsibilities of managers, who need certain skills to
execute these functions. Small businesses, especially start-up companies, may
not have the resources to hire managers for each of their functional and
product areas. This means that small-business managers have to be flexible
enough to learn a range of skills and perform different roles.
Information: These can be said to be facts needed or
received by a person, or group of persons which is or will be useful to them.