THE ROLE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING (A CASE STUDY OF ENUGU STATE) COLLEGE OF EDUCATION (TECHNICAL) ENUGU
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THE ROLE OF
ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING (A CASE STUDY OF ENUGU
STATE) COLLEGE OF EDUCATION (TECHNICAL) ENUGU
Abstract
The recent modernization and automation
of Nigerian factories have created a demand for increased use of according
information in Management decision making.
To make meaningful economic decisions which relate to personnel,
purchasing, production and marketing, Managers of various companies and
Institutions have to rely on the use of quantitative characteristics of
accounting Information which Include:- relevance, timeliness, reliability,
representational, faithfulness, completeness, verifiability, neutrality,
quantifyability, conciseness, among others. This research work has therefore
looked into the effectiveness of the use of Accounting Information in
Management decision making and planning with respect to the Enugu State College
of Education (Technical) Enugu (ESCET).
In the course of this research, it was found that the Enugu State
College of Education (Technical) makes use of accounting Information in
management decision making.The Institute makes use of Accounting Information in
making meaningful economics decision on personnel, purchasing, and fees to be
paid by their students but the extent to which they make use of such
Information especially on school fees vary. The extent to which they depend on
such Information has been found to be Influenced by the following factors:-
(a) The limited nature of formal Information
System in providing external Information be tending to Ignore non-quantitative
and non-economic information.
(b) The late arrival of the formal
Information to be used.
(c) The power structure and political
situation within the college or Organization which may cause the manager to
Ignore or distort the Information.
(d) Cognitive Limitation of the manager
&
(e) Recruitment of Unqualified Accounting
Personnel.
There is a
positive relationship between the efficient use of accounting Information and
the quality of decision taken in the Enugu State College of Education
(Technical) and the efficient use of the Information Contributes positively to
the Institutes performance; thus, the decisions and planning of the management
can not be efficient without accounting Information. This work also suggests
different criteria for the improvement of formal (accounting) Information
Systems. This research work has been structured into five chapters viz:-
Chapter One discussed the Back ground of the study, Problems associated with
the study, the Objectives, Hypothesis testing, the significance of the study,
its scope as well as limitations and delimitation. Chapter Two reviewed the
related literature in the areas of accounting information. Such areas includes:
Types of Accounting Information, Characteristics of accounting Information or
Report, Decision – making using accounting information, short-term and long-term
decisions, levels of Information in decision making, effective decision making,
Application of accounting Information in managerial decisions and financial
ratio analysis. Chapter three took a look at the Research Methodology used.
Chapter four dealts with data analysis and testing of Hypothesis. Chapter five
provided the findings and recommendations on how to improve upon the use of
accounting Information with a corresponding epilogue.
ACKNOWLEDGEMENT
With
gratitude, we acknowledge our supervisor and our H.O.D Mr G.N.O Eneh for his
direction and guidance on how to carryout this research work, Sir we are
grateful we also acknowledge the effort of our able Lecturers who impact a lot
of knowledge on us that help us in carrying out this project work, to mention
but Few. Mr E.A. Ejili, Mrs Mama L. Mr J. Onah and Mr Chidi Ozochi.
Finally, we acknowledge our parents
whom we always run to for financial help through out the time of this research
study.
From the debt of our mine, we say may
God bless all of you who contributed in one way or the other to make this work
successful.
TABLE OF
CONTENTS
Title page
Approval
Page - -
- - -
- - -
i
Certification -
- - -
- - -
- ii
Dedication -
- - -
- - -
- iii
Abstract -
- - -
- - -
- - v
Acknowledgement -
- - -
- - -
vi
Table of
Content - -
- - -
- - vii
CHAPTER ONE:
INTRODUCTION
0.1 Background of the Study- -
- - -
1
1.1 Significance of the Study- -
- - -
4
1.2 Statement of the Problems -
- - -
5
1.3 Purpose of the Study -
- - -
- 6
1.4 Research Questions- -
- - -
- 7
1.5 Hypothesis -
- - -
- - -
8
1.6 Delimitation of the Study- -
- - -
9
1.7 Limitation of the Study -
- - -
- 10
1.8 Definition of Relevant Terms -
- - -
11
CHAPTER TWO:
REVIEW OF THE
RELATED
LITERATURE
2.0 Literature Review -
- - -
- - 16
2.1 Types of Accounting Information/Report -
- 16
2.2 Characteristics of Accounting
Information - 19
2.3 Decision Making & Accounting
Information- -
20
2.4 Short-Tearms and Long-Tearms Decision
Making -
- - -
- - -
- 22
2.5 Levels of Information in Decision
Making -
- - -
- - -
- 23
2.6 Effective Decision Making- -
- - -
24
2.7 Application of Accounting information
in Managerial Decision -
- - -
- 25
2.8 Financial Ratio Analysis -
- - -
- 26
CHAPTER
THREE: RESEARCH METHODS
3.0 Research Methodology -
- - -
- 29
3.1 Sources of Data -
- - -
- - 29
3.2 Sample Size -
- - -
- - -
30
3.3 Statistical Method for Data Analysis - -
- 31
CHAPTER
FOUR: PRESENTATION AND ANALYSIS
OF DATA
4.0 Data Analysis and Testing of
Hypothesis -
- -
- - -
- 34
4.1 Data Presentation -
- - -
- - 35
4.2 Contingency Table -
- - -
- - 35
4.3 Hypothesis -
- - -
- - -
36
CHAPTER
FIVE: SUMMARY
5.0 Findings
- - -
- - -
- - 38
5.1 Conclusion -
- - -
- - -
41
5.2 Recommendations -
- - -
- - 43
5.3 Suggestions for Further Research Study -
- 45
References -
- - -
- - -
46
CHAPTER ONE
INTRODUCTION
1.0 BACKGROUND OF THE STUDY
Institution
is a community of people. It is also individuals efforts working together in
pursuit of common purposes called “Organizational goal”.
Organization
is any group of two or more persons working together to achieve a goal or
goals. (Ricky Gtiffin, 1984. PP4-55). The goals may be that of profit motive
for business organization; Spreading of knowledge for Colleges and
Universities; National defence by the Army; Social Satisfaction by social chibs; etc. there is need for combination and
Utilization of money, men and materials resources for the attainment of
Organizational goals that led the Organization into division of labour.
In broad
terms, there are two types of organizations
(i) The profit Motive Organization
(Business Organization)
(ii) The non-profit Motive Service Venture.
The primary
aim of the former is to make profit on Investment while the objective of the
latter is determined by the Social and Political Considerations such as meeting
the needs of people in the area of basic health-care, providing quality
education, etc. Such group Include:- all Governmental Agencies, the United
Nations Organization, World Health Organization
(WHO) etc.
Basically,
Information is to data what a finished Product is to the raw-materials used in
producing it.
According to
Anthony and Reick (2003; P 270), Information is a fact, datum, observation,
perception or any other thing that adds to knowledge. Data in their states are
only relevant as historical records which can be filed away because there is no
immediate need but once there is a need to use them for management purpose,
they are received, organized and packaged in such a format that will help
management in their function of planning, forecasting or control.
Information
can be external or Internal to a business Organization or an establishment and,
how it is finally put to use depend on the nature of the organization.
External
Information will Include:- All the Information gathered from sources outside of
the immediate environment of the organization, such as International journal,
Government gazettes; Statistical journal; world raw-materials reports; etc.
While those
Internal Information Include those from different branches or sections of the
organization such as: personnel unit, production unit, etc which could reflect
the company’s account, stock records department performance analysis etc.
In
Management, Information is most often related to the purpose for which its is
needed.
This implies
that there is a factor of relevance in information need and utilization with in
any Business Organization or Institution.
The types of
Information required by a one section of the organization may not be the same
that another section of the organization requires to carry out its functions
Information
can either be quantitative or non-quantitative. Accounting Information is
mostly quantitative in nature and it is usually expressed in financial or
monetary terms, as well as accompanied with non-monetary Information Management
of the Institution etc
1.1 SIGNIFICANCE OF THE STUDY
This study has
been designed for Nigerian Organizations of either the profit motive
Organization or service oriented organization (Non-Profit motive) such as the
Enugu State College of Education (Technical).
Meanwhile,
the significance of this study Include:-
(a) Whether accounting Information plays an
important role in the efficient running of an organization through the keeping
of proper records.
(b) The study of accounting Information
throws more light on its efficiency in the development of modern organization.
(c) Since modern business may be owned by
literally hundreds of share holders, the study of accounting Information X-
rays the extent to which the share holders and Administrators may depend on
Financial reports of companies or organizations.
(d) Through this work, one should be able to
communicate the economic measures of, and the Information about the resources
and performances of the reporting entity to those who have reasonable right to
such information.
1.2 STATEMENT OF THE PROBLEMS
Capital
generated by Organizations reflect the ability of the Management of such
Organization to successfully control all the factors necessary for the
production and provision of goods and services,
As a result of the state of economy and
the policies Instituted by government, Managers tend to look for a venue to
Increase quality at lower cost?
(a) There is also the problem of stating an
answer to this question of, “to what extent dose accounting Information help
the managers in allocating scarce resources properly?
1.3 PURPOSE OF THE STUDY
The purpose
of the study, Include:-
(a) To ascertain whether there is any
positive relationship between the efficient use of accounting Information and
quality of decision taken by the College Management.
(b) To ascertain whether the use of
accounting Information efficiently contribute positively to the performance of
the College under study.
(c) To find out whether the College
Managements planning, decisions and control can be efficient with the effective
use of accounting Information.
(d) To determine the factors that impede or
promote the effective use of accounting Information.
(e) To ascertain whether the use of
accounting Information aids in assessing cash flow prospects in the College.
(f) To give suggestions on how to improve
on the role of accounting Information in management decision making and
planning for better promotion.
1.4 RESEARCH QUESTIONS
The
following research questions have been designed by the researchers in the
course of this study.
(a) What are the factors that can negatively
affect the use of accounting Information in an organization?
(b) Is there any clear distinction between
the decisions made through the use of accounting Information and those based on
Non-accounting information?
(c) How positive in relation to the College”
performance is the efficient use of accounting Information?
(d) To what extent does the efficient use of
accounting Information determine the quality of decisions taked by the College
management?
(e) Do you consider accounting Information
more useful than the Non-accounting Information?
1.5 HYPOTHESES
For the
purpose of this research work, the following hypothesis have been stated which
should be tested in the course of this research.
(a) Null Hypothesis (Ho):- There is no positive
relationship between the efficient use of accounting Information and the
quality of decisions taken in the College “Enugu State College of Education
(Technical)
(ESCET)”
Alternative
Hypothesis (Hi):- There is a positive relation between the efficient use of
accounting Information and the quality of decisions taken in the College: “Enugu
State College of Education (Technical) (ESCET)”
(b) Null Hypothesis (Ho):- The use of efficient
accounting Information in the Enugu State College of Education (Technical)
(ESCET) does not Contribute positively to the performance of the College.
Alternative
Hypothesis (Hi):- The use of efficient accounting Information in Enugu State
College of Education (Technical) (ESCET) Contribute positively to the
performance of the College.
(c) Null Hypothesis (HO) The College Management
decision-making and planning can be efficient with out the use of accounting
Information.
Alternative Hypothesis (Hi) The
College Management decision and planning can not be efficient without
accounting Information.
1.6 DELIMITATION OF THE STUDY
This
research, in general term, is geared towards the studying of the main components
of the role of accounting Information in Management decision making with
special reference to the Enugu State College of Education (Technical) (ESCET).
Although, the researchers are students of the College in question, they tried
to know how accounting Information had been effectively and efficiently used by
the Administrators and Staff of the College and then relate it to other
Organizations.
However, in
the course of the study, the researchers still encounter some limitations.
1.7 LIMITATIONS OF THE STUDY
One of the
limitation of this study is the inability of the Management to disclose certain
Information which they consider very sensitive to the researchers such that its
publication might be detrimental to the College’s operations or tantamount to
“street Management”.
Infact
secondary data, as well as the varied opinions of experts are many but could
not be exhaustively reached owning to limited time frame for this work.
The
unavailability of such materials and insufficient financial resources are also
limitation factors in the study.
1.8 DEFINITIONS OF RELEVANT TERMS:-
The relevant
terms that are to be encountered in the courses of this work include:-
(a) Accounting:- The early definitions of
accounting generally focused on the traditional record keeping functions of an
Accountant. In 1941, the American Institute of Certified Public Accountants
(AICPA) defined accounting as “the art of recording, classifying and
summarizing in a significant manner and in terms of measures, processes, and
communicates financial Information about an identifiable economic entity.
This
Information allows users to make “reasoned choices among alternative uses of
scares resources in the conduct of business and economic activities.
Figure 11
below depicts accounting as a service activity. It serves as a link between
business activities and decision makers. Here, one might say that data about
business activities are the input to the accounting system and useful
Information for decision markers becomes in output.
Adopted from
B.E Needles et al, P3
b. Accounting and its Relationship with
Book-keeping, the computer and management Information system:-
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