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32 THE USE OF ACCOUTING INFORMATION FOR DECISION
MAKING
(A CASE STUDY OF NIGERIA NATIONAL PETROLEUM
REFINERY)
ABSTRACT
This study deals with the use of Accounting Information for Decision-
making (A case study of Port-Harcourt Refinery Company) One of the most
important functions of management which is decision making has been
described as a purposeful choosing from a number of alternative courses of
action.
The management can only come up with a good decision if they were
able to get a correct accounting information form the accountants as a result
of this, there are the need for research to find out if managers actually
provided this information to the mangers and if they are relevant in the
decision making of the organization.
The following are stated problems
a.) Inadequate utilization of available accountb.) Inadequate managerial expertise
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The project work in chapter two revealed all the accounting information
needed by the management for decision making and the use and users of
accounting information.
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TABLE OF CONTENTS
Title page---------------------------------------------- i
Approval page----------------------------------------- ii
Dedication---------------------------------------------- iii
Acknowledgement-------------------------------------- iv
Abstract-------------------------------------------------- v-vi
Table of contents---------------------------------------- vii
CHAPTER ONE
1.0 Introduction----------------------------------------- 1
1.1 Background of the study---------------------------- 8
1.2 Statement of problem------------------------------- 11
1.3 Research Question---------------------------------- 13
1.4 Statement of purpose------------------------------ 14
1.5 Significance of the study--------------------------- 15
1.6 Scope of the study---------------------------------- 16
1.6 Limitation of the study------------------------------ 17
1.7 Definition of terms---------------------------------- 17
CHAPTER TWO
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2.0 Literature Review------------------------------------- 21
2.1 The concept of accounting information system------ 21
2.2 Uses and users of accounting information----------- 24
2.3 Effect of poor and inadequate accounting policies--- 30
2.4 Accounting information system in NNPC------------- 31
2.5 Problems encountered by NNPC in the use of their
Accounting information system----------------------- 36
2.2 The role of standard organization of Nigeria (SON)And regulatory bodies--------------------------------- 38
CHAPTER THREE
3.0 Research methodology-------------------------------- 403.1 Source of data----------------------------------------- 40
3.2 Research design-------------------------------------- - 42
3.3 Research population /Sample Size------------------- 42
3.4 Instrument used--------------------------------------- 43
3.5 Data analysis------------------------------------------ 43
CHAPTER FOUR
4.0 Presentation and analysis of data---------------- 45
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4.1 Data presentation--------------------------------- 45
4.2 Data analysis-------------------------------------- 46
CHAPTER FIVE
5.0 Summary, Conclusion and Recommendation---- 595.1 Summary------------------------------------------ 59
5.2 Conclusions----------------------------------------- 60
5.3 Recommendations--------------------------------- 61
Bibliography---------------------------------------- 64
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CHAPTER ONE
1.0 INTRODUCTIONOne of the most important uses of Accounting Information is
decision-making. Decision making has been describes as a purposeful
choosing form a number of alternatives causes of action.
The need for a decision arises in business because a manager is faced
with a problem and alternative causes of action are available, any one of
them which might provide a satisfactory solution to that problem. In
deciding which alternative to chooser the manager will regret all the
information which is relevant to the decision he wants to take.
The accounting provides managers with the necessary information
they need. In this case, it is the accountants that provide the information with
which the management uses for their decision making. This signifies that for
any decision to be taken in an organization, it gives the work of both the
accountants and the managers.
Management can only come up with a good decision, if they are able
to get correct accounting information form the accountant in a situation
where the accountant does not provide correct information; this is bound to
affect the decision making of the management adversely.
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The question now is, how business executive know the company is
embarking on a favorable decision or unfavorable one. The answer to this
question is based on the management and the accounting information.
Management and accounting information have been defined by
various authors, According to the committee of Technology of America
Institute of certified public Accountants founded in 1961, Accounting is the
act of recording, classifying and summarizing in a systematic manner and
terms of money, transactions and events which have in part, a financial
character and interpreting the result thereof.
According to New Encyclopedia Britannica vol.13, the purpose of
accounting is to provide information about the economic affairs of an
organization. This information may be used in a number of ways by the
organizations managers to help them plan and control the organization by
owners and legislative or regulatory bodies to them appraise the
organizations performance and make decision as to help them decide on
how much time or money to devote to the organization, by government
bodies to determine how much tax the organization must pay.
Accounting provides information for all these purpose through the
maintenance of the files of data and the preparation of various kinds of
reports. Most accountant information is historical that is, the accountant
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observes the things that the organization does, records their effect and
prepares reports summarizing what has been recorded. (New Encyclopedia
Britannica Vol.13).
Most accounting data and reports are generated solely or mainly for
company managers. Preparation of these data and reports is the focus of
managerial accounting which consists of three broad functions.
y Cost findingy Budgeting planning and performance reportingy Cost and profit analysis
These points will be explained in the next chapter. Management is the
group of people in business who have over all responsibility for achieving
the companys goals of low cost, creating new and improved products,
increasing the number of jobs available, improving the environment and
accomplishing many other social tasks. To achieve any of these goals, of
course the company must be successful.
Success and survive in a tough, competitive business environment
requires that management concentrates much of its efforts on two major
goads profitability and liquidity. Profitability is the ability to make enough
profit to attract and hold investment capital. Liquidity means having enough
funds on hand to pay depts. When they fail due.
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Managers must constantly decide what to do, how to do it ad whether
the results match the original plans. Successful managers consistently maker
the right decisions based on timely and valid information. Many of this
information are based on the flow of accounting data and their analysis.
Management is one of the most important users do accounting to
provide management with relevant and useful information e.g. the managers
may ask: what was the companys net income during the past quarter? Is the
return to owners adequate? Does the company have enough cash? What
products are most profitable? What is the cost of manufacturing each
product? Bulverde F. needles, J. et al (1984:9).
According to most recent surveys, most top level business executives
have background in accounting and finance than in any other field. The
essence of using accounting information is to enable managers make wise
decision. It is also used (accounting information) to set up system of internal
control to increase efficiency and prevent fraud in companies.
Accounting information aids in profit planning, budgeting and cost
control. In a company, it is the duty of the management accountant to see
that his company keeps good records, prepares proper financial regulations.
Management accountants also need to keep up with the latest development
in the use of computers and in computer systems design.
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Accountants provide many special reports for management decision-
making. This function requires the gathering of both historical and projected
data. It is important for accountants to present the financial effects of
alternative courses of action so that these best courser of action can be
selected. Examples of these special reports are evaluations of proposed new
products, analysis of alternative plan, sites of a proposed advertising
campaign, a long-term financial plan, and a recommendation that a product,
department, or services be dropped. Belivered E. Needles. J.R et al
(1984:11). Some of the ways by which accounting information can be drawn
are:
y General accountingy Cost accountingy Budgetingy Tax accountingy Information system designy Internal Auditing
All these points are to be discussed fully in the next chapter.
In summary, accounting information is primarily concerned with data
gathering form internal and external sources analyzing, processing,
interpreting and communicating the result (information) for use within the
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organization so that management can make more effective plan, decisions
and control operations.
Accounting information is used for the following information needs:
Planning information, Operational control information, organizing directly
and decision-making.
1.1 BACKGROUND OF THE STUDY
Oil prospecting began in Nigeria as far back as 1908 when a Germen
company, the Nigeria Bitumen cooperation started operation in the Araromi
area, west of Nigeria. Their pioneering effort however ended with the
outbreak of First World War in 1914. In 1937, oil prospecting started again
in Nigeria, shell petroleum Development Company of Nigeria was whole
awarded he sole concessionary right covering the whole territory of Nigeria.
Their activities were again interrupted by the Second World War, nut
resumed again in 1947. In 1956, oil wells were discovered in commercial
quantities at Oloibiri in the Niger Delta after several years of prospecting. In
1958, shell started oil production and export from its Oloibiri field.
Other Companies such as Mobil, Agip, Safrap, now (EIF), Tenneco
and Amadeas (Texaco and Chevron) now in 1961 begun exploitation
activities for oil in the onshore and offshore areas of Nigeria. The
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exploration right which formerly was granted to shell alone was now
extended to new comers in line with the government policy of increasing the
pace of exploration in the country. In 1972, Nigeria ranked the seventh in the
world of as a major oil producer.
Since then, we have grown to become the sixth of the largest oil
producing countries in the world. Initially governments interest was only
limited to the oil collection of royalties and other dues offered to it by the oil
companies and making rudimentary laws to regulate the activities of the oil
industry. After the Nigeria civil war, oil had become very important to the
economy. The establishment and strength government control in the
industry.
The ministry of petroleum Resources whose functions were regulatory
was formed and was not until it April 1997 that the merger between the
NNOC and the Ministry of Petroleum Corporation was consummated.
Commercial activities of the former NNOC namely: (exploration,
production, transportation, processing of oil refining marketing of crude oil,
and its refined products) with regulatory functions of the former ministry of
petroleum resources.
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In 1985, the corporation NNPC was recognized into five semi-
autonomous sectors each headed by a sector co-coordinator. The five sectors
were:
y Oil and Gasy Refineriesy Petrochemicalsy Petroleum products makingy Petroleum inspectorates
Today, the NNPC companies six (60 Directorates, and eleven
subsidiaries are charged with the execution of the corporation business. It is
due to the organic development of NNPC that led to reorganizing of the
corporation into five (5) autonomous sectors. Refineries were one of the
sectors as a result of this Port-Harcourt refining company came as one of the
refineries owned by the corporation. Port-Harcourt Refinery Company
limited is in business to provide efficient petroleum refinery services
primarily to NNPC at minimum cost. The company provides quantitative
refinery services for domestic services.
1.2 STATEMENT OF THE PROBLEM
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The central concern of management is decision. In making a sound
decision, the management needs some valuable and accurate information
from the accountant. The accountant is at the services of the management by
providing the management with the necessary information which they need
for decision making.
However, management acquisition and utilization of accounting
information has always been faced with problems ad they are;
y Provision of sometimes inaccurate, inefficient and unreliable accountinginformation by the management accountants.
y Management not making adequate use of the accounting information provided by the management accountant even when the information
produced is on time and accurate.
y The inability of the management accountant to produce the information,timely and the information not being available at the time of decision-
making.
y Inability of the managers to interpret and understand information providedby the government accountants.
y Even when the managers have all the accounting information which theyneed, they do not always make the right decision, this is a result of
management override of policies, that is, management neglecting the
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accounting information and going ahead to come up with any decision or
policy of the choice or giving accounting its rightful place in decision-
making.
The information technology requirement of the company used as a
case study are still behind schedule, most of their operations are still done
manually, this also affect the accuracy and timeliness of their report
information which can thereby affect the decision-making of the
management.
1.3 RESEARCH QUESTIONS
The purpose of the study is to highlight the use of accounting
information in NNPC and to disclose the obstacles involved in the demand
and supply of information which in the research question.
. Has the proper use of accounting information helped the management inmaking efficient and effective decision in the firm?
2. Is there no significant impact of the use of accounting information as an aidto management decision making.
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1.4 STATEMENT OF PURPOSE
This research is aimed at examining how effective and efficient management
apply accounting information in making business decision.
The main objectives of this study are:
y To ascertain the roles played by accurate and quantitative accountinginformation in decision-making.
y To ascertain the type of decision management make based on the accountinginformation at their proposal
y To look into the extent to which manager (s) neglect the use of accountinginformation in their decision making activities.
y To make suggestions for their improvement in the provision and utilizationof accounting information for efficient and effective decision-making in an
organization.
1.5 SIGNIFICANCE OF THE STUDYAccounting information is very important in the life of any business.
It is based on this information that the management will be able to make
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wise decisions. The accountants present the accounting information in such a
way as to assist management in policy and decision making in the day- to-
day operations of the company.
Based on the information produced, the management will have the
benefits on using it to plan and control their current ad future operations
based on it also, the will come up with their management decision and
information of long-term plans. The information also will help the
management report historical information to outsiders.
The account manager based on the management plan
(target/standards) will analyze the performance of the organization and
access whether the organization actually attained the standard set by the
management or not, if there is any variance, the management in charge of
accounts will look into it to find out the causes of the variance, and the
report to the management based on that report. The management can make a
wise decision that will take the cause of the variance into consideration. The
use of accounting information is so important that the management of any
organization cannot do without it. Any organization that does not make use
of accounting information for their decision making is bound to be running
into difficulties that lead to a set back.
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1.6 THE SCOPE OF THE STUDY
The research study is limited to Port-Harcourt Refinery Company
limited, A subsidiary if Nigerian National Petroleum Corporation (NNPC).
Attention will be directed to only relevant accounting information that will
be useful for effective decision-making.
The accounting staff and the managers of their corporation will be
interviewed for the purpose of getting relevant useful accounting
information for decision making, also to determine how effective to use the
accounting information for their decision making. The recommendation and
the conclusion will be based solely on the information gathered form the
company.
1.7 LIMITATION OD THE STUDYThe researcher gained full access to the establishment and the staff of
the company gave him full cooperation. She never experienced any
information of constraint in the cause of his enquiry. Infact the staff of the
research if at all the research and any problems it is financial problems.
1.8 DEFINITION OF TERMS
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DECISION MAKING: This is a process of choosing specific cause
of action form among many possible alternatives. Determine ways and
means for accomplishing the line of action decided upon is also a part of the
decision-making process.
ACCOUNTING: This is the act of recording classifying and
summarizing in a significant manner and in terms of money, transactions
and events which are in part at least of a financial character and interpreting
the results thereof.
INFORMATION: Data that has been processed to produce meaning
relating to a field.
ACCOUNTING INFORMATION: Those processed information
relating to accounting.
MANAGEMENT: This is a group of people in a business who have
overall responsibility for achieving the companys goals.
INVENTORY: This is the stock of goods which a firm posses within
an accounting period.
COST CENTRE: This is the smallest of activities of areas of
responsibility where costs are accumulated.
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PROFIT CENTRE: This is a segment of a business that is
responsible for both its revenues ands expenses, providing information for
such an entity.
PLANNING: The use of information supplied by accountants in
making decision by which management formulate objectives ad chooses a
pattern of action I order to achieve those objectives for future business of the
firm.
CONTROL AND CORDINATION: A process of ensuring that the
cause of actions is maintained and that the desire aims are achieved. This is
done through the use of budget and actual data.
COST DECISION: This is the application of accounting and cost
principles, methods and techniques in the ascertainment of cost and analysis
of savings and or excess as compared with the previous experiences or with
standard.
DECISION: alternative line of actions which are often irrevocable.
ORGANIZATION: In organizing the managers decide how best to
put together the organizations human and other resources in other to carryout
establishment.
COST ACCOUNTING: This refers to the determination and control
of cost.
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GENERAL ACCOUNTING: This is the overall record keeping
preparation of financial statements and report and control of all business
activities.
BUDGETING: This is the planning of financial aspects of business
operations.
QUESTIONAIRE: This is a method of data collection in which the
research questions and question on other relevant issues are put down in a
systematic manner.
MANAGEMENT ACCOUNTING: This is an accounting who is
employed a business.
INFORMATION SYSTEM: This is a system that is used for many
forms, records, flow charts, manuals, control and reports.
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CHAPTER TWO
2.0 LITERATURE REVIEW
The purpose of this review is to understand the use of accounting
information and the role it plays in decision making, seeking the option of
various authors.
2.1 CONCEPTUAL LITERATURE
The success of an organization depends on the effectiveness of the
management in relation to decision making. Effectiveness of management
on the other hand, relies on the source of detail information used in arrived
decision. Accounting practice provides financial, cost, tax, and management
accounting information to enable management make adequate decision that
will enhance the economic growth and survival of the organization
(Aderibigbe 2008).
Management of an organisation has the responsibility of utilizing resources
to generate revenues that is to be shared, among the stakeholders. To
effectively manage the funds, with a view to satisfying all the stakeholders,
management must think very seriously and carefully on all the decisions to
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be made. While the shareholders and creditors to a business the primary
stakeholders base their decision making exercise on past events,
managerial decision making is usually about the future; which is full of risks
and uncertainties. However, accounting information flow through a system,
and this system aid in accuracy and authentication of the decision making of
the organization.
The management accounting view of business may be divided into two
broad categories: (1) basic features and (2) basic assumptions.
Basic Features
The business firm or enterprise is an organizational structure in which the
basic activities are departmentalized as line and staff. There are three
primary line functions: marketing, production, and finance. The organization
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is run or controlled by individuals collectively called management. The staff
or advisory functions include accounting, personnel, and purchasing and
receiving. The organization has a communication or reporting system (e.g.
budgeting) to coordinate the interaction of the various staff and line
departmental functions. The environment in which the organization operates
includes investors, suppliers, governments (state and federal), bankers,
accountants, lawyers, competitors, etc.)
The organizational aspect of the business firm is illustrated in Figure 2.1.
This descriptive model shows that there are different levels of management.
A commonly used approach is to classify management into three levels: Top
management, middle management, and lower level management. The
significance of a hierarchy of management is that decision-making occurs at
three levels.
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2.1.2 Basic Assumptions in Management Accounting
The framework of management accounting is based on a number of implied
assumptions. Although no single work has attempted to identify all of the
assumptions,
Figure 2.1 Conventional Organizational Chart
The major assumptions will be detailed below. Five categories of
assumptions will be presented:
1. Basic goals
2. Role of management
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3. Nature of Decision-making
4. Role of the accounting department
5. Nature of accounting information
Basic Goal Assumptions - The basic goals or objectives the business
enterprise may be multiple. For example, the goal may be to maximize net
income. Other goals could be to maximize sales, ROI, or earnings per share.
Management accounting does not require a specific of type of goal.
However, whatever form the goal takes, management will at all times try to
achieve a satisfactory level of profit. A less than satisfactory level of profit
may portend a change in management.
Role of Management Assumptions - The success of the business depends
primarily upon the skill and abilities of managementwhich skills can vary
widely among different managers. The business is not completely at the
mercy of market forces. Management can through its actions (decisions)
influence and control events within limits. In order to achieve desired
results, management makes use of specific planning and control concepts
and techniques. Planning and control techniques which management may
use include business budgeting, cost-volume-profit analysis, incremental
analysis, flexible budgeting, segmental contribution reporting, inventory
models, and capital budgeting models. Management, in order to improve
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decision-making and operating results, will evaluate performance through
the use of flexible budgets and variance analysis.
Decision-making Assumptions - A critical managerial function is decision-
making. Decisions which management must make may be classified as
marketing, production, and financial. Decisions may also be classified as
strategic and tactical and long-run and short-run. A primary objective of
decision-making is to achieve optimum utilization of the businesss capital
or resources. Effective decision-making requires relevant information and
special analysis of data.
Accounting Department Assumptions - The accounting department is a
primary source of information necessary in making-decisions. The
accounting department is expected to provide information to all levels of
management. Management will consider the accounting department capable
of providing data useful in making marketing, production, and financial
decisions.
Nature of Accounting Information - In order for the accounting
department to make meaningful analysis of data, it is necessary to
distinguish between fixed and variable costs and other types of costs that are
not important in the recording of business transactions. Some but not all of
the information needed by management can be provided from financial
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statements and historical accounting records. In addition to historical data,
management will expect the management accountant to provide other types
of data, such as estimates, forecasts, future data, and standards. Each specific
managerial technique requires an identifiable type of information. The
accounting department will be expected to provide the information required
by a specific tool. In order for the accounting department to make many
types of analysis, a separation of costs into fixed and variable will be
required. The management accountant need not provide information beyond
the relevant range of activity.
An understanding of financial statements is critical to the ability of
management to make good decisions. Financial statements, although
prepared by accountants, are actually created by management through the
implementation of decisions. The historical data from which accountants
prepare financial statements result from actual management decisions. The
reader and user of financial statements is not primarily the accountant but
management. From a management accounting point of view, it is
management rather than accountants that needs to have the greater
understanding of financial statements.
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The income statement and the balance sheet can be viewed as a descriptive
model for decision-making. Financial statements reflect success or lack of
success in making decisions. Management can be deemed successful when
the desired income has been attained and financial position is considered
sound. To achieve managerial success management must manage
successfully the assets, liabilities, capital, revenue and expenses. Financial
statements, then, serve as a ready and convenient check list of decision-
making areas.
The basic balance sheet equation, of course, is A = L + C. A management
accounting interpretation is that the assets or resources come from the
creditors (liabilities) and the owners (capital). It is management
responsibilities to manage both sides of the equation. That is, management
must make decisions about both the resources (assets) and the sources of the
assets (liabilities and capital).
Each item on the balance sheet is an area of management. Stated differently
each item on financial statements represents a critical area sensitive to
mismanagement.
Cash, accounts receivable, inventory, fixed assets, accounts payable, etc. can
be too large or too small. Given this fact, then, for each item there must be
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the right amount or optimum. It is managements responsibility to make the
best decision possible regarding each item on the financial statements. Gross
mismanagement of any single item could either result in the failure of the
business or the downfall of management.
Following are some examples of decisions associated with specific financial
statement items:
Decision-making in Management Accounting
In management accounting, decision-making may be simply defined as
choosing a course of action from among alternatives. If there are no
alternatives, then no decision is required. A basis assumption is that the best
decision is the one that involves the most revenue or the least amount of
cost. The task of management with the help of the management accountant is
to find the best alternative.
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The process of making decisions is generally considered to involve the
following steps:
Identify the various alternatives for a given type of decision.
1. Obtain the necessary data necessary to evaluate the various alternatives.2. Analyze and determine the consequences of each alternative.3. Select the alternative that appears to best achieve the desired goals or
objectives.
4. Implement the chosen alternative.5. At an appropriate time, evaluate the results of the decisions against standards
or other desired results.
2.1.3 Accounting information and Decision-Making
From the descriptive model of the basic features and assumptions of the
accounting perspective of business, it is easy to recognize that decision-
making is the focal point of accounting information. The concept of
decision-making is a complex subject with a vast amount of management
literature behind it. How businessmen make decisions has been intensively
studied. In management accounting, it is useful to classify decisions as:
1. Strategic and tactical
2. Short-run and long-run
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Strategic and Tactical Decisions
In management accounting, the objective is not necessarily to make the best
decision but to make a good decision. Because of complex interacting
relationships, it is very difficult, even if possible, to determine the best
decision. Management decision-making is highly subjective.
Whether a decision is good or acceptable depends on the goals and
objectives of management. Consequently, a prerequisite to decision-making
is that management has set the organizations goals and objectives. For
example, management must decide strategic objectives such as the
companys product line, pricing strategy, quality of product, willingness to
assume risk, and profit objective.
In setting goals and objectives, it is useful to distinguish between strategic
and tactical decisions. Strategic decisions are broad-based, qualitative type
of decisions which include or reflect goals and objectives. Strategic
decisions are non quantitative in nature. Strategic decisions are based on the
subjective thinking of management concerning goals and objectives.
Tactical decisions are quantitative executable decisions which result directly
from the strategic decisions. The distinction between strategic and tactical is
important in management accounting because the techniques of management
accounting pertain primarily to tactical decisions. Management accounting
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does not typically provide techniques for assisting in making strategic
decisions.
Examples of strategic decisions and tactical decisions from a management
accounting point of view include:
Once a strategic decision has been made, then a specific management tool
can be used to aid in making the tactical decision. For example, if the
strategic decision has been made to avoid stock outs, then a safety stock
model may be used to determine the desired level of inventory.
The classification of decisions as strategic and tactical logically results in
thinking about decisions as qualitative and quantitative. In accounting
practice, the approach to decision-making is basically quantitative.
Accounting information deals with those decisions that require quantitative
data. In a technical sense, accounting information consists of mathematical
techniques or decision models that assist management in making quantitative
type decisions
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2.2 THE CONCEPT OF ACCOUNTING INFORMATION SYSTEM
In the course of this research, it was showed that accounting information
has developed over the years from recording cash movement and
transaction, with third parties to the provision of financial data to help
management plan and measure how efficiently activities are being managed
and data to assist in solving problems as they arise.
Accounting information refers to report or relevant financial information
regarding the economic activities of an organization or unit to users (Reger
H. Herman Sonetal 1983). Accounting information developed as far back as
4500 B.C where stewardship accounting information were able to plan their
stocks and wealth. All that was done was the keeping of records of wages,
taxes, due of trade by barter and early 19th
century when the Greeks and
Romans developed a better and systematic book keeping technique to the
present day when machines are used in the accounting process. Accounting
has since received remarkable improvement with the increase in the demand;
for information in planning and decision-making result from changing
environment, has always brought about changes in accounting. Information
made of what is accepted as accounting today would not have been
recognized as such 50years ago changing social attitudes combined with
development in information technology, quantitative methods and
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behavioral sciences have affected radically the environment in which
accounting operates today.
Accounting is moving away from the procedure base encompassing record
keeping and such related work as the preparation of a budget and final
accounts towards the adoption of a role which emphasizes social importance.
(M.W.E Gautier and B under down 1982).
Accounting information are financial position statements and other
reports supplied by the accountant which shows the true and fair financial
position of the economic activities of the organization. Accounting
information includes the balance sheet, profit and loss account and cash flow
statements.
Balance sheet according to Move Gautier and Under Down (1982:29) is the
statement of financial position that lists the accounting period. It provides a
measure of the capital invested by the owners in company or business. It is
also made up of four main sections which are: fixed assets, current asset,
capital and liabilities. This classification simplifies financial analysis of
business.
Trading profit and loss account shows the profitability of the business.
It also shows the amount of economic activities that took place during the
preceding accounting period and profit derivable from such economic
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activities. It shows the gross profit as well as the net profit of the
organization within the accounting period.
Gross profit is the sum of sales less the cost of goods sold.
Cash flow statement is a statement that shows the cash
movement in transaction engaged in by the firm for a particular period
usually one year. The cash flow statement was introduced to replace the fund
flow statement in order to make it easier for users of financial statement to
know the cash available at hand at a given period.
We have two methods of calculating the cash flow in a firm, they are:
Direct method
Indirect method
The balance sheet, profit and loss account and cash flow statement together
constitutes the financial statement of an organization.
The decision making in any organization, accounting information available
to the board are of three (3) types namely:-
y Financial accounting informationy Costing accounting informationy Management accounting information
Financial accounting- According to R. Anao, it refers
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to the act of recording, classifying and interpreting the financial statement in
monetary terms in accordance with accounting standard. It provides
information for external users like government, shareholders e.t.c
Management accounting - According to Ade
Omolehinwa, defined it as the process of identification, measurement,
accumulation, analysis, preparation, interpretation, and communication of
financial information, which is used by management to plan, evaluate, and
control within an organization. It provides information for internal users.
Costing accounting- This is a specialized branch of accounting
concerned with the determination of cost.
It enables the managers get information about the cost of operation of each
department for controlling current operation and planning future operation.
THEORETICAL AND EMPIRICAL REVIEW
A review of the literature on accounting practices suggests that accounting
practices are influenced by contextual factors including wider environmental
and organisational factors (Flamholtz 1983; Hopwood 1987; Rayburn and
Rayburn 1991). The influence of contextual factors is likely to lead to
differences in the role and utilisation of accounting information in decision-
making strategies and processes and importantly to differences in managers
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preferences. However, management accounting literature has also suggested
convergence and uniformity of management accounting practices because of
the increasing adoption of similar management philosophies and system
designs ( Carr 2006; Liu and Pan 2007). Indeed, institutional theorists have
argued that the embeddedness of organisations in their institutional context
has resulted in similar organisational identities and structures leading to
congruence between the external institutional environment and organizations
(Meyer and Rowan 1977b; DiMaggio and Powell 1983).
In the move towards globalisation, the concepts of congruence with the
institutional environment and organisational isomorphism have led to the
assumption of convergence of accounting practices. Indeed, it has been
argued that the increasing pressure of external factors such as market
pressures, government regulations and/or financing requirements have
resulted in organisations increasingly adopting similar management
structures and processes (Ittner and Larcker 1997; Granlund and Lukka
1998).
While agreement exists that external factors have an influence on
companies management structures and processes, the neo-institutional
approach has been criticised for exclusively focussing on external factors
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(Greenwood and Hinings 1996; Hirsch and Lounsbury 1997; Lounsbury
2007). There is evidence, which reveals the influence of internal factors on
management processes and structures; emphasizing the importance of a
holistic analysis. Indeed, a holistic analysis enables the researcher to
integrate other institutional influences, multiple logics and importantly it
considers the cultural framework and the personal characteristics of decision
makers (Lounsbury 2007). Accounting research has been criticised for its
focus on technical aspects and importantly for neglecting the importance of
culture and other contextual factors that influence professional judgement,
which has to be applied increasingly across all accounting disciplines (Patel
et al. 2002; Patel 2003, 2004; Lounsbury 2007).
The strong focus on isomorphism in management accounting research has
resulted in a number of articles that provide evidence about increasing
similarities and global adoption of management accounting practices and
decision-making strategies and processes (Ittner and Larcker 1997; Granlund
and Lukka 1998b; Ben-Arieh and Qian 2003; Carr 2005; Liu and Pan 2007).
However, the role and utilisation of accounting information in these
decision-making processes and strategies has not been rigorously analysed.
Indeed, the literature provides evidence about differences in decision-
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making strategies, but has largely neglected the role and utilisation of
accounting information in these processes. Importantly, the academic
literature has failed to show the influence of contextual factors such as
managers preferences and structural pressures to provide a holistic analysis.
An exception to the limitations of management accounting research in
relation to differences in the utilisation of accounting information has been
provided by Carr et al. (1994) and Carr (1994; 1998) who have shown that
national differences exist in relation to the focus on strategic and financial
objectives and importantly that these differences can lead to variations in the
role, interpretation and utilisation of accounting data such as Return on
Investment (ROI) (Carr et al. 1994; Carr and Tomkins 1998; Carr 2006). In
their study of the automobile industry in different countries, Carr et al (1994)
provide evidence that similar management accounting tools are applied but
that the interpretation of the data and the focus on these accounting figures
differs between countries. Importantly, they revealed a preference for longer
term strategic objectives in Germany compared with the shorter term
objectives of British automobile manufacturing firms.
While Carr et al. (1994) provide valuable insights into the role and
utilisation of accounting information in decision-making processes and
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strategies and managers preferences on this utilisation, they nevertheless do
not engage in a deeper and more contextual analysis of the drivers of this
utilisation of accounting information and managers preferences. Indeed, they
do not consider the complexity that determines managers preferences for
certain objectives.
As such, Carr et al. (1994) provide evidence that shows the existence of
national differences, but they do not attempt to provide a holistic
explanation.
Concisely, international accounting literature and in particular cross-cultural
studies have been criticised for neglecting the importance of relevant
historical, sociological and psychological literature to explain differences
and often address culture as a black box (Harrison and McKinnon 1999;
Patel et al. 2002; Patel 2003; Doupnik and Tsakumis 2004; Patel 2004). In
contrast, this study addresses the influence of strategic and financial
objectives by taking into account relevant historical, sociological and
psychological literature to provide fresher and sharper insights into the
complexities of this topic.
Later studies by Carr (2005; 2006) indicate that intra-country differences
exist in relation to convergence of management approaches and that these
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differences can be related to ownership structures. Carr (2006) argues that
differences between strategic approaches of Anglo-Saxon and German
public companies are diminishing with a stronger focus on short-term
financial perspectives as a result of convergence pressures. However, these
changes are far less prominent in German family firms that Carr (2006)
perceives as being less influenced by institutional changes. Although Carr
(2005, 2006) only provides a limited analysis of the factors that shape
strategic objectives in different settings, his emphasis on the relevance of
ownership structure is important. Indeed, no study has evaluated the role and
utilisation of accounting information in decision-making strategies and
processes and managers preferences of this utilisation in a cooperative
setting.
Along Carrs (2005) line of argument, we evaluate the influence of the
cooperative structure on the role and utilisation of accounting information in
decision-making in general and the influence on short-term financial versus
long-term strategic objectives in particular.
Psychological studies have provided evidence that intuition can be an
important part of decision-making (Mintzberg 1976; Simon 1987; Hall et al.
2007). Researchers have argued that intuition is part of every decision and
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that intuition and analysis are complementary (Meyer and Scott 1983; Simon
1987; Frantz 2003). Furthermore, intuition is not seen as an abstract concept,
but as the result of a subconscious process that considers previous decisions
and experiences. Intuition is thus thought to be sourced by concepts,
techniques, patterns and beliefs that are impressed on peoples minds and
increase through experience, knowledge and education (Barnard 1938).
Intuition has also been regarded as rational, because of its ability to extend
the limited boundaries of rationality by drawing on knowledge, experience
and recognition of familiarities (Simon 1987). Furthermore, intuition is
thought to be particularly important in ill-structured situations, in which
managers face time and information restrictions. The subconscious feeling
of experienced managers can then be a powerful factor that leads to
successful management, while a focus on rational management could result
in a paralysis by analysis (Mintzberg 1976; Hurst 1984; Langley 1995;
Kuo 1998; v. Werder 1999).
Although intuition has been established as a relevant factor in decision-
making processes, its influence on the role and utilisation of accounting
information has not been evaluated. The literature on convergence of
management accounting practices suggests an increasing focus on short-term
financial objectives that are driven by financial performance analyses, which
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might limit the importance of intuition in decision-making strategies and
processes (Carr 2005, 2006). However, the extent of this convergence
towards short-term objectives is still debatable. Moreover, a number of
questions remain regarding the relation between intuitive decision-making
and the use and utilisation of accounting information. An interesting aspect
is the extent to which intuition can become a substitute for accounting
information and the extent in which intuitive feelings lead to an engagement
in a deeper analysis of accounting information.
Other influencing factors that are likely to determine the use of accounting
information and managers preferences on this utilisation are the cultural,
social and educational background of managers. The Nigeria culture and
people have been known for a tendency to follow rules and analytic or
technical evaluations. Indeed, users of accounting information are said to
focus on objective information and a desire to enable reliable analyses that
anticipate opportunities as well as possible risks (Lubatkin and Floyd 1997).
These assumptions indicate that decision-making should rely to a greater
degree on the use of accounting information than on intuition. However, the
influence of culture has to be seen in the context of other factors. Thus, this
study evaluates the role and utilisation of accounting information in the
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context of the dairy cooperative setting and under consideration of both
external and internal factors of influence.
Studies have provided evidence that the complexity of financial decision-
making has increased and importantly that it has resulted in an increasing
implementation of sophisticated and efficient analysis techniques by
managers in different nations. Moreover, an increasing dominance of
sophisticated Discounted Cash Flow (DCF) methods has been indicated,
which are however less used in strategic investment decisions (Pike 1983).
Yet again, the literature on these aspects does not provide a holistic
explanation when and how managers use this accounting information
(Wouters and Verdaasdonk 2002).
In relation to general information requirements, the literature suggests that
information increases confidence in judgements (Hall et al. 2007) and
importantly that justification pressures lead to an increase in utilized
information (Huber and Seiser 2001). As a preference for reliable and
objective analysis is evident in a countrys culture, managers should have a
relatively high demand for information in general and accounting
information in particular. Furthermore, justification pressures are an
important feature of a cooperative company structure as managers often
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need the members approval for decisions. As such, we would expect
elaborate information requirements. However, the influence of one factor
should not be measured without considering the relevant context. Thus, this
case study provides evidence about the importance of these factors within
the institutional setting.
Indeed, we reveal that the organisational setting and other contextual factors
such as the legal environment, market and politics need to be considered to
evaluate the role and utilisation of accounting information in decision-
making strategies and processes.
According to Meyer (2007) accounting plays a significant role within the
concept of generating and communicating wealth of companies. Financial
statements still remain the most important source of externally feasible
information on companies. In spite of their widespread use and continuing
advance, there is some concern that accounting practice has not kept pace
with rapid economic and hightechnology changes which in invariably affects
the value relevance of accounting information.
The importance of Meyers assertion is reinforced by massive accounting
fraud in developed countries especially US, rapidly changing business
environment and reports by some researchers that value relevance of
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accounting information has declined(Lev and Zarowin, 1999and Francis and
Schipper,1999).
However, a number of researchers claim that accounting information has not
lost its value relevance (Vieru, Perttunen and Schadewitz, 2005 and Collins,
Maydew and Weiss, 1997). According to Beaver (2002), value relevance
research investigates the association between a security price dependent
variable and a set of independent accounting variables. There are several
approaches to this definitional explanation. Francis and Schipper (1999) and
Nilsson(2003) define it from four perspectives: (a) the predictive view of
value relevance-the accounting number is relevant if it can be used to predict
future earnings, dividends, or future cash flows (b) the information view of
value relevance the value relevance is measured in terms of market
reactions to new information (c) fundamental analysis view of value
relevance-the accounting information is relevant in valuation if portfolios
formed on the basis of accounting information are associated with abnormal
returns and (d) the measurement view of value relevance the financial
statement is measured by its ability to capture or summarize information that
affects equity value.
The studies on value relevance are broad and diverse. It is important to
define the stricture of concept of value relevance for this study. Some
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researchers may regard ability of accounting information to summarize
business transactions and other events(the measurement view of value
relevance) as sufficient proof of value relevance of accounting data, others
may place greater emphasis on earnings prediction (the prediction view of
value relevance) or information content of accounting data(the information
view of value relevance), and so on. Therefore, the approach developed by
Ramesh and Thiagarajan, 1995 is used for this study to determine the value
relevance of accounting data in Nigeria. This is ability of financial statement
to capture or summarize information that affects equity value.
Germon and Meek (2001) believe that accounting exists because it satisfies a
need - primarily a need for information. In order to be relevant accounting
data must among others, be quick to respond to users (particularly the
investors) needs. Generally, investors are not in a situation to directly assess
the performance of companies in which they intend to invest. They usually
depend on financial reports prepared by the management of such
organizations. Financial report is one of the best sources of accounting
information about a company. Financial reporting is an essential part of
disclosure and helps investor to discover investment opportunities. The
primary purpose of financial statements is to provide information concerning
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the financial situation of the company, its operational results, any changes of
control in the company and cash flow.
Several recent studies on use of accounting information for decision making
are carried out in the developed world. However, few studies in Nigeria
prospect were available. This study tends to add to the existing literature and
assist the researchers to determine whether the result agrees or digresses
from the previous studies.
2.4 USES AND USERS OF ACCOUNTING INFORMATION
The information provides by accounting helps the manager to make
decisions. Robert and Frank (1980:6) pointed out that the information
reveals how closely the companys objectives are being met (score keeping).
y The information directs attention i.e. it answers questions about theoperations or individuals that need attention in order to bring the
organization closer to its objectives.
y The information helps in solving problems i.e. it answers the questions aboutthe best to perform a specific task of the best solution to a given problem,
Garrison (1979:11) confirmed the first author by saying that management
uses the information to plan effectively and focus attention on deviation
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from plans. It is also used to direct day-to-day operation and to arrive at the
best solution to the operating problems faced by the organization.
THE USERS OF ACCOUNTING INFORMATION
Accounting information serves as a base for planning and decision
making. It provides the various users the necessary data assistance in this
direction. These users according to Bulverde E. Needles Jr. Et al (1984) P.N)
could be categorized into:
y Managementy Users with direct financial interesty Users with indirect financial interest.
MANAGEMENT
One cannot conceive of any organization that does not have any
objective. The primary objective for any business organization is profit-
making (Hussey, D.E 1978) this responsibility rests solely on the
management. Although other environmental factors may modify the degree
of profit sought, it must be realized that adequate profit is necessary for the
survival and growth of the business. To achieve the objectives, management
must be able to plan, control and coordinate all the activities of the
organization.
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USERS WITH DIRECT FINANCIAL INTEREST
This class of information users includes:
Investors (shareholders) and potential shareholders, creditors and potentialcreditors and employees of the organization.
Investors and potential investors.SHAREHOLDERSAND POTENTIALSHAREHOLDERS
These are primarily interested in the financial information and
management serves as trustee of the investment of shareholders have
therefore found it necessary to know the performance of the business in
which they have invested.
They therefore make use of accounting information like annual
reports and other financial statements.
CREDITORS AND POTENTIAL CREDITORS
Creditors include debenture holders of interest and money-lenders
who expect returns inform of interest on the debentures or principal creditors
and potential creditors alike have direct financial interest in the firm.
A critical study of the firms annual report reveals the viability of the
firm and the ability of the firm to pay the creditors. Banks, finance,
companies, mortgage companies, security firms, insurance firms and other
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who lend money. (Bulverde E. Needles Jr, 1984:4) Creditors therefore make
use of accounting information.
EMPLOYEES
Labour unions and employees study financial statement of companies
as part of their duty to prepare for important labour negotiations. Based on
the information received through the financial statements, they are able to
negotiate for higher pay bonus, other fringe benefits and other better
working conditions. The use of accounting information is therefore
important to employee.
USERS WITH INDIRECT FINANCIAL INTEREST
Changing environment factors have made the society large for users
of accounting information. It is common knowledge that the government
through her agents and the general public make use of accounting
information in their day-to-day activities. These agents include tax
authorities, regulatory agencies, economic planners and other groups.
TAX AUTHORITIES
Tax revenue is one of the major sources of finance of the government.
This has prompted the establishment of internal revenue sections in all levels
of government to deal with matters relating to the assessment and collection
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of taxes. Taxes such as PAYE, Value Added Tax (VAT) and Excise Tax are
collected.
REGULATORY AGENCIES
These are government agencies set up for the purpose of regulating
public corporations and companies. These agencies make use of accounting
information to determine the rate at which shares should be used.
ECONOMIC PLANNERS
Government wants to take active part in planning and forecasting
information. Economic planners use accounting information to determine
total production inventories, income, dividend, taxes and other economic
statistics. This class of users of information is the general public. They are
mainly consumers who have the interest in the financial statement of the
firms for the purpose of ascertaining the success of the firm, in their
surroundings.
2.3. ACCOUNTING INFORMATION SYSTEM IN JDPC
These are those processed information relating to accounting. As we
know that accounting is the act of recording, classifying and summarizing in
a significant manner and in terms of money transactions and event which are
in part at least a financial character and interpreting the result thereof. After
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analyzing and classifying these transactions and bringing them into
accounting information, users which have been identified earlier, the
companies and allied matters Degree 1990 defined financial/statements to
include:-
y Balance sheety Profit and loss accounty Value Added statementy Notes to the accounty Fund flow statementy Statement of accounting policiesy Five year financial summary.
The statements will be presented to the management and based on them
the management will then take its decision.
2.4. FEATURES OF ACCOUNTING INFORMATION IN JUSTICE
DEVELOPMENT AND PEACE COMMISION (JDPC).
The primary quantitative features to be used in differentiating better
information from unuseful information are relevance and reliability,
according to the Financial Accounting Standard Board (FASB) statement of
account concept No 2.
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Relevance:- in JDPC, relevance of accounting information is its predictive
value. Also, decision can be made between information that alters
expectation and accounting information that merely confirms information
and leads to a new course of, such financial information has relevance to
user. Thus, accounting information has the ability to affect a decision
makers course of action.
Reliability:- it was discovered from the information gathered that a
specific method of treating account has been in operation since the
beginning of the operation and the method adopted has been using
consistently, and so one could say that the information is not too far reliable
because users still depend on it.
However, the factors that determine the reliability of accounting
information in Justice Development and Peace Commission includes:-
y Constituency: - In Justice Development and Peace Commission (JDPC), thesame method applies to similar accounting events. Statement of
Accounting Standard One (SAS 1) stated that a business should use one
method; policy and procedure despite the various classes of way it can be
done.
y Comparability: - From the information gathered from the research work, itwas observed that the examination of the accounting information is
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presented in such a way that similarities and differences which appear in the
statement reflect true similarities and difference.
yNeutrality: - Justice Development and Peace Commission( JDPC) has a very
good characteristic of being completely neutral because it was observed that
accounting information in the report of economic activities way it really is
without add or reduce, increase or decrease or try to formulate any other
information of its own.
y Fairness: - it was observed that the financial information is fair and free fromall forms of bias.
y Comprehension: - information gathered showed that user of accountinginformation e.g. external users government, creditor and internal users
shareholder, auditor do understand the information in it.
2.5. THE EFFECT OF INTERNAL CONTROL ON DECISION
MAKING USING ACCOUNTING INFORMATION AS ITS BASE.
In Justice Development and Peace Commission, in order to carry on
activities in an efficient and orderly manner and ensuring adherence to board
of directors policies as well as possible the completeness and accuracy of
records, there is a system established by the board to control the whole
system of activities and it is known as Internal Control System.
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The managers admitted that as a result of their internal control, the
accounting information is accurate and is readily for decision making. The
individual components of internal control is known as control a internal in
general and also in JDPC.
Internal control and accounting information as completely
interdependent.
Internal control serve as a means of ensuring the completeness and
reliability of accounting information as completely interdependent for
managers for decision making, whole accounting is an act of recording,
analyzing, processing and reporting financial information.
In order to make any decision, the board of directors must have a reliable
estimate of financial impact of that decision. What is needed is an estimate
of the various books of accounts such as: - the balance sheet, the profit and
loss account etc and also included is the accounting ratio or ratio analysis; all
these are due to using the internal control system.
The decision for planning and controlling the activities of the commission
require adequate / frequent and reliable information, therefore there is need
for the information to be reliable or dependable because; as Ray H.G.
Contends bad information leads to bad decision.
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Generally, every successful plan depends on a right and effective
decision. In the absence of a steady flow of information, board would have
no power to do anything and would no longer achieve their aim.
The decision, which the board makes, are of various types. But however, the
decisions made by the board of Justice Development and Peace Commission
for the purpose of this course can be divided into two which are:-
y Decision not wholly related to accounting information or decision not evenrelating to accounting information.
y Those related to accounting information.Decision making by the board using accounting information include:-
y To decide on the extent of directiony Premising (definition of objectives)y Achievement of goal proceduresy Motivation (ways workers can be motivated)
EXTENT OF DIRECTING:- The board makes this direction possible by
taking decision on who is likely fit to direct in the organization. In JDPC for
example, the board manager directs all the activities on behalf of the board
of directors.
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PREMISING (DEFINITION OF OBJECTIVES):- Decision are often taken
by the board in order for employees to know their main aim and work
towards such direction. In JDPC, their aim is for people to
MOTIVATION OF WORKERS:- often this is done by the management.
But the board also partake in such decision in JDPC. The information
received showed that, workers salary has been increase ever since the
organization started. This showed that the organization have good operators
and good ground of investment. While decision related to accounting
information provided by the board include:-
y Decision on how to make effective use of available resourcesy Decision on how to reduce expenditurey Decision on how to improve operating resultsy Decision on how to prevent insolvency and liquidityy Decision about how to increase current assets and current liabilities e.t.c
The various decisions and the accounting information are as follows:-
TABLE 2.1 DECISION AND ACCOUNTING INFORMATION
DECISION TAKEN ACCOUNTING INFORMATION NEEDED
y Effective use of available resources 1. Debit securityratio
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2.Working capital ratio
3.Cash fund flow statement
4. Asset/ liability ratio
y Reduction of expenditure 1.Working capital ratio2.Net profit to gross earning%
3. Expense to sales%
4. Profit to capital employed
5.Expenses to gross profit
y Investing in other financial institution 1. Current ratio2.Debtors collec-
tion period
3.Creditors coll-
ection period
4.Price earning
ratio
5.Total debt to
Shareholders funds
y Liquidity 1.Liquidity ratio2.Loan ratio (cash)
y Efficiency of operation result 1.Gross earning to total
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asset ratio
2.Asset turn over ratio
3.Net profit to capital
Employed
y Insurance cover 1.Debt security period2.Debtors collection period
3.Creditors payment period
y Staffing decision 1.Asset for employee ratio2.Sales to capital employed ratio
y Loan to customers 1.Loan deposit ratio2.Earning yield
3.Liquidity ratio
4.Working capital ratio
y Employment of workers 1.Asset per employee ratio2.Net profit to gross earning
The interpretation of accounting information needed for the various
decision are:-
y Effective use of available resourcesDebt security ratio:- Shareholders fund : 1
Total Asset
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2009 2008
# #
Shareholders fund 73986826 71922661
Total Asset 113265699 102858306
= 73986826 :1 71922661 : 1
113265699 102858306
=0.65:1 0.69:1
The debt security ratio in 2008 is more better than 2009.
2.5 PROBLEMS ENCOUNTERED BY NNPC IN THE USE OF THEIR
ACCOUNTING INFORMATION SYSTEM
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NNPC generally has peculiar problem that are associated with the use
of accounting information, perhaps the two basic problems experienced by
this firm are:
1. inadequate managerial expertise;2. inadequate utilization of available accounting information
1. INADEQUATE MANAGERIAL EXPERTISE;
This constitutes a problem whereby people employed to handle
management position lack necessary experience but may be employed by
reason of their relationship with the owners of the business. Considering also
the accounting packages available in firms recently, due to their
advancement technology, these managers may be found wanting in matching
skills to adequately cope with these trends. This does not enhance
effectiveness and efficiency in output. This problem can be overcome and
performance improved by organizing training programmes and drills to
better acquaint the management personal with the latest development of the
managerial staff to ensure that inputs is maximally utilized.
2. INADEQUATE UTILIZATION OF VAIALBLE ACCOUNTING
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In most organizations, is a worthy of role that available accounting
data is not effectively utilized especially in the aspect of decision-making
This can be tacked to inability to decide or interpret the can accounting
information and relate to the situation or challenge at hand at each point in
time. However, this can be corrected by the presentation of facts in a manner
that can be easily understood by the decision-making manager that may not
be acquainted with accounting terms. Due to care and skill should also be
employed to ensure that accounting information is carefully exhaustively
pursued and edited and nothing is left without consideration.
2.6 THE ROLE OF STANDARD OR ORGANIZATION OF NIGERIA
(SON) AND REGULATORY BODIES
The statutory functions of standard organization of Nigeria (SON) by
section are as follows:
1 To sponsor such national international conference as it may carry.1. To undertake preparation and distribution of standard samples.2. To compile and publish general scientific or other data.3. They also coordinate all activities relate to its function throughout Nigeria
corresponding national organizations i such fields of a view to securing
infirmity in standards specification.
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4. They also develop methods for testing of materials, suppliers and equipmentof development of government of the federation or state and private sectors.
5. They also foster interest in the recommendation and maintenance andacceptance to the general public.
6. They also organize test and do everything necessary to ensure complianceapproved by the council.
7. They organization also undertaken such research as may be necessary forunder this Act. And for that purpose it shall have power to make use of
private upon such terms and contributions as may be agreed upon between
the people concerned
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CHAPTEWR THREE
3.0 RESEARCH METHODOLOGY
This chapter is design to expose the research methodology used in this
study. It discussed the sources of data, research population, sample size and
frame, instruments used, data analysis and statistics method used in the
study.
3.1 SOURCES OF DATAThis talks about the sources by which the researcher obtains
information he used for the study
The sources include:
Primary data
Secondary data
PRIMARY DATA: Here information is obtained from its original sources.
The major forms of primary data are;
a. personal interviewb. Questionnaire
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PERSONAL INTERVIEW: This was conducted by the researcher her
most of the accountants and managers in the company used as the case study
were interviewed is the information concerning the companys background.
The objectives of the company and also the companys accounting
information system and management used of accounting information.
QUESTIONAIRE: Well structures questionnaire designed containing
questions that dealt with aspects of the companies accounting information
system. The questionnaire was formed in such a way that they will be able to
provide the answers that will go a long way in helping to solve those
problems stipulated in the statement of problem and such answers were
analyzed.
SECONDARY DATA: The library constitutes the main sources of
secondary materials used for this work. The information gathers form this
effect, the libraries of Abia state Polytechnic, University of port-Harcourt,
Federal Polytechnic Nekede Owerri and other private libraries were used.
They provide the information used in for this work. Through textbooks,
journals, newspapers, magazines, periodicals and handouts.
3.2 RESEARCH DESIGN
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This described how the data was collected and analyzed. This was
done by the distribution of questionnaire to select samples, and oral
interview was also conducted by the researcher.
3.3 RESEARCH POPULATION/SAMPLE SIZE
The population under study is made up of the top managers and the
chief accountants of port-Harcourt Refinery Company limited. There are
thirty three (33) managers and fifty-four (54) chief accountants in the
establishment making total of eighty-seven (87). The research adopted
random sampling methods whereby all the managers and the managers
accountants have the same chance of being included in the sample. The
sample was determined using the proportion of each group of the population.
Thus for managers 33/87 x 33 = 12.51 and the accountants 54/87 x 54 =
33.51 making a total of forty-six (46) in this case, 46 questionnaires were
distributed thirteen (`13) to managers and thirty-three (33) to accountants.
3.4 INSTRUMENT USEDPersonal interviews and questionnaires form the major method used
by the researcher.
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3.5 DATA ANALYSIS TECHNIQUESThe data was analyzed using tables and percentage some of the
responses were critically analyzed and summarized. This is to present the
result obtained so as to interpret it at a glance.
Key to data analysis is as follows;
Yes number = number of respondents that said yes
No number = number of respondents that said NO
% = Percentage
Total = Total number of respondents.
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CHAPTER FOUR
4.0 PRESENTATION AND ANALYSIS OF DATAThis chapter concentrates on the presentation and analysis of the
Reponses to the questionnaires, which were designed to disclose facts
concerning the subject matter.
The questionnaire which contained twenty-six (26) questions was
divided into three sections: section one was meant for everybody both the
manager and the accountant. Section two was made for accountants only and
section three for the managers only. A part form the questionnaires,
information was only gotten form face to face interview with some of the
managers and accountants. At these responses to the questionnaires were
analyzed in sections taking only the most important question in each section.
4.1 DATA PRESENTATION
This chapter concentrates on the presentation of the response to the
questionnaires which were designed to disclose factors concerning the
subject matter. Section one was meant for everybody both the manager and
the accountant section two was made for accountants only.
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4.2 DATA ANALYSIS
The questionnaire was analyzed as follows:
TABLE 1 QUESTION 5
Is your accounting department different form your financial
accounting department?
Response No of respondents %
Yes 33 100%
No - -
Total 33 100%
From the above table, it is observed that the cost accounting
department is different form the financial department of the organization.
TABLE 2, QUESTION 6
If the answer to question 5 is yes what is the work of the
accountant?
Responses No of respondents %
Decision making - -
Information supplier 8 24
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A&B 25 76
Total 33 100%
From the above table, Nil % of the respondents are of the opinion that the
work of the accountant is decision making, 24% said it is information
supplier and 76 said the accountant works are both decision-making and
information supplier.
TABLE 3, QUESTION 7
Do accountants perform the following roles in your company: (1)
product data (2) Analyze data (3) Interpret data (4) Verify data?
Response No of respondents %
31 33 94%
No 2 6
Total 33 100%
From the table above, 94% of the respondents are of the view that the
accountants supply all the decision-making while 6% said No that
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accountants do not supply all the information needed for management
decision-making.
TABLE 4, QUESTION 9
Do managers at times seek your assistance in interpreting accounting
information where they do not understand?
Response No of respondents %
Yes 4 12%
No 29 88
Total 33 100%
From the table above, 91% of the respondents claimed that managers seek
their assistance ion interpreting accounting information where they do not
understand while 9% of the respondents are with contrary opinion.
TABLE 5, QUESTON 10
Do you at times have problem about the information to be supplied to
management?
Response No of respondents %
Yes 4 12%
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No 29 88
Total 33 100%
12% of the respondents are of the opinion that they at times have problem
about the information to be presented to the management while 885 claimed
that they do not have problem in deciding on the information to present.
TABLE 6, QUESTION 12
In your opinion do managers apply accounting information in decision
making?
Response No of respondents %
Yes 30 91%
No 3 9
Total 33 100%
From the table above, 9% of the respondents claimed that managers apply
accounting information in their decision-making while 9% of the
respondents claimed otherwise.
TABLE7, QUESTION 14
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How well in your opinion, do you think managers apply accounting
information in decision-making of the company?
Response No of respondents %
Very well 20 61
Fairly well 10 30
Very poor 2 6
Not at all 1 3
From the table above, 61% of the number of the respondents claimed that
managers apply accounting information in their decision-making very well
30% said fairly well, 61% very poor while 3% of the respondents said that
they do not apply the information in their decision-making at all.
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TABLE 8 QUESTIONS 15
Are the aims of accounting information being achieved in your company?
Response No of respondents %
Yes 31 94%
No 2 6
Total 33 100%
From the table above, 94% of the respondents are of the view that the aim of
the accounting information is being achieved in the organization while 6%
claimed otherwise.
TABLE 9 QUESTIONS 17
This is section three and is for managers only:
Do you need accounting information for decision-making in your
organization?
Response No of respondents %
Yes 33 100%
No - -
Total 33 100%
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From the table above table, 100% are of the opinion that they need
accounting information for their decision-making
TABLE 10 QUESTIONS 18
Do accounting supply you with information you need for decision-making?
Response No of respondents %
Yes 28 85%
No 5 15
Total 33 100%
From the above table 85% of the respondents are of the opinion that
accountants supply them with all the information they need in decision
making of the organization while 15% claimed otherwise.
TABLE 11 QUESTIONS 19
If the answer to question 10 is yes, do you have any problem in
understanding the i.e. the information supplied by the accountant?
Response No of respondents %
Yes 3 9%
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No 30 91
Total 33 100%
From the above table, 91% of the respondents claimed that they do not have
problem in understanding the informati