The Effect Of Financial Accounting Reporting On The Management Of A Business. A Case Study Of Agu Bros Trading Company Limited 1987

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY:

Financial accounting encompass activities related to the preparation of certain reports, which is known as financial statement.  These statement reports the financial position of a firm at a particular time, the firms activities and resulting profit or losses during the most recent period, and the flow of resources occurring within the firm during the same period.

WALGERNBAC and Co (19) defined financial Accounting as the process of (1) recording  (2)  Classifying  (3) Reporting and interpreting the financial data of an organization.

Following this definition, financial accounting is faced with three major roels recording, classifying and reorting financial data of an organization or business.  In recording financial accounting is engaged with the role of taking note of all he financial activities that takes place in the business.

Classifying includes the grouping of these activities in uninformity while reporting is concerned with the preparation of reports known as financial statements.

These statement reports the financial position of a business at a particular time, the forms activities and resulting profit or loss and source and application of fund of the firm at the most recent period.

However, the question arises what are the effects of these financial accounting reports on the management of a business?  The answers to this pose a problem which they seek to solve.  Not every business person comprehend the importance of financial accounting information of the management of their business.  Some manage the business instinctively, others like traffic defaulter who disology road signs, disobey the waring communicated by financial accounting information and end up in business accident.

There are other sources of information, which have impact on the management of a business and the combination of these source given an information system in its complex nature.

As Frank Wood puts it:  It must not be thought that accounting of any firm is the management control system through, which both manager and external user get a picture of the organization as a total entity.

Moreover, financial accounting information usually comes in a diswished form by “wearing the cloak of technicaties.  Such technicaties include calculation which need expert knowledge in its interpretation.  But some business, due to financial incapacity cannot employ such expert they tend to over look financial accounting information system which has an effect on the management of any business concern, the problem is to all business known this, this the question that the researcher seeks answers.

1.2     STATEMENT OF PROBLEM:

As said earlier, an effective information system is very vital for the function of any business undertaken.  The financial accounting system in most business undertaken do not show fully the principle of accounting system.

The flow of information, the cost of collecting any information and the internal control procedures have some problem.

Actually it would be impossible for the researcher to study all the information system in all or even any of the organization.  The study therefore comproses a study of some typical financial account reporting on the management of a business, the researcher will carry out an experimental study and appraisal of a business.  Financial accounting and see whether there is room for improvement to be made.

It will therefore involve a view of the financial accounting and its related procedures.

1.3     OBJECTIVE OF THE STUDY:

The profit optimization is (or should be) the aim of every business.  Whether the business is managed by the owner or the ownership is from a management, the rules of profit optimization still applies.  The management is able to do as long as they can use their financial resources profitably.  They must be aware of the effect, which financial accounting information has on the management as the business, financial accounting is measures, by means of the report the prepared, the extent to which management has succeeded on their aim to profit optimization.

The report, which serves as financial information of one financial period has an effect on the future achievement of the business.  This effect now becomes the goal of this effect i.e. the financial accounting effect on the management of business should also advice all business persons on the effect.

1.4     RESEARCH QUESTION:

1. What are the importance of financial reports on the management of any business?
2. How can management of a business use financial accounting information in taking good decision for the progress of the business.
3. What is the position of any business whom its management ignores the information contained in the financial accounting reports while taking decision concerning business.

1.5     SIGNIFICANCE OF THE STUDY:

The researcher will be vital or important in;

1. a)Engauine the effect of financial accounting as an information system.
2. b)Controlling the business person to such effect.
3. c)Admorish, not only business person but person’s from the neglect of financial accounting information and;
4. d)Encouraging all to accept and hasten the warning of financial accounting information.

The following classes of people will find the work as a vital reference.

1. a)Managers of companies, corporation and other form.
2. b)How can management of a business use financial accounting information in taking good decision for the progress of the business.
3. c)What is the position of any business whom its management ignores the information contained in the financial accounting reports while taking decision concerning the business.

There are the question while this study tries to provide answers to.

Researchers in similar areas will also find the work useful