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IMPACT OF ACCOUNTING INFORMATION ON THE DECISION MAKING PROCESS OF AN ORGANIZATION

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IMPACT OF ACCOUNTING INFORMATION ON THE DECISION MAKING PROCESS OF AN ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY.

At independence, Nigeria joined the committee of nation with the hope for a better tomorrow. We were able to feed ourselves and were of course almost self-sufficient. Subsequently our hopes seemed unattainable. We seem to be going deeper and deeper into the woods. The consensus is that it has been bad for Nigeria. Due to the adverse economic condition prevailing in the country many businesses have closed, shops and even financial institutions are being declared distressed at alarming rate. Businesses that are yet to be submerged or that want to stay afloat employ all kind of strategies. Some increase price, adopt promotional tools, engage in aggressive marketing etc. whereas others goes for an odd combination of activities and even undergo different kind of small business to survive.  Any business or individual that wants to survive must make the right decision. The era of mile of thumb is gone. 0kafor (2000)

The price of any consumable item from garri and bread to radio and book not to mention petrol has been soaring in geometric proportions over the year. The economy is truly in distress. These compounded and complicated intricacies are the problem of the organization vis-à-vis effective planning and decision making processes. Other factors such as stagflation, taxation, economic and political problem are the major problem which affects information and decision making. The future orientation is what most company and bank get from making accounting decision, the computation and interpretation of analytical ratios from financial statement enable bank to determine their operational trends and provide a basis for management decision making. Other uses of financial analysis are in making financial decision and achieving the goal of sustainability determines compliance with regulatory requirements. Financial analysis is an investment that has positive return in the future on how decision will be made, how to manage the finances to achieve the strategic goals of the institution through decision making. Many people think that accounting is a highly technical field which can be understood only by professional accountants; actually nearly everyone practices accounting in one form or the other. In modern times, management requires a wide variety of information to successfully accomplish its aim and objectives. This information is mainly determined by the element of uncertainty about the future and lack of knowledge about the present. Some of these decisions are of strategic importance having a large impact on the business, others are routine operational decision. Drurry, (1973).                                                                                                                        Therefore accounting information is based on laws and regulations governing the handling of financial information contained in the financial reports of organization. Making the right decision depends on the possession of appropriate, accurate and up to date information provided and presented in a meaningful way. This study set out to examine the contribution of sound accounting system in providing management with financial and other information basis for dealing with decision problems that arises from their organizational operations.                                                                                       1.2   STATEMENT OF THE PROBLEM                                                               Basically, the nature of manufacturing business compels it to carry out a great deal of book-keeping based on accounting principles and information provided with the perpetual increase in the number of consumers of manufactured products. It has become necessary to devise a systematic means in handling the resultant book-keeping and accounting activities. A lot of criticism has always been made about the service of the organization, consumers complain of low quality product while employees complain of lack of promotion, inadequate salaries, lack of training etc. Furthermore, the major challenge facing every financial institution\ business, organization of today is market relevance, on-going fundamental changes in the global politics, economy and emerging competitions particularly challenges proper adequate and contemporary accounting information for management decision making. The company itself tries to coordinate all these challenges effectively and efficiently so as to minimize any anticipated and unanticipated pitfalls Edward (1976). If a sound and effective accounting system is applied properly by the manufacturing organization, the difference will be clear.         Improper attention to the accounting system and handling of accounting information has given birth to the under mentioned problems which are the specific problems of this study:                              1. Perceived difficulty in generating and utilizing accounting information.                                            2. Accounting information generated by accounts departments contributes little to decision making.

  1. Inability of accounting information to perform the basic function s of cost minimization and profit maximization.

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