The Influence of Financial Accounting Reporting on the Management of a Business Organization
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Chapter one on The Influence of Financial Accounting Reporting on the Management of a Business Organization
BACKGROUND OF THE STUDY
According to Ogunjimi in Ejiofor (2008:2) the running of any business is based principally on financial functions and hence what usually first come to mind in every business activity is the monetary aspect involved. No wonder an accounting department plays a vital role in effective running of an organization. Peter and Sylvia (2008:7) explains that financial statements are literally a “road map” telling us where a financial firms has been in the past, where it is now and perhaps where it is headed in the future. Financial reports are invaluable guideposts that can, if properly constructed and interpreted, signal success or signal disasters. In that wise, efforts must be made in establishing a system that will be suitable to the business giving enough consideration to the future expansion and development. Akintoye (2004) expresses that we all make decision which most of the times even when our decisions are purely emotional; we use information to help us arrive at a viable decision. Information includes facts ideas and concept that help us to understand a certain issue. He said it is knowledge helpful in reaching a conclusion. As pointed out before, both manual and mechanized systems of accounting are available in the Nigerian economy. However, it is very important to realize that whenever a system is adopted the following points have to be considered:
(i) That the procedures for handling money or funds should be simple and designed to provide maximum security. (ii) Records should be simple and provide room for easy cross-checking and the system must be capable of meeting all legal requirements of the country in terms of auditing, taxation, company law and the like. The above qualities are necessary if a businessman is aware of the interested parties (1985 of people) in his business operations. One wonders how people get to know about many companies. The simple answer is that people interested in particular company derive their knowledge of such company by the examination of the published annual reports of when the majority are financial statement. Ogunjimi in Ejiofor (2008:2). Financial reporting deals with the presentation of financial and other relevant statements to show the extent to which the objectives of the organizations have been achieved. It has been described as a way or manner of documenting the day to day financial or other transaction of an enterprise for a given accounting year.
STATEMENT OF THE PROBLEM
Financial reporting is an avenue of feeding stakeholders of both profit and non-profit oriented organizations with accounting information that will enable them make informed decisions and judgment about management performance and organizations’ liquidity, viability and stability. Therefore, the importance of financial reporting in Champion Breweries Plc cannot be over emphasized because it also helps stakeholders to overcome any doubt against managers of the funds. In Nigeria today, weak controls coupled with inadequate financial reporting culture has been of growing concern among corporate entities. It is therefore important to determine to what extent corporate entities appreciate the use of financial reporting in planning systems. In more specific terms, the problem is lack of adequate financial reporting culture in Champion Breweries Plc, Uyo which ensure proper measurement of its activities and achievement of state objectives.
OBJECTIVES OF STUDY
To determine whether financial statement show a true and fair view of Champion Breweries financial position. To determine the extent to which the organization meets its social responsibilities. To determine areas where Champion Breweries had made errors or where misleading effects have been involved. To show compliance with statutory regulation and standard.
What role does financial reporting play on the management of champion Breweries? Has there been any significant relationship between financial accounting reporting and management of a business organization? Does proper accounting reporting increase profitability in Champion Breweries? Does Champion Breweries maintain financial accounting report according to the generally accepted accounting principles (GAAP).
Ho: There is no positive and significant relationship between financial accounting reporting and management of a business organization.
Hi: There is a positive and significant relationship between financial accounting reporting and management of a business organization
SIGNIFICANCE OF THE STUDY
This study will be useful to the immediate beneficiaries i.e. champion breweries plc Uyo branch where the study is conducted this is so, because it is clear that any organization that has no effective accounting and record management will not know whether there are making profit or running of a loss. It is also to provide necessary information and enlightenment to some interested members of the public, shareholders, creditors, in-debtors government etc. The major significance of this study will be the contribution to the body of knowledge which is the primary purpose intended by the researcher.
SCOPE OF THE STUDY
The study is limited to champion breweries plc Uyo and is based on the influence of financial accounting reporting on the management of a business organization.
LIMITATION OF THE STUDY
The inability of management to divulge certain information which they consider sensitive. The publication of which might be detrimental to their operations proves to be a limitation on the study. Distance and its attendant cost of travel in order to obtain information with which to write this study was also a major limitation. Hence, the project has not been able to cover all areas which it should have covered, if one were to write freely and this called for the streamline of the scope of study to allow for successful handling of these hindrances without bias.
DEFINITION OF TERMS AND ACRONYMS
Influence: according to oxford advance learners dictionary defined it has the effect that somebody/something has on the way a person thinks or behaves or on the way something works or develops. Financial accounting: Is the branch of accounting concerned with classifying measuring and recording the transaction of a business. At the end of a period, usually a year but sometimes less a profit and loss account and a balance shear are prepared to show the performance and position of the business (oxford dictionary of accounting, Owen et al 2005) Accounting: according to Ojo and Obi (2007:2) the American institute of certified public accountants (AICPA) defined accounting as “the act of recording, classifying and summarizing in a significant and in terms of money transactions and events which are in part or at least of a financial characters and interpreting the result there of” Financial Reporting: This is the presenting of financial date of a company’s position, operating, performance and funds flow for an accounting period (businessDictionary.online), Reporting: This involves reporting on various rows performs by the unit in an organization (Meigs 1777:683). Management: According to Nwachukwu (2009) management is defined as “getting things done through and with others”. He said it can be more scientifically defined as the coordination of all the resources of an organization through the process of planning, organizing, directing, controlling in order to attain organization objectives. Business: Ude (1999) defined business as the organized effort of individuals to produce and for profit the goods and services that satisfy society need. According to Agbo (2010) business is the process of combining human and material resources to produce, distribute goods and or services for the satisfaction of mankind and a reward. Organization: Wikipedia the free encyclopedia (2004) defined organization as a social entity such as an institution or an association that has a collective goal and is linked to an external environment. Business Organization: According to Woodward in Encyclopedia Brintannica (2014), defined Business Organization as an entity formed for the purpose of carrying on commercial enterprise.
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