Effect Of Financial Accounting Reporting On The Management Of A Business
(A Case Study Of Agu Bros Trading Company Limited)
Financial accounting reporting plays a crucial role in shaping the management of a business by providing accurate and timely information about its financial performance and position. These reports enable management to make informed decisions regarding resource allocation, investment strategies, and operational improvements. By analyzing financial statements such as balance sheets, income statements, and cash flow statements, managers can assess the profitability, liquidity, and overall health of the business. Additionally, adherence to accounting standards and regulatory requirements ensures transparency and accountability, enhancing investor confidence and facilitating access to capital. Effective utilization of financial accounting reports empowers management to identify areas of strength and weakness, implement strategic initiatives, and steer the business towards sustainable growth and profitability.
COVER PAGE
TITLE PAGE
APPROVAL PAGE
DEDICATION
ACKNOWLEDGEMENT
PREFACE
LIST OF TABLES
CHAPTER ONE:
INTRODUCTION
1.1 BACKGROUND OF STUDY
1.2 STATEMENT OF PROBLEM
1.3 OBJECTIVES OF THE STUDY
1.4 RESEARCH OF THE STUDY
1.5 SIGNIFICANCE OF THE STUDY
1.6 HYPOTHESIS
CHAPTER TWO:
2.1 LITERATURE REVIEW
2.2 ACCOUNTING AS A LANGUAGE OF BUSINESS
2.3 USERS OF ACCOUNTING INFORMATION
2.4 CHARACTERISTICS OF GOOD INFORMATION
2.5 MANAGEMENT OF INFORMATION
2.6 BASIC ACCOUNTING CONCEPTS
CHAPTER THREE:
3.0 RESEARCH DESIGN
3.1 AREAS OF STUDY
3.2 POPULATION OF THE STUDY
3.3 SAMPLE AND SAMPLING TECHNIQUE
3.4 INSTRUMENTATION AND VALIDATION OF INSTRUMENT
3.5 INSTRUMENT FOR DATA COLLECTION
3.6 METHODS OF INVESTIGATION
3.7 METHOD OF DATA ANALYSIS
CHAPTER FOUR:
4.0 PRESENTATION AND ANALYSIS
4.1 PRESENTATION AND ANALYSIS OF DATA
4.2 OTHER ANALYSIS
4.3 CLASSIFICATION
4.4 ANALYSIS OF ORAL INTERVIEW QUESTION
CHAPTER FIVE:
5.0 RECOMMENDATION AND CONCLUSION
5.1 DISCUSSION OF THE RESULTS
5.2 RECOMMENDATION
5.3 CONCLUSION
5.4 LIMITATION
REFERENCES
BIBLIOGRAPHY
APPENDIX
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;
a) Engauine the effect of financial accounting as an information system.
b) Controlling the business person to such effect.
c) Admorish, not only business person but person’s from the neglect of financial accounting information and;
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.
a) Managers of companies, corporation and other form.
b) How can management of a business use financial accounting information in taking good decision for the progress of the business.
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.
Effect Of Financial Accounting Reporting On The Management Of A Business:
Financial accounting reporting plays a crucial role in the management of a business by providing essential financial information that helps managers make informed decisions and maintain the overall health of the company. Here are some key effects of financial accounting reporting on business management:
- Decision-Making: Financial reports, such as income statements, balance sheets, and cash flow statements, provide a snapshot of the company’s financial performance. Managers use this information to make critical decisions about resource allocation, investment opportunities, cost control, and pricing strategies.
- Performance Evaluation: Financial reporting allows managers to assess the performance of different business units, projects, or products. This evaluation helps in identifying areas of strength and weakness, enabling the management to take corrective actions as needed.
- Budgeting and Forecasting: Financial reports serve as a basis for creating budgets and financial forecasts. Managers use historical financial data to project future performance and plan for future investments, expenditures, and revenue targets.
- Resource Allocation: By analyzing financial reports, management can allocate resources efficiently. They can identify areas that require more investment and those that need cost reductions or restructuring.
- Investor and Creditor Relations: External stakeholders, such as investors and creditors, rely on financial reports to assess the financial health and stability of a company. Positive financial reports can attract investors and lower borrowing costs, while negative reports can have the opposite effect.
- Compliance and Governance: Financial reporting is often subject to regulatory requirements. Accurate and timely reporting ensures that the company complies with accounting standards and legal obligations. This, in turn, supports good corporate governance.
- Risk Management: Financial reports help management identify financial risks and vulnerabilities. By monitoring key financial ratios and trends, they can implement risk mitigation strategies to protect the company from potential financial crises.
- Tax Planning: Financial reporting provides data for tax planning and compliance. Managers can use this information to optimize the company’s tax position, reducing tax liabilities within the bounds of tax regulations.
- Employee Motivation: When employees have access to financial performance information, it can motivate them to contribute to the company’s success. For example, profit-sharing programs or bonuses tied to financial goals can encourage employees to work toward the company’s financial objectives.
- Investment Decisions: Management often needs to decide whether to invest in new projects, expand operations, or acquire other businesses. Financial reporting is instrumental in assessing the financial feasibility of these decisions and estimating the potential return on investment.
In summary, financial accounting reporting is a critical tool for effective business management. It provides the data and insights necessary for decision-making, performance evaluation, resource allocation, and overall strategic planning. Accurate and timely financial reporting enhances transparency, accountability, and the ability to adapt to changing economic conditions, ultimately contributing to the long-term success of the business.