Impact Of Financial Accounting On The Corporate Performance Of Business Organization
(A Case Study Of Nigerian Breweries Plc)
Financial accounting plays a crucial role in enhancing the corporate performance of business organizations through various channels. Firstly, it facilitates transparency and accountability by accurately recording and reporting financial transactions, enabling stakeholders to make informed decisions. Moreover, by providing reliable financial statements, financial accounting aids in evaluating the financial health and efficiency of a company, guiding management in strategic planning and resource allocation. Additionally, adherence to accounting standards ensures compliance with regulatory requirements, fostering investor confidence and reducing the risk of legal penalties. Furthermore, financial accounting enables benchmarking against industry standards and competitors, identifying areas for improvement and optimizing operational efficiency. Overall, the meticulous practice of financial accounting contributes significantly to the overall success and sustainability of a business organization.
The research work “The impact of Financial Accounting Reporting on the corporate performance of Business Organizations”, basically aims at ascertaining how financial accounting reporting has helped in advancing the objectives of corporate organizations. In the process, it investigated the effected that financial accounting bear on the performance of a business. Furthermore, if sought to ascertain the compliance of relevant statues by corporate organizations and the overall satisfaction of stakeholders in a corporate organizations. The study obtained its data basically from primary and secondary sources. The primary sources of data collection employed were questionnaire, oral interview and observations, while the secondary sources of data included textbooks, journals. in the analysis of the data collected, the chi-square was used to analyze the responses gathered. The study revealed that a loot of problems were inherent in financial reporting ranging from non-disclosure of vital information, subjective judgments of prepares of the financial information and most times non-compliance to relevant statues. There were recommendations given such as strict compliance to the relevant statute were made to the companies, the government needs to strengthen its regulatory agencies in order to ensure that the financial statements show a “true and fair view and comply with the relevant statues at all times.
Title page ii
Certification: — iii
Dedication: iv
Acknowledgment: -v
Abstract: vi
Table of contents: vii
CHAPTER ONE:
INTRODUCTION
1.1 Background of The Study: 1
1.2 Statement of The Problem: 3
1.3 Objective of The Study: -4
1.4 Research Hypotheses: 6
1.5 Significance of The Study: 7
1.6 Scope of The Study : 8
1.7 Limitation of The Study: 8
1.8 Definition of Terms: 9
1.9 reference: 10
CHAPTER TWO:
REVIEW OF RELATED LITERATURE
2.1 Overview of the financial Accounting System: 11
2.2 Financial Accounting Records: 11
2.3 The Subsidiary Books the General Journal (proper) 12
2.4 Source Document: 17
2.5 The Ledgers: 19
2.6 Classification of Accounts: 19
2.7 The Trial Balance: 20
2.8 The Trading Profit and Loss Account: 20
2.9 The Balance Sheet: 21
2.10 Principles and Assumption Underlying Financial Standards: 21
2.11 Accounting Standards: 28
2.12 Controversial Issue in Financial Accounting Reporting: 31
2.13 Cross Sectional Analysis of Selected Companies in Enugu State: -36
2.14 Brief History of the Companies: 36
References:
CHAPTER THREE:
RESEARCH DESIGN AND METHODOLOGY
3.1 Research Design:
3.2 Sources of Data:
3.3 Method of Data Collection:
3.4 Determination of Population Size:
3.5 Determination of Sample Size:
3.6 Method of Administration and Questionnaire:
3.7 Method of Date Analysis: –
3.8 Decision Rule:
Reference:
CHAPTER FOUR:
DATA PRESENTATION, ANALYSIS AND
INTERPRETATION
4.1 Date Presentation:
4.2 Data Analysis:
4.3 Hypothesis Testing:
CHAPTER FIVE:
SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
5.1 Summary of Findings:
5.2 Conclusion:
5.3 Recommendation:
Bibliography:
Appendices:
INTRODUCTION
Background of the Study
The impact of financial reporting on the corporate performance of a
business organization is becoming more apparent to user groups of a
financial statement.
Accounting is a not an exact science neither are business operations
without some subjective and judgmental errors when it comes to reporting
them. A financial reporting therefore is a document statement which
informs the various interest groups to a business on the operations and
performance of their business in a period under review its present state of
affairs as well as its anticipated future, in accordance with the statutes. If a
financial report is to service its purpose it ought to be characterized by the
following.
a. Relevance
b. Understandability
c. Reliability
d. Completeness
e. Objectivity
f. Timeliness
In the accounting process of an organization is to provide the
information required to prepare a financial report which shall have the
above characteristics then the transaction doing the period must be
recorded prompt by and accurately and interpreted in conformity with the
Generally Accepted Accounting Principles (GAAP), Statements of
Accounting Standard Board (NASB), International Accounting Standard
committee and the companies and Allied Matters Act cop LFN (CAMA)
Financial accounting reporting become necessary with the obvious
need for accountability of stewardship from the managers to whom
investors entrusted their financial resources. The Railway age in the UK.
Occurred between 1830 to 1870 and for the first time the world same the
emergence of multimillion corporations with large numbers of
shareholders. It was a period of disorder but it brought the basis for the
present day system of corporate financial report. Financial reporting is a
duty of stewardship assigned to the directors of a company by section
334 of the company and Allied Matters Act Cap L20 LFN, equally the
mandatory responsibility of companies to keep accounting records
derives its strength from section 331 and 382 of the same act. These
sections explicitly defined the necessary content and manner in which
financial records should be kept.
1.2 STATEMENT OF THE PROBLEM
The study “The impact of Financial Reporting on the corporate
performance of business organization” aims at investigating the financial
reports of selected companies in Enugu State with a view to determine the
following ;
a. The extent to which a standard financial report contributes to or detracts from the growth of a business organization.
b. The extent to which the financial reports of corporate business organization comply with statutory provisions.
c. The uniformity and conflict which exist in the financial reporting regulations given the multiplicity of regulators.
Therefore, bused on the above statements, the researcher shall investigate
the financial accounting reporting standards and every regulation their bear
on the financial statement and to the extent the selected company (s) has
either complied with or disobeyed the relevant statutes.
1.3 OBJECTIVES OF THE STUDY
The objectives of this study are to critically examine the financial
reports of the selected company and to probe into the fundamental for their
preparation as well as its presentation with a view to determining:
a. The adequacy of the basis and the fundamental that guides its
preparation.
b. The degree to which the financial report meets the needs of its
various users.
c. The extent to which the financial report conform to the established
standard.
d. The influence that financial report has on business performance.
e. Finally, to present suggestions and recommendations based on my
findings.
RESEARCH QUESTIONS
In order to determine the impact of financial reporting on the
corporate performance of business organizations, it is pertinent to test the
following question;
1. Does the information disclosed in the financial statements adequate
to support good decision making?
2. Does the disclosure requirement of the statutes affect corporate
performance positively or negatively?
3. Do companies comply strictly with the regulation?
4. Does the financial report meet the needs of the various users?
This study will offer solutions to ones raised it is my believe that the
result of these finding will go a long why to helping researchers in this
area of study, it will also enhance the understanding of the structure of
published reports and accounts by the users.
The various users groups of the published financial report have their
benefits from this study as follows:
1. The Potential Investors: These are groups who are interested in
committing their financial resources to the buying of the company’s
shares. These set of people will benefit from this study as the result
of this study still arm them with the necessary tools with which to
evaluate the financial report of a corporate organization as it affects
them.
2. The General Public: This group shall benefit from this report by the
knowledge that the business organization exists for them and not
against them, as such has to live up to its full responsibilities.
3. The Regulators of Financial Accounting Report: This group
includes the Nigerian Accounting Standard Board (NASB), the
companies and Allied Matters Act 2004 Cap (20 LFN (CAMA) the
Banking and Other Financial Institutions Act of 1991 (BOFIA),
prudential guidelines for licensed Banks. The Insurance Act 2003.
The study will help them to standardize and harmonize their
operations.
4. The Employee Group Including Existing: Potential and past
employees.
5. The Government Including Tax Authorities Department who
have Interest in the Financial Reports of Companies: The result of
this work shall be of immense assistance to each to these user
groups in the advancement of their interest.
1.4 RESEARCH HYPOTHESES
The following null and alternative hypothesis shall be tested in this
research works:
1. H0: The information provided in financial statements is not
adequate to support good decision making.
Hi: The information provided in financial statements is not
adequate to support good decision making.
2. H0: The disclosure requirements of statements do not affect
corporate performance positively.
Hi: The disclosure requirements of statements do not affect
corporate performance positively.
3. H0: corporate organizations do not comply strictly to the statutory
regulations.
Hi: corporate organizations do not comply strictly to the statutory
regulations.
4. H0: Financial reports do not meet the needs of the various users of
financial information.
Hi: financial reports do not meet the needs of the various users of
financial information.
1.5 SIGNIFICANCE OF THE STUDY
This study is a very important one and most significant at this period
of economic situation which has witnessed the collapse of giant corporate
with impressive profit and loss accounts and balance sheet statement,
because the financial report serves is a “prima facie” evidence on the state
of attains of such companies as well as its performance and could be relied
upon as a certificate because it had the auditors certification, financial
reporting could be done with every ser business, utmost good faith and
diligence.
1.6 SCOPE OF THE STUDY
This study could have covered the impact of financial accounting
reporting on corporate performance of all the sectors of the Nigerian
economy but due to the challenges of such a task especially the financial
resources with which to execute it, it is limited to braving industry. The
study used the Nigerian Breweries plc, Enugu.
1.7 LIMITATIONS OF THE STUDY
The limitations encountered by the researcher of this work are given
as follows:
a. The confidential nature of financial accounting information in the
business organization posed as a problem to this business
organization posed as a problem to this study.
b. The researcher was unable to reach all the members of the sample
as a result of their frequent travels and busy schedule.
c. The sample used in the research though representative but it is
relatively small compared to the population, as a result of lack of
financial with which to carry out the research on a greater sample.
1.8 DEFINITION OF TERMS
Auditor: a person who is qualified to examine the accounts of an
organization to see that they are in order.
Balance Sheet: a business as at a specified date.
Bank: a financial institution whose responsibilities among others is to keep
deposits for their client and customers.
Government: an institution of the state whose responsibility is to maintain
law and order in the society.
Prima facie: sufficient to establish something legally until disprove later.
Researcher: an enquiring basically concerned with search knowledge.
Impact Of Financial Accounting On The Corporate Performance Of Business Organization:
Financial accounting plays a significant role in influencing the corporate performance of a business organization. It serves as a vital tool for measuring, recording, and communicating the financial activities of the organization to both internal and external stakeholders. The impact of financial accounting on corporate performance can be observed through various aspects:
- Decision-Making: Accurate and transparent financial information provided by financial accounting helps management make informed decisions. Whether it’s deciding on investments, expansion, cost-cutting measures, or resource allocation, financial data guides these choices and enhances the likelihood of successful outcomes.
- Resource Allocation: Financial accounting provides insights into the organization’s financial health, including its assets, liabilities, and cash flows. This information aids in allocating resources effectively, optimizing the use of funds, and identifying areas that require additional investment.
- Performance Evaluation: Financial accounting allows for the assessment of the organization’s performance over time. Key performance indicators such as profitability, liquidity, solvency, and efficiency ratios are derived from financial statements. These indicators provide a comprehensive view of how well the organization is performing and help in setting performance benchmarks.
- Investor Confidence: Transparent and reliable financial reporting enhances the confidence of investors and stakeholders. When financial statements are accurate and follow generally accepted accounting principles, investors are more likely to invest in the organization, leading to improved access to capital.
- Credibility and Trust: Accurate financial reporting builds credibility and trust among stakeholders, including customers, suppliers, lenders, and regulatory authorities. This trust can positively impact the organization’s relationships and collaborations.
- Compliance and Regulation: Financial accounting ensures that the organization adheres to legal and regulatory requirements related to financial reporting. Compliance with accounting standards and regulations helps avoid legal troubles and maintains the organization’s reputation.
- Performance Measurement and Goal Setting: Financial accounting provides data that helps set measurable goals and objectives. By analyzing financial results against predefined targets, management can assess performance and take corrective actions if necessary.
- Strategic Planning: Organizations often use financial data to formulate strategic plans. These plans might involve identifying new markets, launching new products, or diversifying operations. Financial information helps evaluate the feasibility of such plans and supports strategic decision-making.
- Risk Management: Financial accounting highlights areas of financial risk, such as excessive debt, liquidity problems, or over-reliance on certain revenue sources. By identifying these risks, management can take steps to mitigate them and ensure the organization’s stability.
- Communication with Stakeholders: Financial statements are a means of communication between the organization and its stakeholders. Clear and transparent financial reporting enhances communication, which is crucial for maintaining positive relationships with stakeholders.
In conclusion, financial accounting has a profound impact on the corporate performance of business organizations. It provides essential information for decision-making, resource allocation, performance evaluation, and maintaining credibility with stakeholders. By effectively utilizing financial accounting principles, organizations can enhance their financial health, strategic planning, and overall success.