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Use Of Financial Accounting Information System For Management Decision Making

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62 Pages
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7,834 Words

A Financial Accounting Information System (FAIS) plays a pivotal role in aiding management decision-making processes within organizations. This sophisticated system integrates various financial data sources, offering a comprehensive and dynamic view of the company’s fiscal health. Through the systematic recording, processing, and reporting of financial transactions, the Financial Accounting Information System becomes an invaluable tool for managers seeking to make informed decisions. The seamless integration of key financial keywords such as budgets, cash flows, and financial statements within the system allows for a holistic understanding of the organization’s economic landscape. By harnessing this information, managers can strategically analyze and interpret financial patterns, identify areas of improvement, and make data-driven decisions that align with the company’s objectives. In essence, the use of a well-implemented Financial Accounting Information System empowers management to navigate the complex financial terrain, fostering effective decision-making and ultimately contributing to the organization’s success.

ABSTRACT

This study focused on the use of financial accounting information system for management devision making.
The objective of the study was to determine whether financial accounting information system was used by management for efficient and effective performance, and the extent the information guided and regulated management decision making in companies. This study proffered solution to the problems encountered by the management in the implementation of the financial accounting information system.
The study relied mostly on secondary data such as the financial rations responses to questionnaire the financial statement statistical test.
The major finding of the study was that employment of non qualified personnel in the account department lead to disregard of accounting information system.
It was also found out from the results of the percentage that accounting information system has a positive impact on management decisions in companies and there is a relationship between performance and effective use of financial accounting information my managers.
It was recommended that companies should employ qualified accountants or alternatively educate their staff on how to use the financial accounting information system for management decision making.
In conclusion it is found that the more merits than demerits in using the financial accounting information system for management decision making in companies

TABLE OF CONTENT

Title page
Certification
Dedication
Acknowledgement
Abstract
List of tables

CHAPTER ONE
1.0 Introduction
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research question
1.5 Significance of study
1.6 Scope of study
1.7 Limitation of study

CHAPTER TWO
2.0 LITERATURE REVIEW
2.1 The concept of accounting information system
2.2 Various decision areas of accounting information system
2.3 Accounting information and decision in companies
2.4 Hindrance of accounting information system to management decision making

CHAPTER THREE
3.0 Research design and methodology
3.1 Research design
3.2 Population of the study
3.3 Sample size determination
3.4 Instrument for data collection
3.5 Validation of the instrument
3.6 Reliability of the instrument
3.7 Questionnaire distribution and retrieval
3.8 Data analysis

CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 Analysis of financial statement
4.1 analysis of responses to questionnaires

CHAPTER FIVE
5.0 SUMMARY OF FINDING CONCLUSION AND RECOMMENDATION
5.1 Summary of finding
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendix.

CHAPTER ONE

INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Within the later part of 1990’s Nigerian economy has been characterized my instability. This might be caused by not making good use of accounting information system for their management decision making. Accounting information is the provision of relevant economic information system to permit informed judgment and decision by user of the information”
Many companies are now closed down rendering many people jobless. This led a lot of instability in the society the surviving companies are on the verge of collapse.
Financial accounting covers those activates related to the preparation of certain report which are know as financial statements. These statements report the financial states of the firm at a particular the financial states of the firm at a particular period or time. The essence of this information system is for management and other users to make decision. The accuracy of the decision made depends on the design of the management information system (M.I .S) which calls for the management concerned to prepare the financial accounting information system for the guidance of the users.
Decision making can be described as the art of choosing among possible managerial actions. The art of decision making is to enable management of a business to choose from among a range of already analyzed and evaluated alternatives. Good management would certainly choose those alternatives which would give the company maximum profit and at the same time reduce their expected loses. there are two classes of decision makers namely the internal and external user. They can be identified in respect of the use of financial accounting information. The management are the internal user while the share holders creditors customer employees and trade union and government agencies are the external user. The management who are the major user of financial accounting information need the financial accounting information to plan. Since not all business persons understand the impact of financial accounting on the management of their respective business they manager their business without taking any note of the importance of financial accounting information system. Whether a business is a sole proprietorship partnership or co-operation financial accounting as an information system has an effect on the management of any business.
The effect of financial accounting information on the management of any business can be over looked. The extent of such effect may not be the same for every business. Many schools of thought believe that no business escapes such an effect.
This study on the effect of financial accounting information on management decision sought to know how financial accounting manner influence managerial decision

1.2 STATEMENT OF THE PROBLEM
The main reason for introducing the use of accounting information system for management decision making is that;
a. Managers of certain business especially small scale businesses do not have sound accounting system to enable them monitor operating expenses and revenue
b. Their ignorance of financial accounting information or lack of its might lead to the non effective and efficient accomplishment of the firms objectives.
c. Accounting information is the only system where by management and external user see picture of the organization as a total entity
d. The managers realized this problem and appreciate the accountants analysis in respect of financial accounting information.

There are basic concepts involved in financial accounting such concepts are summarized under calculations and interpretation. In particle accounting conventions seem to be utilitarian. Their degree of acceptance stems form their usefulness the those making decision involving accounting data. Clearly as these factors change over time so must accounting conventions. Some organizations due to low financial layout or lack of adequate planning might not empty expert needed for the job and this might affect the usefulness of financial accounting information in their management decision making. Accounting makers or managers to enable them monitor operating expenses and revenues of the companies.

1.3 OBJECTIVE OF THE STUDY
The purpose of this study were:
1. To find out the concept of accounting information system.
2. To determine the various decision area of operation in companies
3. To identify the relationship between the use of accounting information and the decision made in the companies.
4. To ascertain hindrances of accounting information to management decision making.
5. To recommend steps that might enhance the use of information provided by accounting system.

1.4 RESEARCH QUESTION
The following research question guided the study
1. To what extent do these information guide and regulate management decision making in the companies?
2. What are the gains of using financial accounting information system in decision making in companies?
3. What is the relationship between the use of accounting information and management decision in companies?
4. What are the hindrance of accounting information system to management decision making?
5. What are the steps to be taken to ensure proper use of information provided by accounting system?

1.5 SIGNIFICANCE OF THE STUDY
The study would be useful to the following group of people. The manager those planning to establish companies government agencies and the society at large.
a. Managers of companies: it would enable the management of companies to accept and abide by the rules provided by accounting information as a tool of evaluating their performance.
b. Establishment of companies: it would enable those planning to establish companies to avoid the pitfall of other companies
c. The government: it would enable the government agencies to establish necessary machinery to supervise public companies so as to avoid the closure of more companies.
d. The society it would provide insight to the society on how business organization rely on financial accounting information system for decision making

1.6 SCOPE OF THE STUDY
The scope of this study lies on the financial accounting information system in management decision making in companies. The investigation was on available records of accounts documents and published works on financial accounting information obtained from interview conducted with the top management of companies.

1.7 LIMITATIONS OF THE STUDY
The limiting factors to this work were that the information and some of the documents used were based at Enugu State.
Furthermore
(a) Financial constraints emerged due to inadequate finance the researcher cloud not cover as much as possible companies
b. Time constraints: Inadequately of time made the researcher not to gather enough facts that would enable her address the issue exhaustively

1.8 RESEARCH HYPOTHESIS
Hypothesis as defined by encyclopedia Americana is “ a proposition assumed to be true merely for purposes of arguments or a proposition or theory but forward to account for and order a body of fact”
Below are the hypothesis tested:

a. Accounting information has a positive impact on management decision in companies.
b. There is a relationship between performance and effective use of financial accounting information system managers.

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Use Of Financial Accounting Information System For Management Decision Making:

Financial accounting information systems play a crucial role in aiding management decision-making within organizations. These systems provide valuable data and reports that help managers make informed choices about various aspects of their business. Here are some of the key ways in which financial accounting information systems are used for management decision-making:

Performance Evaluation:
Managers can use financial reports generated by the system, such as income statements and balance sheets, to assess the company’s financial performance. This helps in identifying areas where the organization is performing well and where improvements are needed.

Budgeting and Planning:
Financial accounting systems provide historical financial data that can be used as a basis for creating budgets and forecasts. Managers can use this information to set financial goals, allocate resources, and plan for future investments.

Cost Analysis:
Managers can analyze the cost structure of the organization using data from the accounting system. This allows them to identify cost drivers, evaluate cost-saving opportunities, and make decisions to improve cost efficiency.

Pricing Strategies:
Financial data helps in determining appropriate pricing strategies for products or services. Managers can analyze costs, competitor pricing, and market demand to set optimal prices that maximize profitability.

Investment Decisions:
Managers often need to decide whether to invest in new projects, equipment, or assets. Financial accounting information, such as cash flow projections and return on investment (ROI) calculations, aids in evaluating the potential financial impact of these investments.

Performance Metrics:
Key performance indicators (KPIs) derived from financial data, such as profitability ratios, liquidity ratios, and leverage ratios, help managers monitor the health of the business and make necessary adjustments.

Risk Assessment:
Financial accounting information can help managers assess financial risks. For example, by analyzing debt levels and liquidity ratios, managers can gauge the organization’s ability to meet its financial obligations and make decisions to mitigate risks.

Tax Planning:
Managers can use financial data to plan for tax liabilities efficiently. By understanding the tax implications of different decisions, they can minimize the company’s tax burden legally.

Compliance and Reporting:
Financial accounting systems ensure that financial data is accurately recorded and reported in compliance with regulatory requirements. This is essential for maintaining the trust of stakeholders and avoiding legal issues.

Strategic Decision-Making:
When formulating long-term strategies, managers rely on historical financial data and forecasts to make informed decisions that align with the organization’s goals and objectives.

In summary, financial accounting information systems provide essential data and reports that enable managers to assess performance, plan for the future, allocate resources effectively, and make informed decisions to achieve the organization’s financial and strategic objectives. These systems are integral to the management decision-making process and contribute to the overall success of the business.