USES OF ACCOUNTING INFORMATION IN ANALYZING THE FINANCIAL POSITION OF A FIRM
(A CASE STUDY OF UAC OF NIG PLC)
TABLE OF CONTENT
1.1 Background of the Study
1.2 Statement of Problem
1.3 Objective of the Study
1.4 Research Question
1.6 Scope of the Study
1.6.1 Significance of the Study
1.6.2 Academic Significance
1.6.3 Practice Significance
1.8 Operational Definition of Terms
2.0 Review of Related Literature
2.0.1 Theoritical Background
2.0.2 Empirical background
2.1 Historical Background
2.2 Types of Accounting Information
2.3 Process of Generating Accounting Information
2.4 Users of Accounting Information
3.0 Research Design and Methodology
3.1 Research Design
3.2 Area of Study
3.3 Population of the Study
3.4 Sources of Data
3.5 Sampling Method
3.6 Research Instrument
3.7 Reliability and Validity of Research Instrument
3.8 Methods of Investigation
4.0 Presentation and Analysis of Data
4.1 Presentation and Analysis of Result
4.2 Test of Hypothesis
5.0 Summaries of Findings, Conclusion
5.1 Summary of Findings
The purpose of this work was to examine the use of accounting information in analyzing the financial position of a firm and UAC of Nigeria plc formed the case study .In pursuit of this objective, a survey was conducted with the use of questionnaire, observation and face –to – face interview method. The use of this survey produced data and information which were analyzed in the project. The study comprises of five chapters.
The first chapter dealt on introduction of crucial issues.
Chapter two covered a review of related literature touching on the various opinions of some authorities in the subject matter.
Chapter three is on the research methodology used in the study.
Chapter four focused on data presentation and analysis, data were collected, analyzed and presented using tables.
Chapter five dealt with summary of findings, recommendation and conclusion.
One of the most important recommendations is that whenever a change in policy is made within the enterprise, let such be disclosed appropriately.
1.1 BACKGROUND OF THE STUDY
Ekwe, M.C (2007:2), states that the survival and growth of any business organization to a large extent depends on the quality of information available to the business manager. Accounting information is a financial data about business transactions expressed in terms of money. The primary objective of accounting is to provide information that is useful for decision making purposes. .According to Balogun and Delano (2007:8), financial statements contain essential information for the decision making process of many stakeholders – including management, employees, bankers, creditors, investors and the government .If the information contained in those financial statements is materially misstated, the resulting decision could be disastrous to many business organizations.
While accounting speaks the language of business, information is the currency with which language is communicated to the users of the financial statements. Information must be accurate and timely in order for it to have representative faithfulness and predictive values. Accounting uses words and symbols to communicate financial information to managers, investors, creditors and other decision maker. It is not limited to those engaged directly in business. Business managers need information provided by the accounting system to plan and control their business activities.
If the information is to be useful, it must be accurate, timely, free from bias, relevant and most importantly complete enough to portray the true financial position of a firm. Every business entity should provide information about its activities because the stakeholders – shareholders, bondholders, bankers, lenders, suppliers, employees, managers, trade contacts, government, financial analyst and investors need to monitor how well their interests are being served. They rely on the periodic financial statement of business enterprise to provide the basic information on the profitability of the business. The financial position of a firm is very important to ascertain whether they are making expected growth.
Virtually all profit seeking organization and most non-profit making organizations maintain extensive accounting records reason is that these records are often required by law. A more basic reason is that, even in a very small organization, a manager is often confronted with a multitude of complex variables. Not even the most brilliant manager can be sufficiently informed just by observing daily operations. Instead he must depend on accounting process to convert business transactions into useful statistical data that can be useful for determining the financial position of a firm.
1.2 STATEMENT OF PROBLEM
Financial accounting information is information provided by the financial statements of a firm to unveil the past and present performance of the firm and its ability to maximize the wealth of the stakeholders. Its primary objective is to provide a platform form the stakeholders to determine the true financial position of a firm for decision making. Despite these pivotal uses of the accounting information, it has not provided a sufficient and reliable ground for determining the profitability, viability and financial strengths of an organization and the researcher wants to find out why.
1.3 OBJECTIVES OF THE STUDY
The primary objective of this study is to find out why the information provided by the financial statement has failed to provide sufficient and reliable platform for determining the true financial position of a firm.
The secondary objectives include:
(a) To examine the importance of accounting information to users.
(b) To investigate the extent of use of the accounting information.
(c) To find out whether the proper accounting policies and concept are followed by UAC Nigeria Plc.
1.4 RESEARCH QUESTIONS
(1) Is there any significant relationship between the accounting information and the uses to which they are put?
(2) Is the information provided by the financial statement sufficient enough to have a representative faithfulness and predictive value?
(3) Is the financial accounting information presented in a style and format which will be easily understood by the end users?
Ho: There is no significant relationship between the accounting information and its uses.
Hi: There is significant relationship between the accounting information and its uses.
Ho: The information provided by the financial statement is not sufficient enough to have a representative faithfulness and predictive value.
Hi: The information provided by the financial statement is sufficient enough to have a representative faithfulness and predictive value.
Ho: The financial accounting information is not presented in a style and format easily understood by the end users.
Hi: The financial accounting information is presented in a style and format easily understood by the end users.
1.6 SCOPE OF THE STUDY
This study focuses on the uses of accounting information in analyzing the financial position of a firm using UAC of Nigeria Plc as a case study. The period of this study is expected to last for two months.
1.7 SIGNIFICANCE OF THE STUDY
This section is divided into two as follows:
1.7.1 ACADEMIC SIGNIFICANCE
This investigation has been structured to benefit the academic world. Its nature and finding made it an important tool of solution to some academic problems. Researchers and tutors of similar case will find it an indispensable companion.
1.7.2 PRACTICAL SIGNIFICANCE
Financial accounting information is an end product peculiar to financial activities of most business undertaking. Many a time, companies including private individual in the business world are faced with the challenges of using the information to make economic decision. This investigation is designed to solve such problems.
1.8 OPERATIONAL DEFINITION OF TERMS
(a) Accounting Concept: The basic theoretical ideas derived to support the activities of accounting.
(b) Assets: Tangible and intangible properties owned by an organization such as land, motor vehicles, goodwill, etc for carrying out its business operations.
(c) Balance Sheet: A statement of the total assets and liabilities of an organization at a particular data, usually the last day of the accounting period.
(d) Financial Statement: The annual statements summarizing a company’s activities for the last year. They consist of the profit and loss account, balance sheet, statement of total recognized gains and losses, and if need be the cash flow statement together with supporting notes.
(e) Profit and Loss Account: An account in the books of an organization showing the profit (or loss) made on its business activities and showing the deduction of the appropriate expenses.
(f) Ration Analysis: The use of accounting ratios to evaluate a company’s operating performance and its financial stability.
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