IMPACT OF MANAGEMENT ACCOUNTING ON FINANCIAL PERFORMANCE
(A CASE STUDY OF CFAD NIGERIA, PLC)
This research work is expected to provide the importance of management accounting and relevance of management† information system to every organization with respect to CFAO Nigeria Plc.The study among other things considers the relevant concepts adopted in management accounting and various works by some authors, it examines the extent of utilization and effect of management accounting on the divisional earning view other five years.Primary data of mine were through questionnaire which were used to obtain facts from both the top and middle managers of the selected divisions in the group.Generalization was made through data collected and the data were subjected to analysis which showed the relevance and impact of management accounting and information system to the organization.In my conclusion, recommendation were made that in order to achieve the desired objectives a good information system must be established and also that a monitoring committee should be set up to ensure the utilization of management accounting in the decision making of an organization.
This research work is expected to show the importance of management accounting and relevance of management information system to every organization with respect to CFAO Nigeria Plc.The study among other things will consider the relevant concepts adopted in management accounting and various works by some authors, it will also examine the extent of utilization and effect of management accounting on the divisional earning view over five years.The entire project work will be divided into five chapters and the data for the study will be group into primary and secondary sources, the researcher will also make use of questionnaires, textbooks, literally materials and journals.Chapter one, will be talking about the general description of the study, the historical background of the case study, the statement of problems, purpose of the study, significance of the study, hypothesis statement, scope and limitation of study and definition of some vital terms associated with management.Chapter two, will be related literature review of some authors about the impact of management accounting on financial performance.Chapter three will talk about data collection through the usage of primary and secondary sources.
Chapter four will talk about how the data gathered from the various staff of CFAO Nigeria Plc, will be analyzed in percentages. Chapter five will talk about the conclusion, recommendations and findings on how to improve financial performance through a good and efficient management accounting techniques.
1.1 GENERAL DESCRIPTION OF STUDY
1.2 HISTORICAL BACKGROUND OF CASE STUDY
1.3 STATEMENT OF PROBLEMS
1.4 PURPOSE OF STUDY
1.5 SIGNIFICANCE OF THE STUDY
1.6 HYPOTHESIS STATEMENT
1.7 SCOPE AND LIMITATION OF STUDY
1.8 DEFINITION OF TERMS
2.0 LITERATURE REVIEW
2.1 HISTORICAL BACKGROUND OF CFAO
2.2 MANAGEMENT ACCOUNTING AND OTHER SUBJECTS
2.3 SOME MANAGEMENT ACCOUNTING CONCEPTS
2.4 MEASUREMENT OF FINANCIAL PERFORMANCE
2.5 MANAGEMENT ACCOUNTING PRACTICE IN CFAO
2.6 TYPES OF FINANCIAL INFORMATION ATTAINABLE AT CFAO
2.7 INFORMATION SYSTEM (COMPUTERIZATION) AND MANAGEMENT ACCOUNTING
2.8 MANAGEMENT PROCESS
2.9 USEFULNESS OF MANAGEMENT ACCOUNTING
2.10 LINK BETWEEN MANAGEMENT AND MANAGEMENT ACCOUNTING
2.11 IMPORTANCE OF MANAGEMENT ACCOUNTING TO CFAO
3.0 RESEARCH METHODOLOGY
3.2 RESEARCH DESIGN AND CHARACTERISTICS
3.3 RESEARCH INSTRUMENT AND ADMINISTRATION
3.4 METHOD OF DATA ANALYSIS
3.5 DATA PROCESSING
3.6 LIMITATIONS OF METHODOLOGY
4.0 DATA PRESENTATION AND ANALYSIS
4.2 DATA PRESENTATION
4.3 TEST OF HYPOTHESIS
4.4 DATA ANALYSIS
4.5 INTERPRETATION OF RESULTS
5.0 SUMMARY, CONCLUSION AND RECOMMENDATION
5.4 RECOMMENDATION FOR FUTURE STUDIES.
1.1††† GENERAL DESCRIPTION OF STUDY
the term management accounting came into use when accountants added to their existing function, it is not new though the interest shown in it is of relatively recent origin.
Management accountants particular task is to provide information to his colleagues relating to the economics aspect of the operation of an enterprise, which he will take from the field of accounting such techniques as will be useful he will always look at the enterprise with the eye of a manager, conscious of management problems, responsibilities, opportunities, limitations, hopes and fears.
Management accounting is abroad based electric subject drawing upon relevant concepts and principles from economics, statistics, operational research, management behavioural science, information system as well as from cost and financial accounting.
It could be reasonably assumed that if there is a sound management accounting department in an organization which produces relevant and accurate information as the right time, then such an organization is bound to financially perform well if such information as the right time, then such an organization is bound to financially perform well, if such information is effectively and efficiently utilized. The extent of which the above assumption or the organization is true using the Nigeria companies/organization is the subject of this study. It is my ultimate desire thesis I should be able to show the importance of management accounting to an organization.
†According to C.T. Horngren and G.L Sundem; management accounting is defined as the process of identification, measurement accumulation, analysis preparation and communication of information that can assist management in fulfilling itís organizational objectives, which are subject to accounting measurements of performance and depends heavily an accounting data for guidance in decision making.
Many executives are better and stronger managers when they have solid understanding of cost accounting and financial accounting and more over their performance and their reward are often determined by how financial measure are made, so they have a natural self-interest in the growing knowledge of management accounting.
An efficient management accounting function is dependent on the availability of a sound accounting system which may be defined as means of gathering and communicating data to aid and coordinate collective decisions in the light of over all growth and objectives of an organization, it is however assumed in this thesis that an efficient and effective management accounting system is the only cause of high financial performance which is referred to as a level of success or other achieved expression on financial terms.
Management has been defined by various scholars, Mary Parker Follet: defined management as the act of getting things done through people, it can also be defined as the process of doing things through and by people in order to attain an objective or as the process of harnessing resources in order to achieve set objectives.
The following can be developed from the above definitions;
1. That management is a process;
2. That there is always an objective to be accomplished;
3. That management involves the use of resources both human and materials resources (non-human).
The function of management, other referred to as element/process of management includes;
A†††††† -††††††† planning
B†††††† -††††††† organizing
C†††††† -††††††† staffing
D†††††† -††††††† co-ordinating
E†††††† -††††††† directing
F††††††† -††††††† controlling.
The organization involved in this study CFAO, Acronym means LA COMPAIGN FRANCIAS DELíAFRIC (French Company in Africa).
It was incorporated in Nigeria on 13th September 1901, as a wholly owned subsidiary of CFAO France. The company becaome a public quoted company on 20th August 1971. The shares are quoted on the Nigeria stock exchange market, CFAO is sited at No 1, DAVIES STREET LAGOS ISLAND.
OBJECTIVES AND PURPOSE
A. Crete customers needs
B. Service customer needs
C. Make profit
D. Survival strategy
E. Business status
F. Business expansion.
However, there is co-operate objectives as CFAO at birth was purely commercial simply, the act of buying and selling of goods. Itís effects at capturing or progressively acquiring a sizeable share of the business market was made possible through a network of business activities, as it is still being done in the divisions and subsidiaries of the group, until late 1977, the division which are seven in number, which comprises of:-
1. ELECTRO HALL: The distribution and maintenance of sharp office equipment (mainly photo copiers Ė and fax machines), De la rue note (counting machines, MGE, UPS, SHARP domestic appliances, West Point refrigeration equipment and DAEWOO BUS.
2. CFAO MOTORS: Involves distribution and maintenance f commercial vehicles spare parts, passenger cars and accessories, also offers comprehensive leasing scheme.
3. STRUCTEC: supply and installation of water tanks and tower, pumps, water treatment plants and water proofing, distribution of building materials.
4. GENERAL IMPORTS: Wholesales distribution of both imported and locally made merchandise.
5. TRANSCAP TRAVELS: Provides air travel agency (reservations and ticket sales) and a welcome service of both international and local airlines.
6. NMI: Involves in the sales and servicing of motor vehicles, spare parts, tyres and tubes.
Their main dealership are PEUGEOT, locally assembled and importation of MERCEDES trucks and buses, local and imported distribution of local MICHELIN TYRES.
B. NMITES/OTIS DIVISIONS: This involves the following
- LIFTS: sales, installation and maintenance of OTIS lifts and escalators.
- TECHNICAL EQUIPMENT: sales and after sales services of WILSON generators set, HYSTER FORKLIFT TRUCKS, case agricultural equipment, Baonal compactors.
7. DEPI. Manufactures of perfumes and comestics, recently diversifying into whole sale distribution of industrial chemicals. A group of others where the companies control both majority shares and management are
- NIPEN: Manufactures of ball point pens and razors, DIL
- MALTEX: manufacturer of malt drink.
- N.T.M Production of blankets, recently diversified into production of mops, dusters, handkerchiefs, baby shawls markins, bed covers and prayer mats.
- SOFITAM:† Sales, services and renovation of industrial and petroleum equipment service, supply and training in the use of safety equipment. A third group where this company does not have a controlling share but has the control of management. These are:-
- CICA: Importation and distribution of generators, forklifts, water pumps and spare parts.
- GALVERNIZING INDUSTRIAL LIMITED: Manufacturer of galvanized roofing sheets.
1.3 STATEMENT OF PROBLEM
So many managers have failed to recognize the effect of management accounting in the financial performance and as a result lead to poor planning control and decision making.
- It retards the growth of the company/organization.
- It leads to loss in shareholders funds.
- It will welcome the idea of take over bid.
- The loss of public confidence in the company and shifting of interest to other company.
- Reputation of the company will be at stake
- It will hinder corporate objectives of the company
- It will delay information process.
- It reduces profit and profitability level.
1.4 PURPOSE OF STUDY
The purpose of this study will among other things include
- To provide a basic understanding of management accounting.
- To make a case for the effective and efficient use of management accounting department as well as a sound management information system (MIS)
- To provide a basic understanding of management and its process.
- To support or denounce the hypothesis stated in this study in relation to CFAO Nigeria PLC.
1.5 SIGNIFICANCE OF THE STUDY
It is the view of the research that this study will be relevant to the society at large and for the academic environment in particular in the following ways:-
- Provide theoretical background for management accounting.
- Provide a foundation for similar study in the future.
- Help the organization to improve the use of management accounting.
- And make the best use of it as a tool for improving their performances.
- Make it more desirable the place and significance of information system to management accounting.
1.6 HYPOTHESIS STATEMENT
Hypothesis testing will involve the use of null hypothesis (ho), the study is seeking to reject. Itís rejection will lead to the acceptance of the alternative hypothesis (Hi)
A. Ho: The utilization of management accounting has no impact on the financial performance of CFAO Nigeria, PLC.
H1: The utilization of management accounting has impact on the financial of CFAO Nigeria Plc.
B. Ho: Management information system (MIS) has no significant impact on the effectiveness of management accounting.
H1: Management information system has significant impact on the effectiveness of management accounting.
1.7 DEFINITION OF TERMS
The following terms are used in this work with their specified meaning.
- Management accounting:- This is the process of measurement accumulation, identification, analysis, preparation, interpretation and communication of information, that assists management in fulfilling itís organizational objectives and itís enormous task of decision making.
- Accounting system:- This refers to a formal means of gathering and communicating data to aid and co-ordinate collective decision in the light of overall goods or objectives of an organization. It is the major quantitative information system in almost every organization.
- Management information system: can be described as the use of technology in processing information and making it available for management decision, in other words it is the network of data processing procedures, developed within an organization integrated to provide managers with timely and effective information, it is usually found in modern business environment.
- Management: According to Lawrence Appley in his book titled ďManagement in ActionĒ defined management as the act of getting things done through people, this means that ďmanagement is the attainment of pre-determined goals by the decision of human performance along pre-direction of human performance along pre-established lines.
- Organization: This refers to any rational or sensible co-ordination of the activities of a number of people to the achievement of some common explicit objective through decision of labour and function also through a hierarchy of authority and responsibility.
It could also mean an entity where the above takes place.
- Financial manager: this is a manager who is concerned with the planning, co-ordinating and control of the organizations financial resources which include money and money worth.
- Computerization: this refers to the use of computer in production of information which will be useful in achieving specific purpose within an organization.
- Control: Is a management function involved in evaluating the organizations performance as against itís set objectives, the basic purpose of control is to determine how successful the planning function has been.
- Performance appraisal: This is a systematic and periodic view which entails the evaluation of an individuals job performance.
- Financial performance: This refers to the level of success or otherwise, resulting from an individuals organizationís actions or an action expressed in terms of itís effect on the financial position of the organization or company.
- Planning: According to DALE MC CONKEYĒ plans are less important than planning thus planning is an important management function of anticipating the future and determining the best course of action to achieve in an organization objectives within a given period and with the availability of manpower and material resources to carry out the job effectively.
- Sub optimally: This exist when one department is seeking to maximize itís objective or gains at the expense of overall organizational objectives.
- Policy: This refers to guide decision-making and provides the frame work of planning.
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