THE IMPACT OF FINANCIAL ACCOUNTING REPORTING IN THE MANAGEMENT OF A BUSINESS

CHAPTER ONE

1.0 INTRODUCTION

1.1 BACKGROUND OF THE STUDY

This project is one that studies the effect of financial accounting reporting of the management of a business. Financial accounting covers those activities that relates to the preparation of certain reports which are known as financial statement These statement report the financial status of a firm at a particular time. The practice of accounting stated since organized life evolved. The early man lived in caves from where he developed into living in communities. Later arose the concept of specialization. That is each person went about doing those activities of life for which he was most gifted. This gave rise to individuals producing certain goods in quantities in excess of what they needed while there were other goods which they need but they did not produce them selves the result was exchange. the first system of exchange was by barter. Later money evolved and replaced barter. During the stage of barter recording were done but only the quantities of good exchanged were recorded. For example in things fall apart, used white marks drawn on the walls as record of his indebtedness to others.

However as soon as money evolved all recording were done in monetary terms. Another perspective worthy of note about the history of accounting is the impact of the different stage of organized business on accounting. At the stage of specialized in using their skills in create and developed the quid system. Here the job was done by one man at most with the aid of members of his family. The guilds system grew and outsiders were employed to work for the owner. The industrial revolution expanded thee output and gave rise to the factory system of working. As the size of these factories grew it became impossible for one person to set up a factory alone. This gave rise to partnership and of course the joint stock companies. The joint stock act of 1844 is a very important landmark in the evolution of accounting. It marked the evolution of accounting. It marked the beginning of auditing. The result of this act is what is known to day as limited liability or public limited liability companies. The essential feature of the limited liability companies is that ownership is separate from management. Large numbers of owner (shareholder) across the globe invest in companies while a few directors are elected to mange these companies. This particular development gave impetus to the evolution of auditing as an aspect of accounting. Also the size of these companies and the stiff competition for funds, markets, new ideas and products gave rise to more rigorous accounting techniques like cost and management accounting to aid management in decision making.