THE USE OF ACCOUNTING AS A MANAGEMENT TOOL

THE USE OF ACCOUNTING AS A MANAGEMENT TOOL (A CASE STUDY OF ANAMBRA STATE AGRICULTURAL DEVELOPMENT PROJECT AWKA)

ABSTRACT

The study centers on the “Use of Accounting as a Management Tool” (A case study of Anambra State Agricultural Development Project, Awka). In pursuance of this investigation research objectives and hypotheses were formulated. Both primary and secondary data were collected and the data were then presented, analyzed, interpreted using textual, graphic and tabular modes of data presentation. The formulated hypotheses were also tested using chi-square as the test statistic. Based on the above, it was found that Anambra State Agricultural Development Project uses Accounting as Management Tool. All their financial transactions of Anambra State Agricultural Development project are recorded in the appropriate books of accounts. From these books, revenue projections, expenditure estimates, financial statements, statements of source and application of funds are prepared. Management of Anambra State Agricultural Development project uses ad inter-alia each of these prepared statements as a tool for decision-making, evaluation of the financial strength, profitability and future prospects. Continuous type of budget is used for planning and controlling purposes. Economic rate of return is used to evaluate projects. Profitability is evaluated in terms of the benefits, which the given community derives from a given project.

With reference to the findings, the researcher recommends that; quarterly and mid year financial statements should be prepared to highlight the key variables affecting achievement of the objectives of Anambra State Agricultural Development Project; Budget should be compared with actual result so as to find out variables where they exist and make amendments where necessary; all the problems identified from the respondents should be addressed; there should be proper authorization and documentation; only qualified staff are to be employed; staff work schedules should be attainable with the actual working hours, ad accounting and computer training programmes should be organized at reasonable intervals.

TABLE OF CONTENTS

Approval page

Dedication

Acknowledgement

Abstract

Table of content

CHAPTER ONE

Introduction

Background of the Study
State of the problem
Objective of the study
Justification for the study
Plan of the study
Scope and limitations of the study
Definitions of some terms

References

CHAPTER TWO

Review of related literature

2.1 The importance and scope of Accounting as a management tool

2.2 The function of Accounting as a management tool.

2.3 The objectives of accounting a management tool

2.4 Problems and Prospects of Accounting as a management tool

2.5 Hypothesis formulation

References

CHAPTER THREE

Research Design and Methodology

3.1 Research Population/Area of Study

3.2 Determination of sample size

3.3 Sources of Data

3.4 Analytical Technique

References

CHAPTER FOUR

4.1 Presentation, Analysis and Interpretation of Data

CHAPTER FIVE

5.1 Findings and Summary of the study

5.2 Policy Recommendations and Conclusion

APPENDIX

Bibliography

Questionnaires Introduction

Questionnaire

Interview Guide

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

Accounting, unlike the other natural sciences, is not based on fundamental laws or absolute precepts. It has evolved over many years through trial and error, and its continual improvement rests on a basis responsive to the requirements of users of financial statements. The domain of financial accounting is therefore visualized as requiring attention at four levels: postulates are the antecedent conditions or essential prerequisites to principles; the principles must meet the supported by the principles. This framework of accounting standards and guidelines defines the area accounting theory. Theories are generalizations, which serve to organize otherwise masses of data, and which thereby establish significant relationships in respect of such data.

Accounting theory is therefore the logical reasoning in the form of a set of broad principles that provide a general frame of reference by which accounting practices can be evaluated, and which guide the development of new practices and procedures. It thus provides a coherent set of systematic principles that form the general structural framework for the evaluation, and development of sound accounting practices. It presents the value judgments upon which accounting principles, concepts and polices are based. Theses policies regulate moderate and direct practices and lead to reports which are used by decision makers. Without a good knowledge of accounting theory, accounting becomes mechanistic, routine and a repetitive drudgery. Osisioma (1986: 40) stated that;

…Accounting involves the collection compilation and systematic recording of business transactions in terms of money, the preparation of financial reports and the use of these reports as tools of management …

Management is heavily dependent on accounting operation facts. Management is regarded as a process of converting information into action and accounting is the source of most of the information. Accounting is a system of principles and techniques that permits the recording, classification, accumulation, presentation and interpretation of financial information so that past performance, present condition and future planning can be evaluated. The decision making process of accounting normally involves planning and control. Accounting formalizes plans be expressing them in the language of figures as budget and control as performance reports which compare results with plans and spotlight deviations or variances form plans.

The importance of accounting information in management can be applied to any organization without regards to its size. Willsmore (1971: 1)observed that;

…Even in the very personal business management can only take place through figures; results, reporting and the man who doesn’t understand that must fail…

Managing a business is a matter of deciding what should be done, seeing to it that the means are available and getting people employed in the business to do it. At every step in this process, management is faced with alternatives, and every decision, to do something or to refrain from doing something involves a choice. In most cases, the probability that a good decision will be made depends on the extent and validity of the information that the manager has about the alternatives and their consequences information which flows from the accounting records or which are developed by special analysis of accounting data constitutes the basis on which a wide variety of business decisions are made. Accounting involves the process of identifying, measuring and communicating economic information to permit informed judgments and decisions by users of the information. The success or failure of accounting as a management tool will depend upon the philosophy on which it was established and the attitude of management towards it as well a the skills involved.

STATEMENT OF THE PROBLEM

The research problem is the use of accounting as a management tool. The success or failure of accounting as a management tool will depend upon the philosophy on which it was established and the attitude of management towards it. Accounting serves the interest of business therefore; it must keep pace with the various stages of business development. Management Accounting is concerned with the application of accounting and statistical techniques to the specific purpose of providing and interpreting information designed to assist management in its function of promoting maximum efficiency. It focuses on the internal environment of business, and provides information for such decisions of the firm as an inter-alia make or Buy, Replacement, Pricing, Cost Reduction Decisions. The techniques applied for the analysis are both statistical and accounting in nature – Budgeting and Budgetary control, standard costing and variance analysis, direct costing and Break-Even Analysis and Project Cost Analysis.

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