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32 THE USE OF ACCOUTING INFORMATION FOR DECISION

MAKING

(A CASE STUDY OF NIGERIA NATIONAL PETROLEUM

REFINERY)

ABSTRACT

This study deals with the use of Accounting Information for Decision-

making (A case study of Port-Harcourt Refinery Company) One of the most

important functions of management which is decision making has been

described as a purposeful choosing from a number of alternative courses of

action.

The management can only come up with a good decision if they were

able to get a correct accounting information form the accountants as a result

of this, there are the need for research to find out if managers actually

provided this information to the mangers and if they are relevant in the

decision making of the organization.

The following are stated problems

a.) Inadequate utilization of available accountb.) Inadequate managerial expertise


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The project work in chapter two revealed all the accounting information

needed by the management for decision making and the use and users of

accounting information.


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TABLE OF CONTENTS

Title page---------------------------------------------- i

Approval page----------------------------------------- ii

Dedication---------------------------------------------- iii

Acknowledgement-------------------------------------- iv

Abstract-------------------------------------------------- v-vi

Table of contents---------------------------------------- vii

CHAPTER ONE

1.0 Introduction----------------------------------------- 1

1.1 Background of the study---------------------------- 8

1.2 Statement of problem------------------------------- 11

1.3 Research Question---------------------------------- 13

1.4 Statement of purpose------------------------------ 14

1.5 Significance of the study--------------------------- 15

1.6 Scope of the study---------------------------------- 16

1.6 Limitation of the study------------------------------ 17

1.7 Definition of terms---------------------------------- 17

CHAPTER TWO


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2.0 Literature Review------------------------------------- 21

2.1 The concept of accounting information system------ 21

2.2 Uses and users of accounting information----------- 24

2.3 Effect of poor and inadequate accounting policies--- 30

2.4 Accounting information system in NNPC------------- 31

2.5 Problems encountered by NNPC in the use of their

Accounting information system----------------------- 36

2.2 The role of standard organization of Nigeria (SON)And regulatory bodies--------------------------------- 38

CHAPTER THREE

3.0 Research methodology-------------------------------- 403.1 Source of data----------------------------------------- 40

3.2 Research design-------------------------------------- - 42

3.3 Research population /Sample Size------------------- 42

3.4 Instrument used--------------------------------------- 43

3.5 Data analysis------------------------------------------ 43

CHAPTER FOUR

4.0 Presentation and analysis of data---------------- 45


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4.1 Data presentation--------------------------------- 45

4.2 Data analysis-------------------------------------- 46

CHAPTER FIVE

5.0 Summary, Conclusion and Recommendation---- 595.1 Summary------------------------------------------ 59

5.2 Conclusions----------------------------------------- 60

5.3 Recommendations--------------------------------- 61

Bibliography---------------------------------------- 64


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CHAPTER ONE

1.0 INTRODUCTIONOne of the most important uses of Accounting Information is

decision-making. Decision making has been describes as a purposeful

choosing form a number of alternatives causes of action.

The need for a decision arises in business because a manager is faced

with a problem and alternative causes of action are available, any one of

them which might provide a satisfactory solution to that problem. In

deciding which alternative to chooser the manager will regret all the

information which is relevant to the decision he wants to take.

The accounting provides managers with the necessary information

they need. In this case, it is the accountants that provide the information with

which the management uses for their decision making. This signifies that for

any decision to be taken in an organization, it gives the work of both the

accountants and the managers.

Management can only come up with a good decision, if they are able

to get correct accounting information form the accountant in a situation

where the accountant does not provide correct information; this is bound to

affect the decision making of the management adversely.


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The question now is, how business executive know the company is

embarking on a favorable decision or unfavorable one. The answer to this

question is based on the management and the accounting information.

Management and accounting information have been defined by

various authors, According to the committee of Technology of America

Institute of certified public Accountants founded in 1961, Accounting is the

act of recording, classifying and summarizing in a systematic manner and

terms of money, transactions and events which have in part, a financial

character and interpreting the result thereof.

According to New Encyclopedia Britannica vol.13, the purpose of

accounting is to provide information about the economic affairs of an

organization. This information may be used in a number of ways by the

organizations managers to help them plan and control the organization by

owners and legislative or regulatory bodies to them appraise the

organizations performance and make decision as to help them decide on

how much time or money to devote to the organization, by government

bodies to determine how much tax the organization must pay.

Accounting provides information for all these purpose through the

maintenance of the files of data and the preparation of various kinds of

reports. Most accountant information is historical that is, the accountant


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observes the things that the organization does, records their effect and

prepares reports summarizing what has been recorded. (New Encyclopedia

Britannica Vol.13).

Most accounting data and reports are generated solely or mainly for

company managers. Preparation of these data and reports is the focus of

managerial accounting which consists of three broad functions.

y Cost findingy Budgeting planning and performance reportingy Cost and profit analysis

These points will be explained in the next chapter. Management is the

group of people in business who have over all responsibility for achieving

the companys goals of low cost, creating new and improved products,

increasing the number of jobs available, improving the environment and

accomplishing many other social tasks. To achieve any of these goals, of

course the company must be successful.

Success and survive in a tough, competitive business environment

requires that management concentrates much of its efforts on two major

goads profitability and liquidity. Profitability is the ability to make enough

profit to attract and hold investment capital. Liquidity means having enough

funds on hand to pay depts. When they fail due.


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Managers must constantly decide what to do, how to do it ad whether

the results match the original plans. Successful managers consistently maker

the right decisions based on timely and valid information. Many of this

information are based on the flow of accounting data and their analysis.

Management is one of the most important users do accounting to

provide management with relevant and useful information e.g. the managers

may ask: what was the companys net income during the past quarter? Is the

return to owners adequate? Does the company have enough cash? What

products are most profitable? What is the cost of manufacturing each

product? Bulverde F. needles, J. et al (1984:9).

According to most recent surveys, most top level business executives

have background in accounting and finance than in any other field. The

essence of using accounting information is to enable managers make wise

decision. It is also used (accounting information) to set up system of internal

control to increase efficiency and prevent fraud in companies.

Accounting information aids in profit planning, budgeting and cost

control. In a company, it is the duty of the management accountant to see

that his company keeps good records, prepares proper financial regulations.

Management accountants also need to keep up with the latest development

in the use of computers and in computer systems design.


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Accountants provide many special reports for management decision-

making. This function requires the gathering of both historical and projected

data. It is important for accountants to present the financial effects of

alternative courses of action so that these best courser of action can be

selected. Examples of these special reports are evaluations of proposed new

products, analysis of alternative plan, sites of a proposed advertising

campaign, a long-term financial plan, and a recommendation that a product,

department, or services be dropped. Belivered E. Needles. J.R et al

(1984:11). Some of the ways by which accounting information can be drawn

are:

y General accountingy Cost accountingy Budgetingy Tax accountingy Information system designy Internal Auditing

All these points are to be discussed fully in the next chapter.

In summary, accounting information is primarily concerned with data

gathering form internal and external sources analyzing, processing,

interpreting and communicating the result (information) for use within the


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organization so that management can make more effective plan, decisions

and control operations.

Accounting information is used for the following information needs:

Planning information, Operational control information, organizing directly

and decision-making.

1.1 BACKGROUND OF THE STUDY

Oil prospecting began in Nigeria as far back as 1908 when a Germen

company, the Nigeria Bitumen cooperation started operation in the Araromi

area, west of Nigeria. Their pioneering effort however ended with the

outbreak of First World War in 1914. In 1937, oil prospecting started again

in Nigeria, shell petroleum Development Company of Nigeria was whole

awarded he sole concessionary right covering the whole territory of Nigeria.

Their activities were again interrupted by the Second World War, nut

resumed again in 1947. In 1956, oil wells were discovered in commercial

quantities at Oloibiri in the Niger Delta after several years of prospecting. In

1958, shell started oil production and export from its Oloibiri field.

Other Companies such as Mobil, Agip, Safrap, now (EIF), Tenneco

and Amadeas (Texaco and Chevron) now in 1961 begun exploitation

activities for oil in the onshore and offshore areas of Nigeria. The


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exploration right which formerly was granted to shell alone was now

extended to new comers in line with the government policy of increasing the

pace of exploration in the country. In 1972, Nigeria ranked the seventh in the

world of as a major oil producer.

Since then, we have grown to become the sixth of the largest oil

producing countries in the world. Initially governments interest was only

limited to the oil collection of royalties and other dues offered to it by the oil

companies and making rudimentary laws to regulate the activities of the oil

industry. After the Nigeria civil war, oil had become very important to the

economy. The establishment and strength government control in the

industry.

The ministry of petroleum Resources whose functions were regulatory

was formed and was not until it April 1997 that the merger between the

NNOC and the Ministry of Petroleum Corporation was consummated.

Commercial activities of the former NNOC namely: (exploration,

production, transportation, processing of oil refining marketing of crude oil,

and its refined products) with regulatory functions of the former ministry of

petroleum resources.


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In 1985, the corporation NNPC was recognized into five semi-

autonomous sectors each headed by a sector co-coordinator. The five sectors

were:

y Oil and Gasy Refineriesy Petrochemicalsy Petroleum products makingy Petroleum inspectorates

Today, the NNPC companies six (60 Directorates, and eleven

subsidiaries are charged with the execution of the corporation business. It is

due to the organic development of NNPC that led to reorganizing of the

corporation into five (5) autonomous sectors. Refineries were one of the

sectors as a result of this Port-Harcourt refining company came as one of the

refineries owned by the corporation. Port-Harcourt Refinery Company

limited is in business to provide efficient petroleum refinery services

primarily to NNPC at minimum cost. The company provides quantitative

refinery services for domestic services.

1.2 STATEMENT OF THE PROBLEM


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The central concern of management is decision. In making a sound

decision, the management needs some valuable and accurate information

from the accountant. The accountant is at the services of the management by

providing the management with the necessary information which they need

for decision making.

However, management acquisition and utilization of accounting

information has always been faced with problems ad they are;

y Provision of sometimes inaccurate, inefficient and unreliable accountinginformation by the management accountants.

y Management not making adequate use of the accounting information provided by the management accountant even when the information

produced is on time and accurate.

y The inability of the management accountant to produce the information,timely and the information not being available at the time of decision-

making.

y Inability of the managers to interpret and understand information providedby the government accountants.

y Even when the managers have all the accounting information which theyneed, they do not always make the right decision, this is a result of

management override of policies, that is, management neglecting the


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accounting information and going ahead to come up with any decision or

policy of the choice or giving accounting its rightful place in decision-

making.

The information technology requirement of the company used as a

case study are still behind schedule, most of their operations are still done

manually, this also affect the accuracy and timeliness of their report

information which can thereby affect the decision-making of the

management.

1.3 RESEARCH QUESTIONS

The purpose of the study is to highlight the use of accounting

information in NNPC and to disclose the obstacles involved in the demand

and supply of information which in the research question.

. Has the proper use of accounting information helped the management inmaking efficient and effective decision in the firm?

2. Is there no significant impact of the use of accounting information as an aidto management decision making.


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1.4 STATEMENT OF PURPOSE

This research is aimed at examining how effective and efficient management

apply accounting information in making business decision.

The main objectives of this study are:

y To ascertain the roles played by accurate and quantitative accountinginformation in decision-making.

y To ascertain the type of decision management make based on the accountinginformation at their proposal

y To look into the extent to which manager (s) neglect the use of accountinginformation in their decision making activities.

y To make suggestions for their improvement in the provision and utilizationof accounting information for efficient and effective decision-making in an

organization.

1.5 SIGNIFICANCE OF THE STUDYAccounting information is very important in the life of any business.

It is based on this information that the management will be able to make


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wise decisions. The accountants present the accounting information in such a

way as to assist management in policy and decision making in the day- to-

day operations of the company.

Based on the information produced, the management will have the

benefits on using it to plan and control their current ad future operations

based on it also, the will come up with their management decision and

information of long-term plans. The information also will help the

management report historical information to outsiders.

The account manager based on the management plan

(target/standards) will analyze the performance of the organization and

access whether the organization actually attained the standard set by the

management or not, if there is any variance, the management in charge of

accounts will look into it to find out the causes of the variance, and the

report to the management based on that report. The management can make a

wise decision that will take the cause of the variance into consideration. The

use of accounting information is so important that the management of any

organization cannot do without it. Any organization that does not make use

of accounting information for their decision making is bound to be running

into difficulties that lead to a set back.


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1.6 THE SCOPE OF THE STUDY

The research study is limited to Port-Harcourt Refinery Company

limited, A subsidiary if Nigerian National Petroleum Corporation (NNPC).

Attention will be directed to only relevant accounting information that will

be useful for effective decision-making.

The accounting staff and the managers of their corporation will be

interviewed for the purpose of getting relevant useful accounting

information for decision making, also to determine how effective to use the

accounting information for their decision making. The recommendation and

the conclusion will be based solely on the information gathered form the

company.

1.7 LIMITATION OD THE STUDYThe researcher gained full access to the establishment and the staff of

the company gave him full cooperation. She never experienced any

information of constraint in the cause of his enquiry. Infact the staff of the

research if at all the research and any problems it is financial problems.

1.8 DEFINITION OF TERMS


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DECISION MAKING: This is a process of choosing specific cause

of action form among many possible alternatives. Determine ways and

means for accomplishing the line of action decided upon is also a part of the

decision-making process.

ACCOUNTING: This is the act of recording classifying and

summarizing in a significant manner and in terms of money, transactions

and events which are in part at least of a financial character and interpreting

the results thereof.

INFORMATION: Data that has been processed to produce meaning

relating to a field.

ACCOUNTING INFORMATION: Those processed information

relating to accounting.

MANAGEMENT: This is a group of people in a business who have

overall responsibility for achieving the companys goals.

INVENTORY: This is the stock of goods which a firm posses within

an accounting period.

COST CENTRE: This is the smallest of activities of areas of

responsibility where costs are accumulated.


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PROFIT CENTRE: This is a segment of a business that is

responsible for both its revenues ands expenses, providing information for

such an entity.

PLANNING: The use of information supplied by accountants in

making decision by which management formulate objectives ad chooses a

pattern of action I order to achieve those objectives for future business of the

firm.

CONTROL AND CORDINATION: A process of ensuring that the

cause of actions is maintained and that the desire aims are achieved. This is

done through the use of budget and actual data.

COST DECISION: This is the application of accounting and cost

principles, methods and techniques in the ascertainment of cost and analysis

of savings and or excess as compared with the previous experiences or with

standard.

DECISION: alternative line of actions which are often irrevocable.

ORGANIZATION: In organizing the managers decide how best to

put together the organizations human and other resources in other to carryout

establishment.

COST ACCOUNTING: This refers to the determination and control

of cost.


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GENERAL ACCOUNTING: This is the overall record keeping

preparation of financial statements and report and control of all business

activities.

BUDGETING: This is the planning of financial aspects of business

operations.

QUESTIONAIRE: This is a method of data collection in which the

research questions and question on other relevant issues are put down in a

systematic manner.

MANAGEMENT ACCOUNTING: This is an accounting who is

employed a business.

INFORMATION SYSTEM: This is a system that is used for many

forms, records, flow charts, manuals, control and reports.


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CHAPTER TWO

2.0 LITERATURE REVIEW

The purpose of this review is to understand the use of accounting

information and the role it plays in decision making, seeking the option of

various authors.

2.1 CONCEPTUAL LITERATURE

The success of an organization depends on the effectiveness of the

management in relation to decision making. Effectiveness of management

on the other hand, relies on the source of detail information used in arrived

decision. Accounting practice provides financial, cost, tax, and management

accounting information to enable management make adequate decision that

will enhance the economic growth and survival of the organization

(Aderibigbe 2008).

Management of an organisation has the responsibility of utilizing resources

to generate revenues that is to be shared, among the stakeholders. To

effectively manage the funds, with a view to satisfying all the stakeholders,

management must think very seriously and carefully on all the decisions to


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be made. While the shareholders and creditors to a business the primary

stakeholders base their decision making exercise on past events,

managerial decision making is usually about the future; which is full of risks

and uncertainties. However, accounting information flow through a system,

and this system aid in accuracy and authentication of the decision making of

the organization.

The management accounting view of business may be divided into two

broad categories: (1) basic features and (2) basic assumptions.

Basic Features

The business firm or enterprise is an organizational structure in which the

basic activities are departmentalized as line and staff. There are three

primary line functions: marketing, production, and finance. The organization


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is run or controlled by individuals collectively called management. The staff

or advisory functions include accounting, personnel, and purchasing and

receiving. The organization has a communication or reporting system (e.g.

budgeting) to coordinate the interaction of the various staff and line

departmental functions. The environment in which the organization operates

includes investors, suppliers, governments (state and federal), bankers,

accountants, lawyers, competitors, etc.)

The organizational aspect of the business firm is illustrated in Figure 2.1.

This descriptive model shows that there are different levels of management.

A commonly used approach is to classify management into three levels: Top

management, middle management, and lower level management. The

significance of a hierarchy of management is that decision-making occurs at

three levels.


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2.1.2 Basic Assumptions in Management Accounting

The framework of management accounting is based on a number of implied

assumptions. Although no single work has attempted to identify all of the

assumptions,

Figure 2.1 Conventional Organizational Chart

The major assumptions will be detailed below. Five categories of

assumptions will be presented:

1. Basic goals

2. Role of management


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3. Nature of Decision-making

4. Role of the accounting department

5. Nature of accounting information

Basic Goal Assumptions - The basic goals or objectives the business

enterprise may be multiple. For example, the goal may be to maximize net

income. Other goals could be to maximize sales, ROI, or earnings per share.

Management accounting does not require a specific of type of goal.

However, whatever form the goal takes, management will at all times try to

achieve a satisfactory level of profit. A less than satisfactory level of profit

may portend a change in management.

Role of Management Assumptions - The success of the business depends

primarily upon the skill and abilities of managementwhich skills can vary

widely among different managers. The business is not completely at the

mercy of market forces. Management can through its actions (decisions)

influence and control events within limits. In order to achieve desired

results, management makes use of specific planning and control concepts

and techniques. Planning and control techniques which management may

use include business budgeting, cost-volume-profit analysis, incremental

analysis, flexible budgeting, segmental contribution reporting, inventory

models, and capital budgeting models. Management, in order to improve


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decision-making and operating results, will evaluate performance through

the use of flexible budgets and variance analysis.

Decision-making Assumptions - A critical managerial function is decision-

making. Decisions which management must make may be classified as

marketing, production, and financial. Decisions may also be classified as

strategic and tactical and long-run and short-run. A primary objective of

decision-making is to achieve optimum utilization of the businesss capital

or resources. Effective decision-making requires relevant information and

special analysis of data.

Accounting Department Assumptions - The accounting department is a

primary source of information necessary in making-decisions. The

accounting department is expected to provide information to all levels of

management. Management will consider the accounting department capable

of providing data useful in making marketing, production, and financial

decisions.

Nature of Accounting Information - In order for the accounting

department to make meaningful analysis of data, it is necessary to

distinguish between fixed and variable costs and other types of costs that are

not important in the recording of business transactions. Some but not all of

the information needed by management can be provided from financial


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statements and historical accounting records. In addition to historical data,

management will expect the management accountant to provide other types

of data, such as estimates, forecasts, future data, and standards. Each specific

managerial technique requires an identifiable type of information. The

accounting department will be expected to provide the information required

by a specific tool. In order for the accounting department to make many

types of analysis, a separation of costs into fixed and variable will be

required. The management accountant need not provide information beyond

the relevant range of activity.

An understanding of financial statements is critical to the ability of

management to make good decisions. Financial statements, although

prepared by accountants, are actually created by management through the

implementation of decisions. The historical data from which accountants

prepare financial statements result from actual management decisions. The

reader and user of financial statements is not primarily the accountant but

management. From a management accounting point of view, it is

management rather than accountants that needs to have the greater

understanding of financial statements.


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The income statement and the balance sheet can be viewed as a descriptive

model for decision-making. Financial statements reflect success or lack of

success in making decisions. Management can be deemed successful when

the desired income has been attained and financial position is considered

sound. To achieve managerial success management must manage

successfully the assets, liabilities, capital, revenue and expenses. Financial

statements, then, serve as a ready and convenient check list of decision-

making areas.

The basic balance sheet equation, of course, is A = L + C. A management

accounting interpretation is that the assets or resources come from the

creditors (liabilities) and the owners (capital). It is management

responsibilities to manage both sides of the equation. That is, management

must make decisions about both the resources (assets) and the sources of the

assets (liabilities and capital).

Each item on the balance sheet is an area of management. Stated differently

each item on financial statements represents a critical area sensitive to

mismanagement.

Cash, accounts receivable, inventory, fixed assets, accounts payable, etc. can

be too large or too small. Given this fact, then, for each item there must be


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the right amount or optimum. It is managements responsibility to make the

best decision possible regarding each item on the financial statements. Gross

mismanagement of any single item could either result in the failure of the

business or the downfall of management.

Following are some examples of decisions associated with specific financial

statement items:

Decision-making in Management Accounting

In management accounting, decision-making may be simply defined as

choosing a course of action from among alternatives. If there are no

alternatives, then no decision is required. A basis assumption is that the best

decision is the one that involves the most revenue or the least amount of

cost. The task of management with the help of the management accountant is

to find the best alternative.


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The process of making decisions is generally considered to involve the

following steps:

Identify the various alternatives for a given type of decision.

1. Obtain the necessary data necessary to evaluate the various alternatives.2. Analyze and determine the consequences of each alternative.3. Select the alternative that appears to best achieve the desired goals or

objectives.

4. Implement the chosen alternative.5. At an appropriate time, evaluate the results of the decisions against standards

or other desired results.

2.1.3 Accounting information and Decision-Making

From the descriptive model of the basic features and assumptions of the

accounting perspective of business, it is easy to recognize that decision-

making is the focal point of accounting information. The concept of

decision-making is a complex subject with a vast amount of management

literature behind it. How businessmen make decisions has been intensively

studied. In management accounting, it is useful to classify decisions as:

1. Strategic and tactical

2. Short-run and long-run


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Strategic and Tactical Decisions

In management accounting, the objective is not necessarily to make the best

decision but to make a good decision. Because of complex interacting

relationships, it is very difficult, even if possible, to determine the best

decision. Management decision-making is highly subjective.

Whether a decision is good or acceptable depends on the goals and

objectives of management. Consequently, a prerequisite to decision-making

is that management has set the organizations goals and objectives. For

example, management must decide strategic objectives such as the

companys product line, pricing strategy, quality of product, willingness to

assume risk, and profit objective.

In setting goals and objectives, it is useful to distinguish between strategic

and tactical decisions. Strategic decisions are broad-based, qualitative type

of decisions which include or reflect goals and objectives. Strategic

decisions are non quantitative in nature. Strategic decisions are based on the

subjective thinking of management concerning goals and objectives.

Tactical decisions are quantitative executable decisions which result directly

from the strategic decisions. The distinction between strategic and tactical is

important in management accounting because the techniques of management

accounting pertain primarily to tactical decisions. Management accounting


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does not typically provide techniques for assisting in making strategic

decisions.

Examples of strategic decisions and tactical decisions from a management

accounting point of view include:

Once a strategic decision has been made, then a specific management tool

can be used to aid in making the tactical decision. For example, if the

strategic decision has been made to avoid stock outs, then a safety stock

model may be used to determine the desired level of inventory.

The classification of decisions as strategic and tactical logically results in

thinking about decisions as qualitative and quantitative. In accounting

practice, the approach to decision-making is basically quantitative.

Accounting information deals with those decisions that require quantitative

data. In a technical sense, accounting information consists of mathematical

techniques or decision models that assist management in making quantitative

type decisions


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2.2 THE CONCEPT OF ACCOUNTING INFORMATION SYSTEM

In the course of this research, it was showed that accounting information

has developed over the years from recording cash movement and

transaction, with third parties to the provision of financial data to help

management plan and measure how efficiently activities are being managed

and data to assist in solving problems as they arise.

Accounting information refers to report or relevant financial information

regarding the economic activities of an organization or unit to users (Reger

H. Herman Sonetal 1983). Accounting information developed as far back as

4500 B.C where stewardship accounting information were able to plan their

stocks and wealth. All that was done was the keeping of records of wages,

taxes, due of trade by barter and early 19th

century when the Greeks and

Romans developed a better and systematic book keeping technique to the

present day when machines are used in the accounting process. Accounting

has since received remarkable improvement with the increase in the demand;

for information in planning and decision-making result from changing

environment, has always brought about changes in accounting. Information

made of what is accepted as accounting today would not have been

recognized as such 50years ago changing social attitudes combined with

development in information technology, quantitative methods and


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behavioral sciences have affected radically the environment in which

accounting operates today.

Accounting is moving away from the procedure base encompassing record

keeping and such related work as the preparation of a budget and final

accounts towards the adoption of a role which emphasizes social importance.

(M.W.E Gautier and B under down 1982).

Accounting information are financial position statements and other

reports supplied by the accountant which shows the true and fair financial

position of the economic activities of the organization. Accounting

information includes the balance sheet, profit and loss account and cash flow

statements.

Balance sheet according to Move Gautier and Under Down (1982:29) is the

statement of financial position that lists the accounting period. It provides a

measure of the capital invested by the owners in company or business. It is

also made up of four main sections which are: fixed assets, current asset,

capital and liabilities. This classification simplifies financial analysis of

business.

Trading profit and loss account shows the profitability of the business.

It also shows the amount of economic activities that took place during the

preceding accounting period and profit derivable from such economic


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activities. It shows the gross profit as well as the net profit of the

organization within the accounting period.

Gross profit is the sum of sales less the cost of goods sold.

Cash flow statement is a statement that shows the cash

movement in transaction engaged in by the firm for a particular period

usually one year. The cash flow statement was introduced to replace the fund

flow statement in order to make it easier for users of financial statement to

know the cash available at hand at a given period.

We have two methods of calculating the cash flow in a firm, they are:

Direct method

Indirect method

The balance sheet, profit and loss account and cash flow statement together

constitutes the financial statement of an organization.

The decision making in any organization, accounting information available

to the board are of three (3) types namely:-

y Financial accounting informationy Costing accounting informationy Management accounting information

Financial accounting- According to R. Anao, it refers


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to the act of recording, classifying and interpreting the financial statement in

monetary terms in accordance with accounting standard. It provides

information for external users like government, shareholders e.t.c

Management accounting - According to Ade

Omolehinwa, defined it as the process of identification, measurement,

accumulation, analysis, preparation, interpretation, and communication of

financial information, which is used by management to plan, evaluate, and

control within an organization. It provides information for internal users.

Costing accounting- This is a specialized branch of accounting

concerned with the determination of cost.

It enables the managers get information about the cost of operation of each

department for controlling current operation and planning future operation.

THEORETICAL AND EMPIRICAL REVIEW

A review of the literature on accounting practices suggests that accounting

practices are influenced by contextual factors including wider environmental

and organisational factors (Flamholtz 1983; Hopwood 1987; Rayburn and

Rayburn 1991). The influence of contextual factors is likely to lead to

differences in the role and utilisation of accounting information in decision-

making strategies and processes and importantly to differences in managers


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preferences. However, management accounting literature has also suggested

convergence and uniformity of management accounting practices because of

the increasing adoption of similar management philosophies and system

designs ( Carr 2006; Liu and Pan 2007). Indeed, institutional theorists have

argued that the embeddedness of organisations in their institutional context

has resulted in similar organisational identities and structures leading to

congruence between the external institutional environment and organizations

(Meyer and Rowan 1977b; DiMaggio and Powell 1983).

In the move towards globalisation, the concepts of congruence with the

institutional environment and organisational isomorphism have led to the

assumption of convergence of accounting practices. Indeed, it has been

argued that the increasing pressure of external factors such as market

pressures, government regulations and/or financing requirements have

resulted in organisations increasingly adopting similar management

structures and processes (Ittner and Larcker 1997; Granlund and Lukka

1998).

While agreement exists that external factors have an influence on

companies management structures and processes, the neo-institutional

approach has been criticised for exclusively focussing on external factors


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(Greenwood and Hinings 1996; Hirsch and Lounsbury 1997; Lounsbury

2007). There is evidence, which reveals the influence of internal factors on

management processes and structures; emphasizing the importance of a

holistic analysis. Indeed, a holistic analysis enables the researcher to

integrate other institutional influences, multiple logics and importantly it

considers the cultural framework and the personal characteristics of decision

makers (Lounsbury 2007). Accounting research has been criticised for its

focus on technical aspects and importantly for neglecting the importance of

culture and other contextual factors that influence professional judgement,

which has to be applied increasingly across all accounting disciplines (Patel

et al. 2002; Patel 2003, 2004; Lounsbury 2007).

The strong focus on isomorphism in management accounting research has

resulted in a number of articles that provide evidence about increasing

similarities and global adoption of management accounting practices and

decision-making strategies and processes (Ittner and Larcker 1997; Granlund

and Lukka 1998b; Ben-Arieh and Qian 2003; Carr 2005; Liu and Pan 2007).

However, the role and utilisation of accounting information in these

decision-making processes and strategies has not been rigorously analysed.

Indeed, the literature provides evidence about differences in decision-


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making strategies, but has largely neglected the role and utilisation of

accounting information in these processes. Importantly, the academic

literature has failed to show the influence of contextual factors such as

managers preferences and structural pressures to provide a holistic analysis.

An exception to the limitations of management accounting research in

relation to differences in the utilisation of accounting information has been

provided by Carr et al. (1994) and Carr (1994; 1998) who have shown that

national differences exist in relation to the focus on strategic and financial

objectives and importantly that these differences can lead to variations in the

role, interpretation and utilisation of accounting data such as Return on

Investment (ROI) (Carr et al. 1994; Carr and Tomkins 1998; Carr 2006). In

their study of the automobile industry in different countries, Carr et al (1994)

provide evidence that similar management accounting tools are applied but

that the interpretation of the data and the focus on these accounting figures

differs between countries. Importantly, they revealed a preference for longer

term strategic objectives in Germany compared with the shorter term

objectives of British automobile manufacturing firms.

While Carr et al. (1994) provide valuable insights into the role and

utilisation of accounting information in decision-making processes and


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strategies and managers preferences on this utilisation, they nevertheless do

not engage in a deeper and more contextual analysis of the drivers of this

utilisation of accounting information and managers preferences. Indeed, they

do not consider the complexity that determines managers preferences for

certain objectives.

As such, Carr et al. (1994) provide evidence that shows the existence of

national differences, but they do not attempt to provide a holistic

explanation.

Concisely, international accounting literature and in particular cross-cultural

studies have been criticised for neglecting the importance of relevant

historical, sociological and psychological literature to explain differences

and often address culture as a black box (Harrison and McKinnon 1999;

Patel et al. 2002; Patel 2003; Doupnik and Tsakumis 2004; Patel 2004). In

contrast, this study addresses the influence of strategic and financial

objectives by taking into account relevant historical, sociological and

psychological literature to provide fresher and sharper insights into the

complexities of this topic.

Later studies by Carr (2005; 2006) indicate that intra-country differences

exist in relation to convergence of management approaches and that these


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differences can be related to ownership structures. Carr (2006) argues that

differences between strategic approaches of Anglo-Saxon and German

public companies are diminishing with a stronger focus on short-term

financial perspectives as a result of convergence pressures. However, these

changes are far less prominent in German family firms that Carr (2006)

perceives as being less influenced by institutional changes. Although Carr

(2005, 2006) only provides a limited analysis of the factors that shape

strategic objectives in different settings, his emphasis on the relevance of

ownership structure is important. Indeed, no study has evaluated the role and

utilisation of accounting information in decision-making strategies and

processes and managers preferences of this utilisation in a cooperative

setting.

Along Carrs (2005) line of argument, we evaluate the influence of the

cooperative structure on the role and utilisation of accounting information in

decision-making in general and the influence on short-term financial versus

long-term strategic objectives in particular.

Psychological studies have provided evidence that intuition can be an

important part of decision-making (Mintzberg 1976; Simon 1987; Hall et al.

2007). Researchers have argued that intuition is part of every decision and


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that intuition and analysis are complementary (Meyer and Scott 1983; Simon

1987; Frantz 2003). Furthermore, intuition is not seen as an abstract concept,

but as the result of a subconscious process that considers previous decisions

and experiences. Intuition is thus thought to be sourced by concepts,

techniques, patterns and beliefs that are impressed on peoples minds and

increase through experience, knowledge and education (Barnard 1938).

Intuition has also been regarded as rational, because of its ability to extend

the limited boundaries of rationality by drawing on knowledge, experience

and recognition of familiarities (Simon 1987). Furthermore, intuition is

thought to be particularly important in ill-structured situations, in which

managers face time and information restrictions. The subconscious feeling

of experienced managers can then be a powerful factor that leads to

successful management, while a focus on rational management could result

in a paralysis by analysis (Mintzberg 1976; Hurst 1984; Langley 1995;

Kuo 1998; v. Werder 1999).

Although intuition has been established as a relevant factor in decision-

making processes, its influence on the role and utilisation of accounting

information has not been evaluated. The literature on convergence of

management accounting practices suggests an increasing focus on short-term

financial objectives that are driven by financial performance analyses, which


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might limit the importance of intuition in decision-making strategies and

processes (Carr 2005, 2006). However, the extent of this convergence

towards short-term objectives is still debatable. Moreover, a number of

questions remain regarding the relation between intuitive decision-making

and the use and utilisation of accounting information. An interesting aspect

is the extent to which intuition can become a substitute for accounting

information and the extent in which intuitive feelings lead to an engagement

in a deeper analysis of accounting information.

Other influencing factors that are likely to determine the use of accounting

information and managers preferences on this utilisation are the cultural,

social and educational background of managers. The Nigeria culture and

people have been known for a tendency to follow rules and analytic or

technical evaluations. Indeed, users of accounting information are said to

focus on objective information and a desire to enable reliable analyses that

anticipate opportunities as well as possible risks (Lubatkin and Floyd 1997).

These assumptions indicate that decision-making should rely to a greater

degree on the use of accounting information than on intuition. However, the

influence of culture has to be seen in the context of other factors. Thus, this

study evaluates the role and utilisation of accounting information in the


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context of the dairy cooperative setting and under consideration of both

external and internal factors of influence.

Studies have provided evidence that the complexity of financial decision-

making has increased and importantly that it has resulted in an increasing

implementation of sophisticated and efficient analysis techniques by

managers in different nations. Moreover, an increasing dominance of

sophisticated Discounted Cash Flow (DCF) methods has been indicated,

which are however less used in strategic investment decisions (Pike 1983).

Yet again, the literature on these aspects does not provide a holistic

explanation when and how managers use this accounting information

(Wouters and Verdaasdonk 2002).

In relation to general information requirements, the literature suggests that

information increases confidence in judgements (Hall et al. 2007) and

importantly that justification pressures lead to an increase in utilized

information (Huber and Seiser 2001). As a preference for reliable and

objective analysis is evident in a countrys culture, managers should have a

relatively high demand for information in general and accounting

information in particular. Furthermore, justification pressures are an

important feature of a cooperative company structure as managers often


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need the members approval for decisions. As such, we would expect

elaborate information requirements. However, the influence of one factor

should not be measured without considering the relevant context. Thus, this

case study provides evidence about the importance of these factors within

the institutional setting.

Indeed, we reveal that the organisational setting and other contextual factors

such as the legal environment, market and politics need to be considered to

evaluate the role and utilisation of accounting information in decision-

making strategies and processes.

According to Meyer (2007) accounting plays a significant role within the

concept of generating and communicating wealth of companies. Financial

statements still remain the most important source of externally feasible

information on companies. In spite of their widespread use and continuing

advance, there is some concern that accounting practice has not kept pace

with rapid economic and hightechnology changes which in invariably affects

the value relevance of accounting information.

The importance of Meyers assertion is reinforced by massive accounting

fraud in developed countries especially US, rapidly changing business

environment and reports by some researchers that value relevance of


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accounting information has declined(Lev and Zarowin, 1999and Francis and

Schipper,1999).

However, a number of researchers claim that accounting information has not

lost its value relevance (Vieru, Perttunen and Schadewitz, 2005 and Collins,

Maydew and Weiss, 1997). According to Beaver (2002), value relevance

research investigates the association between a security price dependent

variable and a set of independent accounting variables. There are several

approaches to this definitional explanation. Francis and Schipper (1999) and

Nilsson(2003) define it from four perspectives: (a) the predictive view of

value relevance-the accounting number is relevant if it can be used to predict

future earnings, dividends, or future cash flows (b) the information view of

value relevance the value relevance is measured in terms of market

reactions to new information (c) fundamental analysis view of value

relevance-the accounting information is relevant in valuation if portfolios

formed on the basis of accounting information are associated with abnormal

returns and (d) the measurement view of value relevance the financial

statement is measured by its ability to capture or summarize information that

affects equity value.

The studies on value relevance are broad and diverse. It is important to

define the stricture of concept of value relevance for this study. Some


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researchers may regard ability of accounting information to summarize

business transactions and other events(the measurement view of value

relevance) as sufficient proof of value relevance of accounting data, others

may place greater emphasis on earnings prediction (the prediction view of

value relevance) or information content of accounting data(the information

view of value relevance), and so on. Therefore, the approach developed by

Ramesh and Thiagarajan, 1995 is used for this study to determine the value

relevance of accounting data in Nigeria. This is ability of financial statement

to capture or summarize information that affects equity value.

Germon and Meek (2001) believe that accounting exists because it satisfies a

need - primarily a need for information. In order to be relevant accounting

data must among others, be quick to respond to users (particularly the

investors) needs. Generally, investors are not in a situation to directly assess

the performance of companies in which they intend to invest. They usually

depend on financial reports prepared by the management of such

organizations. Financial report is one of the best sources of accounting

information about a company. Financial reporting is an essential part of

disclosure and helps investor to discover investment opportunities. The

primary purpose of financial statements is to provide information concerning


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the financial situation of the company, its operational results, any changes of

control in the company and cash flow.

Several recent studies on use of accounting information for decision making

are carried out in the developed world. However, few studies in Nigeria

prospect were available. This study tends to add to the existing literature and

assist the researchers to determine whether the result agrees or digresses

from the previous studies.

2.4 USES AND USERS OF ACCOUNTING INFORMATION

The information provides by accounting helps the manager to make

decisions. Robert and Frank (1980:6) pointed out that the information

reveals how closely the companys objectives are being met (score keeping).

y The information directs attention i.e. it answers questions about theoperations or individuals that need attention in order to bring the

organization closer to its objectives.

y The information helps in solving problems i.e. it answers the questions aboutthe best to perform a specific task of the best solution to a given problem,

Garrison (1979:11) confirmed the first author by saying that management

uses the information to plan effectively and focus attention on deviation


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from plans. It is also used to direct day-to-day operation and to arrive at the

best solution to the operating problems faced by the organization.

THE USERS OF ACCOUNTING INFORMATION

Accounting information serves as a base for planning and decision

making. It provides the various users the necessary data assistance in this

direction. These users according to Bulverde E. Needles Jr. Et al (1984) P.N)

could be categorized into:

y Managementy Users with direct financial interesty Users with indirect financial interest.

MANAGEMENT

One cannot conceive of any organization that does not have any

objective. The primary objective for any business organization is profit-

making (Hussey, D.E 1978) this responsibility rests solely on the

management. Although other environmental factors may modify the degree

of profit sought, it must be realized that adequate profit is necessary for the

survival and growth of the business. To achieve the objectives, management

must be able to plan, control and coordinate all the activities of the

organization.


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USERS WITH DIRECT FINANCIAL INTEREST

This class of information users includes:

Investors (shareholders) and potential shareholders, creditors and potentialcreditors and employees of the organization.

Investors and potential investors.SHAREHOLDERSAND POTENTIALSHAREHOLDERS

These are primarily interested in the financial information and

management serves as trustee of the investment of shareholders have

therefore found it necessary to know the performance of the business in

which they have invested.

They therefore make use of accounting information like annual

reports and other financial statements.

CREDITORS AND POTENTIAL CREDITORS

Creditors include debenture holders of interest and money-lenders

who expect returns inform of interest on the debentures or principal creditors

and potential creditors alike have direct financial interest in the firm.

A critical study of the firms annual report reveals the viability of the

firm and the ability of the firm to pay the creditors. Banks, finance,

companies, mortgage companies, security firms, insurance firms and other


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who lend money. (Bulverde E. Needles Jr, 1984:4) Creditors therefore make

use of accounting information.

EMPLOYEES

Labour unions and employees study financial statement of companies

as part of their duty to prepare for important labour negotiations. Based on

the information received through the financial statements, they are able to

negotiate for higher pay bonus, other fringe benefits and other better

working conditions. The use of accounting information is therefore

important to employee.

USERS WITH INDIRECT FINANCIAL INTEREST

Changing environment factors have made the society large for users

of accounting information. It is common knowledge that the government

through her agents and the general public make use of accounting

information in their day-to-day activities. These agents include tax

authorities, regulatory agencies, economic planners and other groups.

TAX AUTHORITIES

Tax revenue is one of the major sources of finance of the government.

This has prompted the establishment of internal revenue sections in all levels

of government to deal with matters relating to the assessment and collection


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of taxes. Taxes such as PAYE, Value Added Tax (VAT) and Excise Tax are

collected.

REGULATORY AGENCIES

These are government agencies set up for the purpose of regulating

public corporations and companies. These agencies make use of accounting

information to determine the rate at which shares should be used.

ECONOMIC PLANNERS

Government wants to take active part in planning and forecasting

information. Economic planners use accounting information to determine

total production inventories, income, dividend, taxes and other economic

statistics. This class of users of information is the general public. They are

mainly consumers who have the interest in the financial statement of the

firms for the purpose of ascertaining the success of the firm, in their

surroundings.

2.3. ACCOUNTING INFORMATION SYSTEM IN JDPC

These are those processed information relating to accounting. As we

know that accounting is the act of recording, classifying and summarizing in

a significant manner and in terms of money transactions and event which are

in part at least a financial character and interpreting the result thereof. After


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analyzing and classifying these transactions and bringing them into

accounting information, users which have been identified earlier, the

companies and allied matters Degree 1990 defined financial/statements to

include:-

y Balance sheety Profit and loss accounty Value Added statementy Notes to the accounty Fund flow statementy Statement of accounting policiesy Five year financial summary.

The statements will be presented to the management and based on them

the management will then take its decision.

2.4. FEATURES OF ACCOUNTING INFORMATION IN JUSTICE

DEVELOPMENT AND PEACE COMMISION (JDPC).

The primary quantitative features to be used in differentiating better

information from unuseful information are relevance and reliability,

according to the Financial Accounting Standard Board (FASB) statement of

account concept No 2.


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Relevance:- in JDPC, relevance of accounting information is its predictive

value. Also, decision can be made between information that alters

expectation and accounting information that merely confirms information

and leads to a new course of, such financial information has relevance to

user. Thus, accounting information has the ability to affect a decision

makers course of action.

Reliability:- it was discovered from the information gathered that a

specific method of treating account has been in operation since the

beginning of the operation and the method adopted has been using

consistently, and so one could say that the information is not too far reliable

because users still depend on it.

However, the factors that determine the reliability of accounting

information in Justice Development and Peace Commission includes:-

y Constituency: - In Justice Development and Peace Commission (JDPC), thesame method applies to similar accounting events. Statement of

Accounting Standard One (SAS 1) stated that a business should use one

method; policy and procedure despite the various classes of way it can be

done.

y Comparability: - From the information gathered from the research work, itwas observed that the examination of the accounting information is


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presented in such a way that similarities and differences which appear in the

statement reflect true similarities and difference.

yNeutrality: - Justice Development and Peace Commission( JDPC) has a very

good characteristic of being completely neutral because it was observed that

accounting information in the report of economic activities way it really is

without add or reduce, increase or decrease or try to formulate any other

information of its own.

y Fairness: - it was observed that the financial information is fair and free fromall forms of bias.

y Comprehension: - information gathered showed that user of accountinginformation e.g. external users government, creditor and internal users

shareholder, auditor do understand the information in it.

2.5. THE EFFECT OF INTERNAL CONTROL ON DECISION

MAKING USING ACCOUNTING INFORMATION AS ITS BASE.

In Justice Development and Peace Commission, in order to carry on

activities in an efficient and orderly manner and ensuring adherence to board

of directors policies as well as possible the completeness and accuracy of

records, there is a system established by the board to control the whole

system of activities and it is known as Internal Control System.


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The managers admitted that as a result of their internal control, the

accounting information is accurate and is readily for decision making. The

individual components of internal control is known as control a internal in

general and also in JDPC.

Internal control and accounting information as completely

interdependent.

Internal control serve as a means of ensuring the completeness and

reliability of accounting information as completely interdependent for

managers for decision making, whole accounting is an act of recording,

analyzing, processing and reporting financial information.

In order to make any decision, the board of directors must have a reliable

estimate of financial impact of that decision. What is needed is an estimate

of the various books of accounts such as: - the balance sheet, the profit and

loss account etc and also included is the accounting ratio or ratio analysis; all

these are due to using the internal control system.

The decision for planning and controlling the activities of the commission

require adequate / frequent and reliable information, therefore there is need

for the information to be reliable or dependable because; as Ray H.G.

Contends bad information leads to bad decision.


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Generally, every successful plan depends on a right and effective

decision. In the absence of a steady flow of information, board would have

no power to do anything and would no longer achieve their aim.

The decision, which the board makes, are of various types. But however, the

decisions made by the board of Justice Development and Peace Commission

for the purpose of this course can be divided into two which are:-

y Decision not wholly related to accounting information or decision not evenrelating to accounting information.

y Those related to accounting information.Decision making by the board using accounting information include:-

y To decide on the extent of directiony Premising (definition of objectives)y Achievement of goal proceduresy Motivation (ways workers can be motivated)

EXTENT OF DIRECTING:- The board makes this direction possible by

taking decision on who is likely fit to direct in the organization. In JDPC for

example, the board manager directs all the activities on behalf of the board

of directors.


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PREMISING (DEFINITION OF OBJECTIVES):- Decision are often taken

by the board in order for employees to know their main aim and work

towards such direction. In JDPC, their aim is for people to

MOTIVATION OF WORKERS:- often this is done by the management.

But the board also partake in such decision in JDPC. The information

received showed that, workers salary has been increase ever since the

organization started. This showed that the organization have good operators

and good ground of investment. While decision related to accounting

information provided by the board include:-

y Decision on how to make effective use of available resourcesy Decision on how to reduce expenditurey Decision on how to improve operating resultsy Decision on how to prevent insolvency and liquidityy Decision about how to increase current assets and current liabilities e.t.c

The various decisions and the accounting information are as follows:-

TABLE 2.1 DECISION AND ACCOUNTING INFORMATION

DECISION TAKEN ACCOUNTING INFORMATION NEEDED

y Effective use of available resources 1. Debit securityratio


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2.Working capital ratio

3.Cash fund flow statement

4. Asset/ liability ratio

y Reduction of expenditure 1.Working capital ratio2.Net profit to gross earning%

3. Expense to sales%

4. Profit to capital employed

5.Expenses to gross profit

y Investing in other financial institution 1. Current ratio2.Debtors collec-

tion period

3.Creditors coll-

ection period

4.Price earning

ratio

5.Total debt to

Shareholders funds

y Liquidity 1.Liquidity ratio2.Loan ratio (cash)

y Efficiency of operation result 1.Gross earning to total


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asset ratio

2.Asset turn over ratio

3.Net profit to capital

Employed

y Insurance cover 1.Debt security period2.Debtors collection period

3.Creditors payment period

y Staffing decision 1.Asset for employee ratio2.Sales to capital employed ratio

y Loan to customers 1.Loan deposit ratio2.Earning yield

3.Liquidity ratio

4.Working capital ratio

y Employment of workers 1.Asset per employee ratio2.Net profit to gross earning

The interpretation of accounting information needed for the various

decision are:-

y Effective use of available resourcesDebt security ratio:- Shareholders fund : 1

Total Asset


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2009 2008

# #

Shareholders fund 73986826 71922661

Total Asset 113265699 102858306

= 73986826 :1 71922661 : 1

113265699 102858306

=0.65:1 0.69:1

The debt security ratio in 2008 is more better than 2009.

2.5 PROBLEMS ENCOUNTERED BY NNPC IN THE USE OF THEIR

ACCOUNTING INFORMATION SYSTEM


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NNPC generally has peculiar problem that are associated with the use

of accounting information, perhaps the two basic problems experienced by

this firm are:

1. inadequate managerial expertise;2. inadequate utilization of available accounting information

1. INADEQUATE MANAGERIAL EXPERTISE;

This constitutes a problem whereby people employed to handle

management position lack necessary experience but may be employed by

reason of their relationship with the owners of the business. Considering also

the accounting packages available in firms recently, due to their

advancement technology, these managers may be found wanting in matching

skills to adequately cope with these trends. This does not enhance

effectiveness and efficiency in output. This problem can be overcome and

performance improved by organizing training programmes and drills to

better acquaint the management personal with the latest development of the

managerial staff to ensure that inputs is maximally utilized.

2. INADEQUATE UTILIZATION OF VAIALBLE ACCOUNTING


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In most organizations, is a worthy of role that available accounting

data is not effectively utilized especially in the aspect of decision-making

This can be tacked to inability to decide or interpret the can accounting

information and relate to the situation or challenge at hand at each point in

time. However, this can be corrected by the presentation of facts in a manner

that can be easily understood by the decision-making manager that may not

be acquainted with accounting terms. Due to care and skill should also be

employed to ensure that accounting information is carefully exhaustively

pursued and edited and nothing is left without consideration.

2.6 THE ROLE OF STANDARD OR ORGANIZATION OF NIGERIA

(SON) AND REGULATORY BODIES

The statutory functions of standard organization of Nigeria (SON) by

section are as follows:

1 To sponsor such national international conference as it may carry.1. To undertake preparation and distribution of standard samples.2. To compile and publish general scientific or other data.3. They also coordinate all activities relate to its function throughout Nigeria

corresponding national organizations i such fields of a view to securing

infirmity in standards specification.


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4. They also develop methods for testing of materials, suppliers and equipmentof development of government of the federation or state and private sectors.

5. They also foster interest in the recommendation and maintenance andacceptance to the general public.

6. They also organize test and do everything necessary to ensure complianceapproved by the council.

7. They organization also undertaken such research as may be necessary forunder this Act. And for that purpose it shall have power to make use of

private upon such terms and contributions as may be agreed upon between

the people concerned


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CHAPTEWR THREE

3.0 RESEARCH METHODOLOGY

This chapter is design to expose the research methodology used in this

study. It discussed the sources of data, research population, sample size and

frame, instruments used, data analysis and statistics method used in the

study.

3.1 SOURCES OF DATAThis talks about the sources by which the researcher obtains

information he used for the study

The sources include:

Primary data

Secondary data

PRIMARY DATA: Here information is obtained from its original sources.

The major forms of primary data are;

a. personal interviewb. Questionnaire


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PERSONAL INTERVIEW: This was conducted by the researcher her

most of the accountants and managers in the company used as the case study

were interviewed is the information concerning the companys background.

The objectives of the company and also the companys accounting

information system and management used of accounting information.

QUESTIONAIRE: Well structures questionnaire designed containing

questions that dealt with aspects of the companies accounting information

system. The questionnaire was formed in such a way that they will be able to

provide the answers that will go a long way in helping to solve those

problems stipulated in the statement of problem and such answers were

analyzed.

SECONDARY DATA: The library constitutes the main sources of

secondary materials used for this work. The information gathers form this

effect, the libraries of Abia state Polytechnic, University of port-Harcourt,

Federal Polytechnic Nekede Owerri and other private libraries were used.

They provide the information used in for this work. Through textbooks,

journals, newspapers, magazines, periodicals and handouts.

3.2 RESEARCH DESIGN


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This described how the data was collected and analyzed. This was

done by the distribution of questionnaire to select samples, and oral

interview was also conducted by the researcher.

3.3 RESEARCH POPULATION/SAMPLE SIZE

The population under study is made up of the top managers and the

chief accountants of port-Harcourt Refinery Company limited. There are

thirty three (33) managers and fifty-four (54) chief accountants in the

establishment making total of eighty-seven (87). The research adopted

random sampling methods whereby all the managers and the managers

accountants have the same chance of being included in the sample. The

sample was determined using the proportion of each group of the population.

Thus for managers 33/87 x 33 = 12.51 and the accountants 54/87 x 54 =

33.51 making a total of forty-six (46) in this case, 46 questionnaires were

distributed thirteen (`13) to managers and thirty-three (33) to accountants.

3.4 INSTRUMENT USEDPersonal interviews and questionnaires form the major method used

by the researcher.


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3.5 DATA ANALYSIS TECHNIQUESThe data was analyzed using tables and percentage some of the

responses were critically analyzed and summarized. This is to present the

result obtained so as to interpret it at a glance.

Key to data analysis is as follows;

Yes number = number of respondents that said yes

No number = number of respondents that said NO

% = Percentage

Total = Total number of respondents.


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CHAPTER FOUR

4.0 PRESENTATION AND ANALYSIS OF DATAThis chapter concentrates on the presentation and analysis of the

Reponses to the questionnaires, which were designed to disclose facts

concerning the subject matter.

The questionnaire which contained twenty-six (26) questions was

divided into three sections: section one was meant for everybody both the

manager and the accountant. Section two was made for accountants only and

section three for the managers only. A part form the questionnaires,

information was only gotten form face to face interview with some of the

managers and accountants. At these responses to the questionnaires were

analyzed in sections taking only the most important question in each section.

4.1 DATA PRESENTATION

This chapter concentrates on the presentation of the response to the

questionnaires which were designed to disclose factors concerning the

subject matter. Section one was meant for everybody both the manager and

the accountant section two was made for accountants only.


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4.2 DATA ANALYSIS

The questionnaire was analyzed as follows:

TABLE 1 QUESTION 5

Is your accounting department different form your financial

accounting department?

Response No of respondents %

Yes 33 100%

No - -

Total 33 100%

From the above table, it is observed that the cost accounting

department is different form the financial department of the organization.

TABLE 2, QUESTION 6

If the answer to question 5 is yes what is the work of the

accountant?

Responses No of respondents %

Decision making - -

Information supplier 8 24


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A&B 25 76

Total 33 100%

From the above table, Nil % of the respondents are of the opinion that the

work of the accountant is decision making, 24% said it is information

supplier and 76 said the accountant works are both decision-making and

information supplier.

TABLE 3, QUESTION 7

Do accountants perform the following roles in your company: (1)

product data (2) Analyze data (3) Interpret data (4) Verify data?


31 33 94%

No 2 6

Total 33 100%

From the table above, 94% of the respondents are of the view that the

accountants supply all the decision-making while 6% said No that


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accountants do not supply all the information needed for management

decision-making.

TABLE 4, QUESTION 9

Do managers at times seek your assistance in interpreting accounting

information where they do not understand?


Yes 4 12%

No 29 88

Total 33 100%

From the table above, 91% of the respondents claimed that managers seek

their assistance ion interpreting accounting information where they do not

understand while 9% of the respondents are with contrary opinion.

TABLE 5, QUESTON 10

Do you at times have problem about the information to be supplied to

management?


Yes 4 12%


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No 29 88

Total 33 100%

12% of the respondents are of the opinion that they at times have problem

about the information to be presented to the management while 885 claimed

that they do not have problem in deciding on the information to present.

TABLE 6, QUESTION 12

In your opinion do managers apply accounting information in decision

making?


Yes 30 91%

No 3 9

Total 33 100%

From the table above, 9% of the respondents claimed that managers apply

accounting information in their decision-making while 9% of the

respondents claimed otherwise.

TABLE7, QUESTION 14


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How well in your opinion, do you think managers apply accounting

information in decision-making of the company?


Very well 20 61

Fairly well 10 30

Very poor 2 6

Not at all 1 3

From the table above, 61% of the number of the respondents claimed that

managers apply accounting information in their decision-making very well

30% said fairly well, 61% very poor while 3% of the respondents said that

they do not apply the information in their decision-making at all.


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TABLE 8 QUESTIONS 15

Are the aims of accounting information being achieved in your company?


Yes 31 94%

No 2 6

Total 33 100%

From the table above, 94% of the respondents are of the view that the aim of

the accounting information is being achieved in the organization while 6%

claimed otherwise.


This is section three and is for managers only:

Do you need accounting information for decision-making in your

organization?


Yes 33 100%

No - -

Total 33 100%


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From the table above table, 100% are of the opinion that they need

accounting information for their decision-making


Do accounting supply you with information you need for decision-making?


Yes 28 85%

No 5 15

Total 33 100%

From the above table 85% of the respondents are of the opinion that

accountants supply them with all the information they need in decision

making of the organization while 15% claimed otherwise.


If the answer to question 10 is yes, do you have any problem in

understanding the i.e. the information supplied by the accountant?


Yes 3 9%


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No 30 91

Total 33 100%

From the above table, 91% of the respondents claimed that they do not have

problem in understanding the informati

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