ACCOUNTING INFORMATION AS AN AID TO MANAGEMENT DECISION MAKING

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ACCOUNTING INFORMATION AS AN AID TO MANAGEMENT DECISION MAKING

ABSTRACT

This study is the analysis of accounting information as an aid to management decision making. A survey research design was adopted in which fifty workers, of a typical manufacturing company, were used and data were collected using questionnaire. Four research hypotheses were raised and tested; while the demographic information of the respondents were analysed using simple percentage, the hypotheses were tested using t-test statistic at a significant level of 5%. The testing of the hypotheses revealed that:

Accounting information has effects on management decision;

There is a significant relationship between the perception of employees and accounting information;

There is a significant relationship between time factor and accounting information;

Accounting information has effects on the

company’s performance

Based on the findings it was recommended that companies should employ professional accountant in order to provide valuable information and keep accurate record of their accounts

Key words:

Accounting, information, management, performance, financial

Introduction

Accounting is the language of business as it is the basic tool for recording, reporting and evaluating economic events and transactions that affect business enterprises. It processes all documents of a business financial performance from payroll, cost, capital expenditure and

other obligations to sale revenue and owners’ equity. It provides financial information about one’s business to the

internal and external users, such as managers, investors and others. It is sometimes referred to as a means to an end, with the ending being the decision that is helped by the availability of accounting information (Arneld and Hope 1990). Management is the art of working particularly through people, for the achievement of the broad goals of an organisation (Ejiofor 1987), in trying to achieve these goals the manager has to map out strategies to find out the accounting information suitable for the company. Management accounting uses both financial and non financial information and is generally intended for the use of internal users who use the information to make decisions that help achieve the goals and objectives of the organisation. Financial information used by management accountants include sale growth, profits, return on capital employed and market shares, non financial informations include customer satisfaction level, production quality, performance of competing products and customer loyalty. Management accountants use both financial and non-financial information to aid business decision-making (Melissa Bushman 2007) Decision making is the process of choosing alternative courses of action using cognitive processes. Making decision is necessary when there is no one clear course of action to follow. Accounting systems can aid our decision making by providing information relevant to the decision and to the decision makiner. Accounting systems also provide check for the validity through the process of auditing and accountability (Gray et. Al 1996). Effective and efficient accounting information plays a central role in management decision making.

Literature Review

In managing an organisation and implementing an internal control system the role of accounting information is crucial. An important question in the field of accounting and management decision making concerns the fit of accounting information with organisational requirements for information communication and control (Nicolaou 2000). Accounting information system is considered as a subsystem of Management Information System (MIS). To regard accounting as an information system, perhaps, is the latest definition of accounting, as can be deduced from the statement of American Institute of Certified Public

Accountants (1966). “Accounting actually is information

system and to be more precise, accounting is the practice of general theories of information in the field of effective economic activities and consists of a major part of the information which is pre

sented in the quantitative form”.

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