THE USEFULNESS OF INTERPRETED ACCOUNTS IN DECISION MAKING BY MANAGEMENT

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THE USEFULNESS OF INTERPRETED ACCOUNTS IN DECISION MAKING BY MANAGEMENT

CHAPTER ONE: INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Interpreted account as the name implies is more than mere figure into their appropriate look of account. It involves the use of collected information and data in the assessment of efficiency in addition.

The study of interpreted account would enable one’s monitor the performance of the business, with the view of taking appropriate corrective measures as at when necessary.

My concern here is to the usefulness into which one can put the data that are usually available in the interpreted account of organization.

Some of these data are already made available in the interpreted account while others might have to be made using the accounts.

1.2 STATEMENT OF THE PROBLEM

The following are statement of research problem to be researched;

whether the profit realized over the period are adequately related to the capital employed

whether the company is solvent enough to meet its current liabilities out of it current asset

whether the company has been efficient in operation over the year.

1.3 NEED FOR THE STUDY

Accounting is a discipline that provide information on which external and internal user of the information may base on decision making that result in the allocation of economic resources in the society, according to: (Grenold1975).

In order to make use of this information, the users have to analyze and interpret the accounts appropriate relationship between the various figures presented in the financial statement.

According to (Ayodele Asaolu 1997), Accounting information is as follows:

THE EMPLOYEE

The employees provide man power needed for the day to day operation of the organization employee would like to know;

What is the ratio of wages and salaries to total expenses.

The appropriation of total capital in the investment in machinery and staff retaining and development.

GOVERNMENT

Government is interested in the overall economic within the country and therefore would like to know if;

The organization is being known properly.

The organization is making profit

The organization makes profit and it accrues to government in the form of co-operation tax.

CREDITORS

Creditors supply goods materials and services to the organization in short term credit basis only. Creditors are interested in their payment and therefore would wish to know.

If the organization makes enough profit from which to pay for such goods and service then payment and is due to their significance and evaluate the importance of the result. The objective behind the preparation of financial statement prepared in such a way that the different types of user will be able to interpret the information and data contained in the statement for the purpose of making decision according to spices and regular /1980 pg 6 defined interpreted account as the art and science of translating figures in such a way as to reveal the financial strength and weakness of a business and its cause which have contributed thieves to Falio analysis is a useful techniques as an aid to the interpretation of according information, the interpretation of final account through the use of ratio can be identified into two parts.

Firstly, there is analysis of those outside the firm who are selecting to understand more from the published accounting data.

Secondly, there is management wish to interpret a much further range of internal information in a meaningful way in these case current information will be assessed to past trend of the same with co-operate information for the same organization.

In the same way, management evaluates and control its activities through company financial statement refer to the company trading profit and loss account and balance sheet.

The information provide historical assessment of the company trading position i.e. a true and fair view of the profit and loss account of the financial year while the latter gives a company’s financial position of the financial statement.

Another method used by accountant to interpret the balance sheet of the beginning and the end of the year. Also, to explain their findings in a statement which dissolves the movement which have taken place during the period in respect of each asset and liability. Such a statement may be termed a movement of fund statement.

The essence of the interpreted accounts for management decision making are simply as follows:

It enables one to control management performance through out the organization.

Its determined the individual manager responsibility for the ultimate result.

The criteria employed helps management to direct operation and to make decision in a way that fulfills over objective.

The criteria and performance system employed provides relevant and regular feedback for control of management interpreted account could assess management in making decision with special reference to 7up bottling plc.

1.4 OBJECTIVE OF THE STUDY

The main objective of the study is to provide financial information of the organization involves was follows:

To provide information to the users so as to enable them make relevant decision for management.

To find out the relationship between the capital employed and the resulting profit realized during the period .

To summarize its performance in terms of profit

To ascertain the solvent of the company as at when due

To know whether the analysis gives useful interpretation as to efficiency.

To help show the relative strength and weakness of the company.

1.5 RESEARCH QUESTIONS

Hypothesis is an arrangement which a researcher make to enable he/she study and event.

According to (Nwanwa 1981 pg 64). I always adopt a formal and a symbol to be used which would show or state the assumption. These assumption is called null hypothesis and it is referred to as Ho and the next step is to an alternative hypothesis Hi. These hypotheses when tested will confirm the interpreted account for management decision making which provides efficient information in regard to decision making. The two hypotheses are formulated for verification and testing

H0: The profitability of manufacturing company does not depend on capital employed

Ans: (a)strongly agreed (b)Strongly disagreed (c)Agreed d. Disagreed

H1: The profitability of manufacturing company relies on capital employed?

Ans: (a) strongly agreed (b Strongly disagreed (c.)reed

d. Disagreed

H0: The Company is not solvent to meet its liquidity demands?

Ans: Strongly Agreed b. Strongly disagreed c. Agreed

d. Disagreed

H1: Can the company meet its liquidity requirements?

Ans: a. Strongly Agreed b. Strongly disagreed

Agreed d. Disagreed

1.6 SCOPE OF THE STUDY

The scope of the study is mainly seeking to investigate the way 7up company Aba adopts his decision making . the data for the study is ranged from 2006 to 2010 and is gathered from 7up Bottling Company Aba.

1.7 LIMITATION OF THE STUDY

TIME CONSTRAINT

Due to the insufficient time given for the completion of this project. It was impossible to cover all the interpreted account for management decision making and response to questionnaire from the company was usually delayed.

FINANCIAL CONSTRAINT

In our present economic condition of the country. It is very expensive to undertake a project of this nature especially the cost of the material input. However, fund was source from various means to see that the work was completed.

MANAGEMENT POLICY

The request for the management of 7up bottling company plc to give out copies of their financial statement and report for some years was not entertained first by the management for strategies and security reasons.

1.8 DEFINITION OF TERMS

These are where you define some technical terms used. It is as follows:

FINANCIAL STATEMENT

These are meant to represent the organization financial situation to the owners, creditors and then general public.

FINANCIAL ANALYSIS

This is the process of identifying the financial strength and weakness of the organization by proposed relationship between the item of the balance sheet and profit and loss account.

RATIO

A ratio defined as indicated quotient of two mathematical expression and as the relationship between two or more things.

MANAGEMENT

According to Oxford Advance Learners dictionary, management can be defined as the act of running and controlling a business in an organization

COST CENTER

They are any part of the organization to which cost can be charged.

RELIABILITY OF DATA

Information collected might fail, misleading and also be bias in judgment.

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