IMPACT OF ACCOUNTING INFORMATION IN ANALYSING THE FINANCIAL POSITION OF A FIRM

Description

IMPACT OF ACCOUNTING INFORMATION IN ANALYSING THE FINANCIAL POSITION OF A FIRM

ABSTRACT

This research work is on the impact of accounting information in analyzing the financial position of a firm with particular reference to CAP Nig. Plc. The main aim of this research work is to determine or access the use of accounting information in analyzing the financial position of a firm and also review of accounting information in a firm with a view to discovering causes failure in their balance sheet etc. The information for the study was collected using primary and secondary methods of data collection. For the primary data collection, questionnaires, personal observations and oral interviews were used while existing literature relevant to the topic was consulted for the secondary data. The researcher used chi-square statistical model to analyze the data. The following recommendations were proffered by the researcher The general public should be well enlightened about the roles of accountants. Adequate information should be given in financial statement or annual reports of firms to aid interpretations. Information should be verifiable and free from bias, it should be comprehensive, nothing should be omitted that is necessary to represent events and conditions, nor should anything be include that would cause the information to be misleading. Information should be simple but not oversimplified, explanations and interpretations should be including where necessary.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

According to Harison (1995) Accounting information is a financial data about business transaction expressed in terms of money. Transaction refers to both internal and external transactions that constitute the inputs of the accounting information system.

Accounting uses words and symbols to communicate financial information to manager, investors, creditors and  other decision makers, accounting information is not limited to those engaged directly in business. Infact most adults deal with their financial thereby giving accounting a significance roe in society.

Business managers need information provided by the accounting system to plan and control their business activities, in addition investors, creditors and government agencies need financial information to make investing, handing, regulatory and tax related decision, if accounting information is to be useful, it must be expressed in terms of a common denominator, so that the effect of transaction can be combined.

Every business entity should provide information about its activity because the stakeholders, such as shareholder, brand holders, barkers, lenders, suppliers, employees, management, trade contacts, government, financial analyst and advisor all need to monitor how well their interest are being served. They rely on the periodic financial statement of business enterprises to provide the basic information on the profitability of the business. The financial position of a firm is very important to know, if they are making expected turnover. It is also important in achieving attractive returns and sustainable growth on shareholders investments.

Virtually all profit. Seeking organization and most non- profits organization maintain extensive accounting records one reasons is that these records are often required by law. A more basic reason is that, even in a very small organization, a  manager is confronted with a multitude of complex variables. Not even the most brilliant manager can be sufficiently informed just by observing daily operations. Instead, he or she must depend on the accounting process to convert business transactions into useful statically data that can be abstracted and summarized in accounting reports.

In every sense, thin process is essential to the co-ordinate and rational management of most organizations-regardless of their size. Thus, a large portion of the information that a business manager requires is derived from accounting data. The ability to analyses and use the data helps managers accomplish you discover the types of business achieve that can be accounted for usefully, the method used to collect accounting data and the implications of the resulting information. Furthermore and often just as important  you will become aware of the limitation of accounting reports.

1.2 STATEMENT OF PROBLEMS

The problems that will be encountered in using the accounting information in analyzing the financial position of a firm include the following:

1.    That the users of accounting information are not adequately informed.

2.    People that use the accounting information do not understand the information given.

3.    That the accounting bodies do not follow the proper guidelines and rules.

1.3  OBJECTIVE OF THE STUDY

The purpose of the study means the reasons why the study or research is being carried out. However the objective or purpose of thin study include the following:

1.    To find out if the proper accounting policies and concepts are followed in CAP PLC.

2.    To show the important of accounting information to  the users.

3.    To investigate the extent of use of accounting information.

3.          To show the ability of CAP PLC to generate income.

4.          Finally to analyze the financial position of CAP PLC. Using the accounting information supplied in the annual reports.

1.4  RESEARCH HYPOTHESIS

H0: The accounting information adopted by the CAP Nigeria plc   has negative impact in the growth of the company.

H1: The accounting information adopted by CAP Nigeria plc        has        negative impact in the growth of the company.

H0: The accounting system in the CAP Nigeria plc Enugu is not   effective and adequate.

H1: The accounting system in the CAP Nigeria plc Enugu is effective and adequate.

H0: The accounting system in the CAP Nigeria plc Enugu does not        provided for proper financial control and accountability of   stewardship.

H1: The accounting system in the CAP Nigeria plc Enugu    provided for proper financial control and accountability of      stewardship.

1.5  RESEARCH QUESTION

Three dominant question being reviewed by this research include:

1.  Does the accounting information adopt by CAP Nigeria plc any positive impact in the growth of the company?

2.  Is the accountancy/The accounting system in the CAP Nigeria plc Enugu effective and adequate?

3.  Does the accounting system in the CAP Nigeria plc Enugu provide for proper financial control and accountability of stewardship?

4.  Does the accounting system in the CAP Nigeria plc Enugu provide useful information for the effective control and management of co-operate operation?