Impact Of Accounting Information On Decision Making Process.

Chapter One
1 Introduction
Impact Of Accounting Information On Decision Making Process project material.
Decision Making Process project research material Impact Of Accounting
Information On Decision Making Process research materials.

Introduction Managing the company is the process of conducting business

operations toward achieving short term and long term objectives, in line with the
overall company's objective Management is a process of getting things done
through organization, direction, motivation and planning base on structured
objectives and goals. The executive director must be articulate in the overall
management of the organization. The achievements of these goals imply that the
manager has to map out strategies that include keeping accurate record of
accounting information from the source documents to the final accounts and the
financial statements presented to the shareholders (Ken, 2018). Managers makes
use of financial and non- financial information available through the accounting
documents with the intension to prepare a reliable, timely, relevant and comparable
information to all stakeholders that would help them in making economic decision.
Decision making is an essential aspect of realizing organizational goal. Every goal
is only achievable when a good decision is made. Making decision is vital and has
to be matched with accounting and internal control systems in order to meet the
organization goal by providing relevant and reliable information to the
stakeholders. Kim (2018) opined that accounting systems also provide check for
the validity through the process of auditing and accountability. This research will
try to discover the impact of acourting information on the process of deu sion
making in computer. The first chapter will show the backgrawand of thy study
battement of the problem and pur pose of the study . chapter tow concerns with the
litrure reveue . the method legy will be discased in the third chapter .chaptor four
will show the study results and dissauss the final chapter will be the conclusion of
the study .
1.1 Background of the study

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 employees, managers, potential investors, financial
institutions and others.
The making of decision, as everyone knows from personal experience is a
burdensome task, says Wadia (1966). In most cases indecision is as disastrous as
making a wrong one, therefore a plan of action is indispensable. Management is
constantly confronted with the problem of alternative decision making especially
knowing that resources are relatively scarce and limited. It is therefore pertinent
that good accounting information be made available for proper and accurate
decision making, maximization of profitability and optimal utilization of scarce
resource. Accounting information is not only necessary for evaluation of the past
and keeping the present on course; it is useful in planning the future of the
enterprise. It is a part and parcel of today’s life which is necessary to understand
the accurate financial situation of the organization and used as the basis of making
any decisions. Since strategic decisions have long-term effect on the business and
therefore it is important to analyze accounting information for making strategic
decisions. Accounting information helps managers understanding their tasks more
clearly and reducing uncertainty before making their decisions (Chong, 1996).
Accounting 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 (Arnold
and Hope, 1990).Accounting systems can aid in decision making,provide
information relevant to the decision and to the decision maker (Gray, 1996).
Effective and efficient accounting information plays a central role in management
decision making (Tiramisu Tunji, 2012). Accounting information is one type of
information recognized as a ‘learning machine’ that can help to evaluate how
objectives might be achieved by quantifying the financial impact of each
alternative available to the decision (Burchell et al., 1980). Accounting and
financial information are among the most important information widely used in the
managerial decisions (Royaee, Salehi, & Aseman, 2012). Within contemporary
economic conditions, a successful manager needs a lot of reliable accounting
information in order to be able to make quality business decisions (Miko, 1998).
Economical information especially financial and accounting ones are the
information which always managers use in short term and strategic decisions and
they may have most application among different variables effective in decision-
making and in all types of decisions (Royaee, Salehi, & Aseman, 2012 and
Hubber, 1990).

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 making.
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.

There are some areas where accounting information helps decision making. It

provides investors a baseline of analysis for – and comparison between – the
financial health of security-issuing institutions. Financial accounting helps
creditors assess the solvency, liquidity and creditworthiness of businesses.
Financial accounting (and its cousin, managerial accounting) helps organizations
make business decisions about how to allocate scarce resources. Financial
accounting information helps in making Investment decisions as fundamental
analysis depends heavily on a company’s balance sheet, its statement of cash flows
and its income statement. All of the financial statements for publicly traded
companies are created and reported according to the financial accounting standards
set forth by the Financial Accounting Standard Board (FASB).
Without the information provided by financial accounting, investors would have
less understanding about the history and current financial health of stock and bond
issuers. The requirements set forth by the FASB create consistency in the timing
and style of financial accounts, which means that investors are less likely to be
subject to accounting information that has been filtered based on a firm’s current
condition.
Accounting information also aids lending or dividend decisions as number of
common accounting ratios that creditors rely on, such as the debt-to-equity (D/E)
ratio and times interest earned ratio, are derived from the financial statements.
Even for privately owned businesses that do not necessarily follow the
requirements of the FASB, no lending institution assumes the liability of a large
business loan without critical information provided by financial accounting
techniques.
Reliable accounting serves a practical function for the firms themselves. Beyond
the regulatory and compliance hurdles that financial accounting helps clear,
financial accounting also helps managers create budgets, understand public
perception, track efficiency, analyze performance and develop short- and long-term
strategies.

In this study three decision areas such as financial decision, investment decision
and dividend decision were selected. These different areas of decision somehow or
in one way or the other solely depends on accounting information. Without
accounting information individuals, companies or business organization into
various kind of investments cannot determine financial investments and dividend
decision to be taken. Accounting information helps to take long term investment
decisions by giving the proper view of present and future conditions of the
organization. This study is initiated to evaluate the importance i.e. the impact of
accounting information on decision making process

1.2 STATEMENT OF THE PROBLEM

Information is absolutely necessary for decision making in any business

organization. The problem however lies in the quality and validity of the
information, i.e. if it is timely, adequate, and clear. The main purpose of the use of
accounting information is to reduce risk, failure and uncertainties and also stay
ahead of competitors. Not minding the immense benefit derived from the of use of
accounting information, it is generally acknowledged that most unqualified
accountants generate inaccurate information and so result in failure of
organizations to achieve desired goal . In other wards the major problem
discovered when making decisions in an organization is the identification of
fundamental concept of accounting information to be implemented by each
company which can affect the company positively or negatively.

These problems stated immensely contribute to the failure of the use of accounting
information in business with the result that inappropriate decisions are made to the
detriment of the organization. It is only through accounting information that
managers and external users get a picture of the organization.
This study will seek to show the information organisation can derive from
accounting information & their usefulness for decision making in business
organization. The purpose is to see the need for accounting information to any
business organisation how it helps in decision making.

1.3 PURPOSE OF THE STUDY

Gross efficiency and non-application of sound professional principles have been
known to be a serious factor contributing to the failure of business. The economic
investors are no credit sellers, they would invest if and only if the government, the
individual around would convince them that investment in Nigeria economy is
wise and their return in participating is high for less risk in financial cost. The only
way to adequate its fears is to produce via cost minimization and maximization of
the efficient way of production. Apart from ability of capital, technicality efficient
management information is paramount. If the organization is to achieve its aims
and objectives.

1.4RESEARH QUESTIONS

They are as follows:

1. Is there any positive and significant relationship between accounting
information and management decision?
2. How can this information generated by the accountant be useful to improve
the company
3. Are there any accurate and timely financial information for internal
management purposes

1.5 STATEMENT OF HYPOTHESIS

HO: Proper use of accounting information does not help business organizations in
making efficient and effective decisions.
H1: Proper use of accounting information help business organizations in making
efficient and effective decisions.

1.7 SIGNIFICANCE OF THE STUDY

This research study will help to maximize the beneficial impact of accounting
information on the decision making process of an organization. This boosts the
profitability of the organization as well as ensuring its continuity as a business
entity.

It will help in the efficient allocation of scarce resources that have alternative being
use as well as increase productivity thereby uplifting the standard of living. It will
review the improvement in the organization or company handling the accounting
information and show equally the ways through which improvement could be
accomplished.

This research study will help us to know the beneficiaries of accounting

information in decision making which are: creditors, investors, management and
shareholders.

Creditor: A company’s financial information enables a creditor determine whether

amount owing to them will be paid when due.

Investor: The investors provide risk capital so they need the information to help
them determine whether they should buy, hold or sell.

Management: The financial information helps them to analyze the performance

and position of the organization and to take appropriate measure to improve the
company’s result.

Tax Authorities: It helps them to determine the credibility of the tax return filed
on behalf of the company.

This project will also serve as a reference to student who may be interested to
embark on a research of this nature.
chapter two

2 LITERATURE REVIEW
Information is provided from accounting about how a business relates to the
internal and external users, including, investors, managers, and others (Woods,
2008). According to (Tickell, 2010), information and information system are
viewed to have increasing effects on the enterprises, occupying model fields and
management analysis. Ovidian (2013) states that, good accounting information
should be available to offer suitable and accurate decision-making that could lead
to maximization of profitability of an organization and utilization of scarce
resource optimally. 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. Accounting is a tool used by business enterprises to record, report,
evaluating economic events & transactions that normally affect its operations
(Paulson, 2006). 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 provides financial information about one’s business to the
internal as well as for external users, such as managers, investors and others
(Arneld and Hope 1990). According to (Royaee et al., 2012) AIS is the most
important information widely used in the managerial decisions and influenced on
organization performance. One of the most important features that saturate
organizations is management decision and it shows its failure or progress in
achieving already set goals and objectives (Clinton et al. 2011). Evans, R. as
quoted in Young, J. (1982), “One of the marks of the executive is the ability to
decide. One of the obligations of free men is the willingness to decide. One of the
qualities of effective people is the courage to decide.” Definition of decision, Cited
by (Siyanbola, 2012) , it 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 maker.
2 The Structured Literature Review

2.1. The Literature Review Protocol

In this step, we describe the motivations for this research project and how we
decided to approach this stream of literature. As far as the motivation is concerned,
we were aware that sustainability accounting and reporting is a contemporary
research field thathas garnered growing attention from accounting researchers as
well as practitioners in recent years. In this regard, it appears interesting to explore
management accountants’ role in sustainability, given that the extant literature has
shown how they can play a pivotal role in introducing innovations in management
accounting and reporting. Therefore, we decided to carry out a literature review, a
Structured Literature Review (SLR), specifically, to understand the state of
research on the role played by management accountants in sustainability
accounting and reporting and to offer insights on future developments. In our
initial meetings, we designed the research plan to be carried out. In particular, we
chose the Scopus database as our source of information and we identified the
combination of search fields, such as keywords, date of publication, and document
type. Then, we identified inclusion and exclusion criteria for selecting publications
to include in our dataset. A detailed description of the literature search is provided
in Section . Lastly, we determined the units of analysis to analyze the publications
included in the final dataset, as described in Section .

2.2. The Research Questions

The motivation for this research project, highlighted in the literature review
protocol, and the research gap that it endeavors to fill, led us to formulate the
research questions that would guide our research and that represent the second step
of the SLR. According to Massaro et al. (p. 744), an SLR “needs to critique an
existing field of knowledge before it can offer a path towards future research”.
Drawing upon Alvesson and Deetz and the three tasks of critical research that they
identified, i.e., “insight”, “critique”, and “transformative redefinitions”, Massaro et
al. state that at least three research questions should guide an SLR. The first
research question should provide answers to how a stream of literature has
progressed over time; this can be done by analyzing, for example, publications’
impact, trend, and distribution among journals, books, etc. The second research
question should offer a critical analysis of the developments of a certain research
field, and, in this aim, an analytical framework must be developed to shed light on
the foci that characterize the literature examined. In particular, the analytical
framework should be composed of different units of analysis to organize and
examine existing studies and their main findings and it should foster a critique of
the literature in question. This will pave the way to answering the third research
question, which is aimed at identifying new directions for future research that
could contribute to expanding knowledge on the issue at stake. Therefore, by
adapting the three research questions identified by Massaro et al. to the specific
topic under investigation in this article, we formulate the following research
questions:

RQ.1 How is research for inquiring into the role of management accountants in
sustainability accounting and reporting developing?

RQ.2 What is the focus and critique of the research on the role of management
accountants in sustainability accounting and reporting?
RQ.3 What future avenues of research on the role of management accountants in
sustainability accounting and reporting can be identified?

2.3. Type of Studies and Literature Search

The third step consists in selecting what type of studies is relevant to the research
and carrying out the literature search. First, databases are selected and keywords
are determined in order to identify papers suitable for this study. We chose Scopus
as the database for publication selection since it is “one of the most appropriate
data warehouses for literature review studies” . (p. 3229), thanks to its broad
coverage of academic peer-reviewed literature . Then, we identified the relevant
keywords for our research and we used them to construct the search string that was
applied to “titles, abstracts, and keywords” for publications published in English
and included in the “Business, Management and Accounting” area. The search
string consisted of two parts; the first concerned sustainability accounting and
reporting and the second related to management accountants. It included the
following keywords: “sustainability” OR “sustainable practice*” OR
“sustainability practice*” OR “sustainable development” OR “SDG*” OR
“sustainable report*” OR “sustainability report*” OR “sustainability reporting” OR
“sustainability accounting” AND “controller*” OR “accountant*” OR
“management accountant*” OR “CFO*” OR “Chief Financial Officer*”. The part
of the search string devoted to sustainability accounting and reporting includes
various terms that refer to the sustainability accounting and reporting domain, like
“sustainability accounting”, “sustainability report”, and “sustainability reporting”,
which, to date, represent one of the most common accounting tools used to account
for sustainability . It also includes terms that are strictly related to sustainability,
such as “sustainable development”, “sustainability practices”, and “Sustainable
Development Goals (SDGs)”. The part concerning the management accountant, in
turn, includes the words “management accountants” and “controllers” because in
some countries, e.g., German-speaking countries, “controller” is used as a
synonym for management accountant .This part of the string also includes the
words “Chief Financial Officer” and “CFO” because they may also act as
management accountants, in some companies. Finally, we included the term
“accountant” because, in the accounting literature, it is sometimes used as a
synonym for “management accountant”. It is important to specify here that, in the
search string we included different terms to find papers on the role of management
accountants in sustainability accounting and reporting, such as “CFO” or
“accountant”. Nevertheless, we selected and included in our SLR only those
publications that specifically focus on management accountants, i.e., that are
specifically referred to management accounting and controlling. This was made
possible through the reading of the abstracts and the full texts which provide
information to clearly understand the focus of the papers. Therefore, in the
remainder of the article, we only use the term “management accountants” to refer
to those professionals who are in charge of management accounting. In order to
accomplish an exhaustive search and to collect the most relevant studies on the
topic, we did not exclude any journals. For the same reason, we did not limit the
search to journal articles, but also included books, book chapters, and working
papers; nor did we define a specific time frame. The search process, carried out on
12 October 2020, yielded 202 studies and the basic information like author(s), title,
year of publication, abstract, etc., was retrieved. In determining which studies
should be included or excluded, we defined inclusion and exclusion criteria. We
included publications whose main topic was the role and involvement of
management accountants in sustainability accounting and reporting. Likewise, we
excluded articles where the management accountant was just one of the recipients
of specific recommendations rather than the main topic of the study; we also
excluded studies where the term “accountant” referred to auditors or fiscal experts
as well as publications where the term “controller” referred to electromechanical
devices. The decision to exclude or include any publication was based, first, on
reading the title, keywords, and abstract; then, if the information included in the
abstract was not sufficient to include or exclude a study, the full text was read. At
the end of this process, we had identified 46 publications, which we began to read
in full. As we analyzed them, we realized that some publications, while explicitly
referring to the role of management accountants in sustainability accounting and
reporting in their abstracts, in the full text management accountants might simply
be mentioned in passing or, along with other
accounting professionals, were merely the recipients of general comments on
sustainability accounting and reporting. We excluded these publications, thus
obtaining a final sample of23 studies published between 2001 and 2020 (see
Appendix A)