Effect of Financial Accounting Reporting on Management of Business



1.1     Background of the Study

Financial accounting covers those activities related to the preparation of certain reports which are known as financial statement. These statements report the financial status of a firm at a particular time the firm activities and resulting profit or losses during the most recent period and the flow of resources occurring within the firm during the same period.

According to Montgomery A.T (1978) gives us an idea on the meaning of financial accounting as a specialized branch of accounting that keeps track of a company’s financial transactions.

However the questions arises what are the efforts of these financial account reports in the management of business?

The answer poses a problem which the paper will seek to solve. Not all business persons understand the impact of financial accounting information on the management of their business, some managers business intuitively. Other, like traffic defaulters who disobey road signs, disobey the warning of communicated by financial accounting information and end up in a ‘Business Accident’

There other sources of information which have impact on the business management and the combination of these sources give an information system in the complex nature

According to Bieman H. Jr and Diebin (1972) defined accounting as the field of accounting concerned with the summary, analysis and reporting of financial transactions pertaining to a business.

Moreover, financial accounting information usually comes in the disguised form by ‘’wearing’’ the cloak of technicalities. Such technicalities include calculations which need expert knowledge in its interpretation. But when some business because of layout, cannot employ such experts hands, they tend to ignore financial accounting information system which has an effect on the management of any business concern. The problem is: do all businessmen know this? This is the question that the researcher seeks to answer also.

1.2  Statement of the Problem

Is very important for the functioning of any business. The financial accounting system in most business organization system. The flow of information, the cost of collecting any information and the internal control procedures has some loops hole.

In reality, it would be impossible for the researcher to study all the information system in all or even one of the organizations. The study therefore involves the study of some typical financial accounting reporting on the management of a business. The researcher will carry out an empirical study and appraisal of a business financial accounting and see whether there is a room for improvement to be made. It will therefore involve a review of the financial accounting and its related procedures.

1.3  Objectives of the Study

The good of every business is profit optimization. The management of most business exist primarily for this objective, whether the business ownership is profit optimization or maximization as some books may choose to call it, are the still same. Profit optimization used rather than maximization. In this paper because optimization has social effect.

The management is able to do this as long as they are able. It use their financial profitably they must know the effect which financial accounting information has on the management of the business. Financial accounting measures by means of the reports they prepare the extent to which management has succeeded in their goals of profit optimization.

The report which serves as financial information of the accounting period has an impact on the achievement of the business. This effect now becomes the goal this research. The researcher seeks to know more about this effect (i.e the financial accounting effect on the management of business) and also vices all business persons on the effect.

1.4    Research Question

In order to make this research to be more meaningful, there is a need to implore in some questions which responses are received from respondents are stated below.

  1. To determine if the business have ever taken loans from banks.
  2. How are the effects of financial accounting information determine the type of business the customer/staff engage in.
  3. How the effect of financial accounting determine how big the capital of a business is.
  4. Determining how many employees the business have in the study area.
  5. Determining how many businesses does publish their account.

What are the constraints to effect of financial accounting information in emetine?

What are the solutions to the identified problem?

1.5    Statement of Hypothesis

Hypothesis is defined by the enclydopedia American as ‘’a proposition assumed to be true merely for purpose of argument or a proposition/theory put forward to account for under a body of facts.’’

The hypotheses of this research work are: this will be used.

  1. Financial accounting information has both positive and negative impact on the management of a business and as such there is a common need for accounting to supply to its owners information about the business.


THE NULL HYPOTHESIS HO: Financial accounting information has negative impact on the management of a business.

THE ALTERNATIVE HYPOTHESIS HI: Financial accounting information has a positive impact on the management of a business.


THE NULL HYPOTHESIS HO: Neglect of financial information will not have any effect on the business.

THE ALTERNATIVE HYPOTHESIS HI: Neglect of financial accounting information will have effect on the business.

1.6    Significance of the Study

The research will be significant or useful in;

  1. Examining the effect of financial accounting as information system.
  2. Directing the business person to such effect.
  3. Warning, not only business persons but all persons from neglect of financial accounting.
  4. Encouraging all to obey head the warning of financial accounting information.

The following classes of people will find the work as useful references.

  1. Managers companies, corporations and any other firm business whether such business are owned by management or not.
  2. Actual and potential leaders of money to business
  3. Customers
  4. Owners and shareholders
  5. Government
  6. Other researchers.

1.7   Scope of the Study

No research work is purely original. Something has to be drawn from work of others. With acknowledgement and appreciation, the researcher will include textbooks in all forms or branches of accounting.

Textbooks in management, finance and marketing, magazines and encyclopedia will be used extensively. Apart from extensive use of literature, other method of research will include.

  1. Interview with business/staff.
  2. Questionnaires will be design and distributed to some businessmen. The questionnaires will be designed for officers in management of public and private companies, shareholders, partners and owners in sole proprietorship.
  3. A look into the document of some business and drawing heavily from such records is intended. Financial accounting information i9s often regarded as ‘’figure’’ information and the method used in this research is the ‘’transformation’’ of the data into information such be useful to both those who have knowledge of accounting and those who do not.

1.8       Limitation of the Study

A voluminous work would result, as it were in all research work done on all parts of account information generally (since this might lead to researching into all the different branches of accounting i.e cost accounting, Auditing etc. Still voluminous would be a research into the financial accounting information since this would include what it is, how it can be prepared its usefulness and most of others.

Bearing this in mind this research work shall then be limited to THE EFFECT OF FINANCIAL ACCOUNTING INFORMATION REPORTING TO THE MANAGEMENT OF A BUSINESS.

The research is aware of the fact that other types of information play a part in management of a business but this research is based on the question. If those where types of information are readily available and only financial accounting information is lacky.

1.9    Definition of Terms

The following are defined in this section

  1. Effect
  2. Financial accounting
  3. Information
  4. Management
  5. EFFECT: The oxford advancer learner dictionary of English dexntes effect as ‘’influence one effect has on another’’ it can therefore be good or bad.
  6. FINANCIAL ACCOUNTING: Financial accounting ‘’is concerned with the recording of transaction for a business enterprises or other economic units and the periodic preparation of various reports from such records ‘’ financial accounting then can be said to be a systematic gathering, summarizing and reporting of business transaction in monetary terms such that it provide information which permits informed judgement by the uses of such information.
  7. INFORMATION OR REPORT: These can be thought of as being facts needed or received by a person or group of persons which is or be useful to him/her. These information or reports may be spoken/written programmed or teleprinted.
  8. MANAGEMENT: management can be defined as the rational selection of courses of action to optimize the interrelationship of man, materials and money for the survival and the growth of the organization. It can be regarded as the ‘’process of getting things done through people’’ A person who manages is called a manager.
  9. BUSINESS: Business is a process whereby human materials and capital resource are combined to earn/satisfy human needs and wants. An entity which carries on such organized efforts is known as a business entity.