AN APPRAISAL OF ACCOUNTING INFORMATION AS A TOOL FOR DECISION MAKING PROCESS IN THE MANUFACTURING SECTOR (A CASE STUDY OF INTERNATIONAL TOBACCO COMPANY PLC, ILORIN, KWARA STATE)
TABLE OF CONTENTS
Table of content
1.1 Background of the study
1.2 Statement of the Study
1.3 Purpose of the Study
1.4 Significance of the Study
1.5 Research Methodology
1.6 Research Question
1.7 Scope of the Study
1.8 Organization and Plan of the Study
1.9 Definition of Term
CHAPTER TWO: LITERATURE REVIEW
2.1 Types of Financial Statement
2.2 Information to be disclosed in Financial Statement
2.3 The roles of Financial Statement in decision making
2.4 Problems of the use of Financial Statement
2.5 Methods of Analyzing Financial Statement
2.6 Interpretation of Financial Statement
2.7 Uses of Financial Statement
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design
3.2 Population of the Study
3.3 Sampling size and Sampling Method
3.4 Research Instrument
3.5 Source of Data
3.6 Statistical Techniques for Data Analysis
3.7 Historical Background of International Tobacco Company Plc
3.8 Organization Chart
CHAPTER FOUR: STATISTICAL ANALYSIS
4.2 Analysis of responses to Research Questions
4.3 Financial Control System
4.4 Interpretation of the Findings
CHAPTER FIVE: SUMMARY, RECOMMENDATION AND CONCLUSION
1.1 BACKGROUND OF THE STUDY
Appraisal statement has been defined by the statement of accounting standard No: 2 (SAS 2) as the means of communication to invested party’s information on the resources, obligation and performance of the reporting entity or enterprises.
Financial statement therefore are statement of summarizing transaction of a business, prepared and presented basically for a time period for various decision making situation by variety of users.
The purpose of this statement is not to evolve a basic theory of accounting but to identify some of this concept, which are generally accepted. Appraisal statements are therefore expected to be clear and easy to understand by users.
An appraisal statement consist of balance sheet, profit and loss account, note to the accounts source and application of fund statement, value added statement and historical financial summary users of appraisal statement include investors, creditors, employees and revenue regulatory authorities (SAS 1).
1.2 STATEMENT OF THE PROBLEM
Unfortunately, the management of business organization and some other users of the appraisal statement lack the qualitative understanding of the impact of appraising financial statement and consulting it when decision have been made. This research work will take an in-depth into this.
1.3 PURPOSE OF THE STUDY
The main purpose of this study or research work as to assess the extent of usage of appraisal statement an a basis for managerial decision making in a manufacturing sector.
The main problem encountered by companies in recent time as their inability to plan, organizes and effectively uses of appraisal information and resources to achieve the goals of wealth maximization.
This research work is undertaken to evaluate how appraisal statement can be use as a tool for guiding the process of decision-making in a manufacturing sector
OTHER PURPOSE INCLUDE THE FOLLOWING
1. To evaluate qualitative understanding of appraisal statement which serve as a guild line for making vital decision by the management.
2. To evaluate the extent of management decision depending on the appraisal statement.
3. To recommend and rectify some weakness in the prevailing attitude toward the use of appraisal statement for decision-making purpose.
1.4 SIGNIFICANT OF THE STUDY
Studies in the past revealed that many organizations have neither focused nor made the expected profit because of decision based on inaccuracy, rule of thumb and malfunction for management (Shapiro 1978).
However, accountants are now showing an increasing interest in understanding the relationship between financial statement, which is also the appraisal statement and decision-making in business (Thibhover, 1973). This research will therefore determine the bearing of appraisal in managerial decision-making in a manufacturing sector. The appraisal statement will help the users to take decision as regards investment and this enable business enterprise to expands.
1.5 RESEARCH METHODOLOGY
The research methodology showed details, the data that were used which are; Primary and Secondary Data and under Primary data we have: Observation, Questionnaire, Interview, Experiment while in Secondary data we have: Journals, Media, Text books, Internet and current annual report.
1.6 RESEARCH QUESTIION
Research project work is “how effective or useful is the consultation of a appraisal statement when management decision are being made in the management sector”.
From this research work we will be able to deduce the importance of appraisal statement in making decision or if it not necessary to consult it.
1.7 SCOPE OF THE STUDY
The International Tobacco Company Plc, Ilorin is the case study of the project work. The research covers the 2009 annual reports, which consist of the following.
1. The balance sheet
2. The Profit and loss account income statement
3. Sources and application of funds
4. Note to accounts
5. Value added statement
6. 5 years financial summary
Financial statement for 2009 only being the year ended. There is no limitation because all the information needed was gathered through all the assistance of Mr. Ojo (accountant).
The only constraints is that the year 2010 annual result in not yet published which would have been used as a useful statement together with other gathered information
1.8 ORGANIZATIONS AND PLAN OF THE STUDY
The project will contain five (5) chapters. Chapter one include the background of the study which followed by statement of the problems and significant of the study. It will be ended with definition of some term.
The second chapter is about the literature review in which the topic of the project will be examined and discuss. Here, view of different author will be extracted from their various literatures.
Chapter three talks about the research methodology and type of data collection to be used. The historical of the case study included in this chapter and the organizational chart as well.
Furthermore, chapter four reviews the responses to research questions and financial control system including the interpretation of the finding.
Lastly, chapter five contain the summary of the above chapter conclusion, necessary recommendation, bibliography and questionnaire.
1.9 DEFINITION OF TERMS
AUDITOR: Therefore an auditor is an individual to whom the receipt and payment of an organization were read. He is also an expert assigned with the power to establish an opinion as the tine and fair view of the financial statement of the company.
BALANCE SHEET: This is the summary of all assets and liabilities of a company.
CREDITOR: A person whose money is owned.
DEBTOR: A person indebted to another the debt usually in money.
2.1 TYPES OF FINANCIAL STATEMENT
The basis of financial planning analysis and decision-making is financial information. Financial statement information is needed to predict or forecast and compare the firms earning ability. It is also required in economic decision-making. The financial information of an enterprise is contained in the appraisal statement or financial statement.
Meigs (1984), had describe appraisal statement as the means of conveying to management and to the interested overseer, a concise picture of profitability and financial position of the business.
Appraisal statement can be generally defined as the summarized information of the firms financial affairs organizes systematically they are the means of presenting the firms financial situation to the user (Pandy 1979).
In SAS 2, appraisal statement are expected to be simple clean and easy to be understand by the users. Beside, they are the mean of communicating to interested parties or users information on the resources obligatory and performance of the reporting entity or enterprise.
Financial statements are often classified as internal (management accounting) and external (financial accounting) statement. The institute of cost and management accounting (ICMA), defined internal appraisal statement in the terminology as the provision of a formation of policies, planning and controlling of activities of the enterprises, decision making on alternative course of action, disclosure to employee and safeguarding assets.
Internal appraisal statement are concerned with the provision of information to people within the organization to help them to make better decision. It is entirely optional and the information should be produced only if it considered that the benefits from the use of the information by management exceed the cost of controlling and preparation (Durry 1990).
Internal appraisal statements are not given to parties outside the entity or the shareholders. They are prepared mainly for the benefit of the embankment and used exclusively by the management therefore they are prepared to meet specific internal policies needs and as guard lines to managers.
According to Pandey (1979), external appraisal statements are the product of accounting. They are given to parties outside the entirely. Externals parties are unable to specify guided line for the preparation for appraisal statement. The information presented in external financial statement help investor and other user to make better decision about the entry. Thus, appraisal statement must present information, which is relevant to economic decision.
That is, they must be useful for predicting the future success and failure of the business.
Relevance as an important quantitative characteristic of financial statement is concerned with how accounting can serve external decision maker (Humgren, 1990). External appraisal statement involve the measuring and economic units and the predict preparation of various report from such record. (Warrium and Feses 1968). It can also be defined as “discipline responsible for providing the information needed to evaluate the present and planned activities of organization in society:.
External appraisal statements principally consist of the profit and loss account, balance sheet, notes of the account sources and application of fund, value added statement and the 5 years financial statement.
According to Pendy (1979), the profit and loss account is the “Score board” of the firm’s performance during a particular period of time the generally accepted convention is to show one year event in the profit and loss account. Since the profit the loss account reflects the result of the summary of revenue expenses and net income (or net loss) of a firm for a period of time
Thus, it serves as measure of the firm’s profitability. The balance sheet is one of the most significant appraisal statements. It indicates the financial condition or the state of affair of business at a particular point of time. More specifically, it confirms information about resources and obligation of a business entity.
Vackeny (1973), in his view, sees, balance sheet as the presentation of concise summary of assets and liabilities in a well arranged intelligible form, so that the financial position of the company at the date of the statement may by clearly ascertained..