C H A P T E R O N E
BACKGROUND OF THE STUDY
Accounting as a profession or discipline, has always been seen as an information-generating one, which fittingly makes the job of the Accountant to be that of observing economic activities, recording the observations in the prescribed books, analysing the recordings, interpreting his analysis and preparing reports to all users of Accounting Information. The prepared reports are generally referred to as financial statements, which clearly outline or identify the areas of strengths and weaknesses of a business organisation. Various interest groups use the generated Accounting Information in the financial statements as input or guide towards the making of effective decisions on financial matters.
Put somewhat more pointedly, “Accounting is the process of identifying, measuring and communicating of economic information to permit informed judgement and decisions by users of the information” (American Accounting Association, 1966). The above definition of Accounting clearly shows the purpose or usefulness of Accounting Information to the various stakeholders - i.e. to enable them (users) of the information to make sound and objective decisions relating to them.
These users or interest groups are broadly classified into two categories, viz: internal and external interest groups. The internal interest group includes: management, employees and shareholders. While external interest group on the other hand includes: Government Agencies/Parastatals, trade creditors and suppliers, trade union, the general public as well as financial institutions (bankers).
Management for instance, uses Accounting Information as a tool for effective decision-making, which borders on planning, organising, controlling and evaluation of overall performance of the organisation over a specific period. It could be said therefore that management and accurate, timely and Accounting Information go a long way to determine the destiny of any business organisation; especially when the very competitive nature of the business environment as well as the current global economic downturn are being considered.
STATEMENT OF THE PROBLEM
Over the years, it has been observed that many businesses have gone right down to the wire as a result of the various stakeholders (users of Accounting Information) been unable to put the published financial statements to effective use. Even when these financial statements are put to use, it is either the information so derived is not timely or of no relevance.
There are also some reported cases where adequate and accurate Accounting Information are being overlooked by the very user(s) who are supposed to make judicious use of these pieces of information. It is equally worrisome that the importance of the financial statements as a source of Accounting Information has not been fully embraced for the purpose of effective decision-making by the various users of Accounting Information. It suffices to mention that Accounting Information as a matter of relevance and urgency is indispensable to all categories of stakeholders whether internal or external to the organisation.
It is in view of the foregoing and in the interest of the users of Accounting Information in particular and Accounting profession in general that this study hopes to highlight the need and relevance of timely, accurate and overall usefulness of Accounting Information to the majority if not the whole perceived stakeholders in any business outfit especially now that businesses are experiencing the global economic downturn.
OBJECTIVES OF THE STUDY
Objectives of the study are as follows:
i. To examine the nature and the need for Accounting Information; ii. To determine whether users of Accounting Information rely on published financial statements for effective decision-making; iii. To examine whether users of Accounting Information usually analyse published...
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