RESPONSIBILITY ACCOUNTING: A VERITABLE TOOL FOR ORGANIZATIONAL GROWTH (STUDY OF SELECTED MANUFACTURING COMPANIES PORT HARCOURT)
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RESPONSIBILITY ACCOUNTING: A VERITABLE TOOL FOR
ORGANIZATIONAL GROWTH (STUDY OF SELECTED MANUFACTURING COMPANIES PORT HARCOURT)
ABSTRACT
This study x-rayed ‘Responsibility Accounting: As
a veritable tool for Organizational Growth”. A Study of selected manufacturing
companies in Port Harcourt. The study highlighted the concept of responsibility
its benefits and principles, decentralization, dimensions, social
responsibility accounting, among others. Structured questionnaires were
employed in the course of gathering relevant data for the study. We utilized
quasi-experimental research design and specifically, cross-sectional study was
adopted in order to show the effect of each dimensions of Responsibility
Accounting on each dimension of Organizational Growth. The data collected was
analyzed using simple percentage and the four hypotheses formulated was tested
using Pearson Product Moment Correlation. The targeted population for the study
was 300 out of which a total number of 171 was sampled and used for the study.
Our findings revealed that there was a substantial and high relationship
between the variables for hypotheses one and two while in hypotheses three and
four, a moderate relationship was disclosed between the respective variables.
This indeed implies that there is a positive relationship between
Responsibility Accounting and Organizational Growth. Based on the findings and
conclusion of the study, organization Growth is a function of good and
efficient Responsibility Accounting system installed in the organization.
LIST
OF TABLES
Table 3.4.1 Questionnaire Distribution and
Collection 50
Table 4.1.1 Response Pattern on questionnaire
distribution 56
Table 4.2.1 Presentation/Analysis of Data
Collected in
questionnaire 57
Table 4.2.2 Presentation/Analysis of Data
Collected in
question 2 58
Table 4.2.3 Presentation/Analysis of Data
Collected in
question 3 58
Table 4.2.4 Presentation/Analysis of Data
Collected in
question 4 59
Table 4.3.1 Return on Investment and Turnover 60
Table 4.3.2 Return on Investment and Market Share 61
Table 4.3.3 Residual Income and Turnover 62
Table 4.3.4 Residual Income and Market Share 63
TABLE
OF CONTENTS
Title Page i
Declaration ii
Dedication iii
Acknowledgement iv
Abstract v
List of Tables vi
Table of Contents vii
CHAPTER
ONE: INTRODUCTION
1.1 overview
of the Study 1
1.2 Statement
of the Study 3
1.3 Purpose
of the Study 5
1.4 Research
Questions 5
1.5 Statement
of Hypotheses 6
1.6 Significance
of the Study 8
1.7 Limitations
of the Study 9
1.8 Operational
Definition of Terms 10
1.9 Organization
of the Study 12
CHAPTER
TWO: REVIEW OF LITERATURE
2.1 Introduction 14
2.2 The
Need for Decentralization 16
2.3 Definition
of Responsibility Accounting 17
2.3.1 Basic Principles and Benefits of
Responsibility
accounting 19
2.3.2 The Need for information about segment
performance 20
2.4 Dimensions
of Responsibility Accounting 21
2.5 Corporate
Social Responsibility Accounting 30
2.5.1 Meaning of Social Responsibility Accounting 31
2.5.2 Objectives of Social Responsibility
Accounting 31
2.5.3 The Need for Social Responsibility Accounting
32
2.5.4 Approaches to Social Responsibility
Accounting 33
2.6 Organization
Growth 34
2.7 Stages
of Organizational Growth 36
2.8 Growth:
A Function of Leadership 40
2.9 Action
learning: A prerequisite for Organizational
Growth 41
2.10 Problems
Encountered with Organizational Growth 42
2.10.1 Creativity: A Dynamics to Organizational
Growth 43
2.11
Conclusion 45
CHAPTER
THREE RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction 48
3.2 Research
Design 48
3.3 Study
Area 49
3.4 Population
of Study 49
3.5 Operational
Measurement Variables 50
3.6 Sampling
Procedure/Sample Size 51
3.7 Instrumentation
52
3.8 Validity
of Instrument 52
3.9 Reliability
of instrument 53
3.10 Data
Collection Method 53
3.11 Data
Analysis Technique 55
CHAPTER FOUR: DATA ANALYSIS, INTERPRETATION AND
DISCUSSION OF RESULTS
4.1 Introduction 56
4.2 Presentation/Analysis
of Data Collected in Section A 57
4.3 Presentation/Analysis
of Data collected in Section B 59
4.4 Hypothesis
by Hypothesis, Interpretation and
Summary of Result/Findings 64
4.5 Discussion
of Findings 71
CHAPTER
FIVE: SUMMARY CONCLUSION RECOMMENDATION AND SUGGESTIONS FOR FURTHER RESEARCH
STUDY
5.1 Introduction 72
5.2 Summary
of the Study 72
5.3 Conclusion
73
5.4 Recommendations 75
5.5 Suggestions
for Further Research Study 76
CHAPTER
ONE
INTRODUCTION
1.1 OVERVIEW OF THE STUDY
Every
organization is a complex system made up of, energized and lubricated by a
series of integrated and interdependent sub-systems. These sub-systems may have
divisions within them, some minor and others major, depending on the role or
task assigned to them. Despite the heterogeneous engage and develop are
coordinated towards the actualization of the economic dreams of the entire
organization. In the light of this, the task assigned to each sub-system, which
represents a task (responsibility) centre must be executed and thereafter
evaluated critically in order to ascertain whether or not the result (s) so
obtained or achieved are objectively in line with the overall organization
standards or subjectively in favour of a particular responsibility centre at
the detriment of others.
Also,
a system of responsibility accounting must be designed so as to facilitate the
measurement of performance of each responsibility centre. Measuring performance
along the lines of managerial responsibility is an essential managerial tool.
Thus, a responsibility accounting system holds individual managers accountable
for the performance of the business segments under their control. In addition,
Meigs and Meigs (1990:966) asserted that such systems provide top management
with information useful in identifying the strong and weak segments throughout
the business organizations.
Considering
the uncompromising benefits of division of labour and specialization, no one
segment of an organization can effectively and efficiently use its resources
and that of others to develop itself and other sections of the enterprise. Any
organization that allows the contrary would certainty face sectional dominance,
economic retrogression within the enterprise which resulted from lack of
coherence in objective, policy, strategy, and disintegration.
Furthermore,
in a typical business organization, administration can be centralized or
decentralized. Thus, the possibility of a sound organizational growth depends
on the policy of administration. Therefore, any organization that intends to
work out its growth strategy form a given responsibility centre (s) must
abandon centralization and embrace decentralized operations. In Carl, S.W. et
al (2002:902) decentralization involves separating a business into divisions or
operating units and delegating responsibility to unit managers. They added that
in decentralized business, the unit managers are responsible for planning and
controlling the operations of their units. This move must be focused on the
overall corporate objective.
All
organization progress through a life cycle of growth, maturity, and decline,
and in each stage the organizational structure is likely to be different.
Jones, G.R. and George, J.M. (2006:213). During the growth state, the
organization is expanding rapidly, gaining customs and market share. Growth
occurs when an organization is just beginning and products and services are
gaining a foothold. It can also take place when a company develops a new
product or expands into new markets, nationally or internationally chart will
change, expansion in the level of management, as well as creation of new
departments.
In
the maturity stage, the organization is no longer growing at a rapid rate, but
stable in its production and sales. There may be introduced of minor changes to
a product or service but would not have major effect on organizational
structure. In the decline stage, the organization is losing ground in the
market place. It could be that its products or services are becoming obsolete
or that its competitors are taking over the market. Dubrin, A.J. (2004:319)
noted that in decline, the organization may shed levels of management or
positions in all divisions. Work may be outsourced in some areas and thus,
deleting them from the organizational structure.
1.2 STATEMENT
OF THE PROBLEM
Responsibility
accounting and its role in organizations has captured the attention of many
studies in the accounting literature in the last few decades. This focus may be
due to several reasons among which are: unit manger’s responsibility and
authority for cost control, making decisions that affect both cost and revenue
(profits) as well as the assets invested in their responsibility centres.
Responsibility account collects and reports planned and actual accounting
information about inputs of responsibility centres, which is the main focus.
(Sikka, P.K 2004:174)
It
should also be noted that each segment of the organization has its own
objectives which is peculiar to its activities and upon which it is going to be
evaluated. Consequently, competition for excellence and productivity is bound
to occur among the responsibility centres which would positively affect the
organization. Thus, the growth and development of the organization largely
depends on how effective and efficient the responsibility centres carried out
their respective activities
Therefore,
the accounting system must be designed as to suit the existing structure of the
organization. As noted earlier, responsibility must be coupled with authority.
A person is obliged to perform his duties only when he is conferred with
adequate powers to do so. Sikka, P.K. (2004:176) emphasized that sound
organizational structure, with clear-cut assignment of authorities and
responsibilities should exist for the successful functioning of the
responsibility accounting system. When the organization is not in order, it
will miserably fail to work. Responsibility accounting system therefore,
depends basically on the assigned responsibilities and authorities such that
the performance of each manager or responsibility centre is evaluated on such
factors.
Based
on the above, this study explores the interactive relationships among the three
basic responsibility centres in an organization and the extent of their
contribution towards organizational growth and development.
1.3 PURPOSE/OBJECTIVE
OF THE STUDY
Considering
the essentials and applicability of this result of the work, in industries and
business, the fundamental purpose or objective of the study is determine the
extent to which Responsibility Accounting affects Organizational Growth. Others
includes the following:
i) To
identify the interacting relationship between Return on Investment and
Turnover.
ii) To
ascertain the relationship between Return on Investment and Market Share.
iii) To
find out whether or not there is an interactive force between Residual Income
and Market Share.
iv) To
explicitly investigate and determine the nature of relationship between
Residual Income and Turnover of an organization.
1.4 RESEARCH
QUESTIONS
With
regard to the objectives or rationale behind this study, an attempt will be
made to address the following research questions: what is the interactive
relationship between responsibility accounting and organizational growth and
development? More specifically, we shall endeavor to provide possible solutions
to the following questions
i) What
is the relationship between Return on Investment and Turnover?
ii) What
is the interactive relationship between Return on Investment and Market Share
of a particular organization?
iii) What
is the relationship between Residual Income and Market Share?
iv) What
is the relationship between Residual Income and Turnover?
1.5 STATEMENT OF HYPOTHESES
A
critical analysis and review of the problems associated with
Responsibility
Accounting and Organizational Growth have necessitated the formulation of the
following hypotheses in their null form.
H01: There
is no significant relationship between Return on Investment and Turnover.
H02: There
is no significant relationship between Return on Investment and Market Share of
the organization.
H03: There
is no significant relationship between Residual Income and Market Share.
H04: There
is no significant relationship between Residual Income and Turnover.
1.5.1 DISCUSSION
OF THE HYPOTHESIS
The
conceptual framework seeks to ascertain the interactive relationship between
each dimensions of Responsibility Accounting and Organizational Growth within
the context of a typical organization.
Hypothesis One:
This hypothesis seeks to ascertain the relationship between Return on
Investment and turnover. The concern here is whether managerial performance in
a responsibility centre leads to increase in turnover or retards it. Hence, it
is hypothesized that there is no significant relationship between Return on
Investment and Turnover.
Hypothesis Two:
In organizational setting; it has been observed that the more an employee makes
proper use of his acquired skill, knowledge and expertise in the production
process, he is more likely to efficient, ceteris paribus. Therefore this
hypothesis sought to determine whether Return on Investment of a given responsibility
centre has a common relationship with its share in the market thereby enhancing
growth and equality holder’s expectations.
Hypothesis Three:
One important variable of organizational growth is the proportion of the market
the organization’s product occupies. Therefore, this hypothesis seeks to
ascertain the relationship between Residual Income and Market Share. In other
words, it intends to establish whether managerial performance of a
responsibility centre accelerates the market share of the organization.
Hypothesis Four:
this hypothesis seeks to ascertain the relationship between Residual Income and
Turnover. Its tries to determine whether managerial performance of a
responsibility centre enhances the turnover it generate which will have a
positive effect on the expectation of investors.
1.6 SIGNIFICANCE
OF THE STUDY
In
view of the fact that research is a continuous process, this study was carried
out in order to add to the wealth of knowledge gathered so far on
responsibility accounting and its position on the life of an organization.
Given
the notion that responsibility accounting spurs out the spirit of commitment
among the segment managers and their various employees whose performance are
evaluated based on the expected organizational growth, empirical evidence
confirming this proposition holds vital implications for the centire
enterprise- these will be increase in workers’ morale, and organizational
efficiency, among others.
Above
all, business organizations, students, lecturers, businessmen and women as well
as researchers in management and behavioural sciences will benefit immensely as
this study will contribute to their wealth of experience and knowledge in
responsibility accounting as an indispensable ingredient for organizational
growth, and will also arouse thoughts in creative and conscious individuals as
a foundation for further research.
1.7 LIMITATION
OF THE STUDY
A
limitation would be anything that falls outside the control of the researcher
and which may affect the internal validity of the study. This study is designed
to cover all manufacturing organizational in Port Harcourt municipality so as
to collect sufficient data on the interactive relationship between
responsibility accounting and organizational growth. This intended scope could
not, however, be attained because of cost of data collection and heterogeneous
location of the selected organizations for the study.
The
survey therefore, will cover few manufacturing industries in Port Harcourt
city. Data collected from these manufacturing organizations were generalized to
be a true representation of a other parts of the city not covered.
The
sensitive nature of the sample elements also hindered the findings. There was
difficulty in getting access to these organizations and their employees to
understand the academic nature or demand of the study. For instance, some of
the employees reasoned that their response may be implicating. This was
discovered through the poor rate of response to the distributed questionnaires.
Also, some of the sampled organizations were pessimistic at the beginning as
they thought that the study may endanger employee- management relationship or
it could lead to evolutionary thoughts in the organization.
The
attitude of most enterprise managers towards giving out information in good
time was yet another limitation. These mangers were reluctant to disclose
information concerning their companies due to fear of redundancy or giving
sensitive information which their competitor’s will use to benchmark them. It
was after proper discussion and conviction on the rationale behind the study
that their fears were erased.
Despite
these limitations, financial assistance were rendered from benevolent spirits
while the low literate ones among the employees were given thorough explanation
on how to fill the structured questionnaires.
1.8 OPERATIONAL
DEFINITION OF TERMS
Responsibility Accounting:
This is system of accounting in which costs and revenues are analyzed in
accordance with areas of personal responsibilities so that performance of the
budget holders can be monitored and evaluated in financial terms.
Responsibility Centre: This is a segment or sub-unit of an
organization under the control of a manager who is held responsible for the
activities of that centre. It could also referred as a sub-system.
Division of Labour: This
is the breaking down of production processes into stages of various dimension,
each stage of which handled and controlled by a specialists who is also
accountable to it.
Decentralization:
In an organization, Decentralization is the process whereby top management
permits and encourages responsibility centres to function as autonomous
operating units.
Centralization:
This is an organization where top management maintains all decision-making
authority at the corporate level and disallows responsibility centres from
existing as autonomous operating units.
Cost Centre:
Is a responsibility centre whose manager exerts influence over costs but not
over the revenue that may be generated by the centre or the investment that
generates the revenues.
Investment Centre:
This refers to a responsibility centre whose manager makes all decisions that
relate to the centre. The manager is given the authority to control the costs
and revenue as well as the investment that generates the revenue.
Profit Centre:
Is a responsibility centre whose manager is given the responsibility for
controlling not only costs but also revenues.
Return on Investment (ROI):
A measure of performance for an investment centre. It is determined by dividing
the investment centre’s assets into its income.
Controllable Items/Activities:
These are activities, items or tasks over which a manager had significant
though not complete, influence within a given time span.
Cost Control:
This refers to the ability of management to monitor and supervise expenditures
(recurrent and capital) in order to ensure that things are going according to
plan and that actual results (cost incurred) are obtained for comparison
against planned results so that appropriate corrective action(s) can be taken
on the variance that is bound to arise.
1.9 ORGANIZATION
OF THE STUDY
This
study is organized into five chapters. Chapter one deals with the context of
the problem, statement of the problem, purpose of the study, research
questions, hypotheses, significance of the study, definition of terms, and the
limitations of the study.
Chapter
two deals with the review of related literature on the area of the study, while
chapter three is on research design, sampling procedure/sample size
determination, data collection method, and data analysis technique among
others.
Chapter
four deals with the presentation and analysis of data collected, and lastly,
chapter five presents the discussion, conclusion, summary and recommendations
for further research study.
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