USES OF ACCOUNTING INFORMATION IN ANALYZING THE FINANCIAL POSITION OF A FIRM (A CASE STUDY OF UAC OF NIG. PLC)
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USES OF ACCOUNTING
INFORMATION IN ANALYZING THE FINANCIAL POSITION OF A FIRM
(A CASE STUDY OF UAC
OF NIG. PLC)
ABSTACT
The purpose of this work was to examine
the use of accounting information in analyzing the financial position of a firm
and UAC of Nigeria plc formed the case study .In pursuit of this objective, a
survey was conducted with the use of questionnaire, observation and face –to –
face interview method. The use of this survey produced data and information
which were analyzed in the project. The study comprises of five chapters.
The first chapter dealt on introduction
of crucial issues.
Chapter two covered a review of related
literature touching on the various opinions of some authorities in the subject
matter.
Chapter three is on the research
methodology used in the study.
Chapter four focused on data
presentation and analysis, data were collected, analyzed and presented using
tables.
Chapter five dealt with summary of
findings, recommendation and conclusion.
One of the most important
recommendations is that whenever a change in policy is made within the
enterprise, let such be disclosed appropriately.
TABLE OF CONTENT
CHAPTER ONE
1.0
Introduction
1.1
Background of the Study
1.2
Statement of Problem
1.3
Objective of the Study
1.4
Research Question
1.5
Hypothesis
1.6
Scope of the Study
1.7
Significance of the Study
1.7.1
Academic Significance
1.7.2
Practice Significance
1.8
Limitation
1.9
Operational Definition of Terms
Reference
CHAPTER TWO
2.0 Review of
Related Literature
2.0.1 Theoritical Background
2.0.2 Empirical background
2.1 Historical
Background
2.2 Types of
Accounting Information
2.3 Process of
Generating Accounting Information
2.4 Users of
Accounting Information
References
CHAPTER THREE
3.0 Research Design
and Methodology
3.1 Research Design
3.2 Area of Study
3.3 Population
of the Study
3.4 Sources of Data
3.5 Sampling Method
3.6 Research
Instrument
3.7 Reliability and
Validity of Research Instrument
3.8 Methods of
Investigation
CHAPTER FOUR
4.0
Presentation and Analysis of Data
4.1
Presentation and Analysis of Result
4.2 Test of
Hypothesis
CHAPTER FIVE
5.0
Summaries of Findings, Conclusion
and
Recommendation
5.1 Summary of Findings
5.2 Conclusion
5.3 Recommendation
Bibliography
Appendix
CHAPTER ONE
1.0
INTRODUCTION
1.1
BACKGROUND OF THE STUDY
Ekwe, M.C (2007:2), states that the
survival and growth of any business organization to a large extent depends on
the quality of information available to the business manager. Accounting
information is a financial data about business transactions expressed in terms
of money. The primary objective of accounting is to provide information that is
useful for decision making purposes. .According to Balogun and Delano (2007:8),
financial statements contain essential information for the decision making
process of many stakeholders – including management, employees, bankers,
creditors, investors and the government .If the information contained in those
financial statements is materially misstated, the resulting decision could be
disastrous to many business organizations.
While accounting speaks the language of
business, information is the currency with which language is communicated to
the users of the financial statements. Information must be accurate and timely
in order for it to have representative faithfulness and predictive values.
Accounting uses words and symbols to communicate financial information to
managers, investors, creditors and other decision maker. It is not limited to
those engaged directly in business. Business managers need information provided
by the accounting system to plan and control their business activities.
If the information is to be useful, it
must be accurate, timely, free from bias, relevant and most importantly
complete enough to portray the true financial position of a firm. Every
business entity should provide information about its activities because the
stakeholders – shareholders, bondholders, bankers, lenders, suppliers,
employees, managers, trade contacts, government, financial analyst and
investors need to monitor how well their interests are being served. They rely
on the periodic financial statement of business enterprise to provide the basic
information on the profitability of the business. The financial position of a
firm is very important to ascertain whether they are making expected growth.
Virtually all profit seeking
organization and most non-profit making organizations maintain extensive
accounting records reason is that these records are often required by law. A
more basic reason is that, even in a very small organization, a manager is
often confronted with a multitude of complex variables. Not even the most
brilliant manager can be sufficiently informed just by observing daily
operations. Instead he must depend on accounting process to convert business
transactions into useful statistical data that can be useful for determining
the financial position of a firm.
1.2
STATEMENT OF PROBLEM
Financial accounting information is
information provided by the financial statements of a firm to unveil the past
and present performance of the firm and its ability to maximize the wealth of
the stakeholders. Its primary objective is to provide a platform form the
stakeholders to determine the true financial position of a firm for decision
making. Despite these pivotal uses of the accounting information, it has not
provided a sufficient and reliable ground for determining the profitability,
viability and financial strengths of an organization and the researcher wants
to find out why.
1.3
OBJECTIVES OF THE STUDY
The primary objective of this study is
to find out why the information provided by the financial statement has failed
to provide sufficient and reliable platform for determining the true financial
position of a firm.
The secondary objectives include:
(a)
To examine the importance of accounting information to users.
(b)
To investigate the extent of use of the accounting information.
(c)
To find out whether the proper accounting policies and concept are followed by
UAC Nigeria Plc.
1.4
RESEARCH QUESTIONS
(1)
Is there any significant relationship between the accounting information and
the uses to which they are put?
(2)
Is the information provided by the financial statement sufficient enough to
have a representative faithfulness and predictive value?
(3)
Is the financial accounting information presented in a style and format which
will be easily understood by the end users?
1.5
HYPOTHESIS
Ho: There is no significant
relationship between the accounting information and its uses.
Hi: There is
significant relationship between the accounting information and its uses.
Ho: The information
provided by the financial statement is not sufficient enough to have a representative
faithfulness and predictive value.
Hi: The information
provided by the financial statement is sufficient enough to have a
representative faithfulness and predictive value.
Ho: The financial
accounting information is not presented in a style and format easily understood
by the end users.
Hi: The financial
accounting information is presented in a style and format easily understood by
the end users.
1.6
SCOPE OF THE STUDY
This study focuses on
the uses of accounting information in analyzing the financial position of a
firm using UAC of Nigeria Plc as a case study. The period of this study is
expected to last for two months.
1.7
SIGNIFICANCE OF THE STUDY
This section is
divided into two as follows:
1.7.1
ACADEMIC SIGNIFICANCE
This investigation
has been structured to benefit the academic world. Its nature and finding made
it an important tool of solution to some academic problems. Researchers and
tutors of similar case will find it an indispensable companion.
1.7.2
PRACTICAL SIGNIFICANCE
Financial accounting
information is an end product peculiar to financial activities of most business
undertaking. Many a time, companies including private individual in the
business world are faced with the challenges of using the information to make
economic decision. This investigation is designed to solve such problems.
1.8
OPERATIONAL DEFINITION OF TERMS
(a)
Accounting Concept: The basic theoretical ideas derived to support the
activities of accounting.
(b)
Assets: Tangible and intangible properties owned by an organization such as
land, motor vehicles, goodwill, etc for carrying out its business operations.
(c)
Balance Sheet: A statement of the total assets and liabilities of an
organization at a particular data, usually the last day of the accounting
period.
(d)
Financial Statement: The annual statements summarizing a company’s activities
for the last year. They consist of the profit and loss account, balance sheet,
statement of total recognized gains and losses, and if need be the cash flow
statement together with supporting notes.
(e)
Profit and Loss Account: An account in the books of an organization showing the
profit (or loss) made on its business activities and showing the deduction of
the appropriate expenses.
(f)
Ration Analysis: The use of accounting ratios to evaluate a company’s operating
performance and its financial stability.
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