The Impact of Financial Accounting Information on Decision Making Process

The Impact of Financial Accounting Information on Decision Making Process




Nigeria joined the nation’s committee at independence, hoping for a better tomorrow. We could feed ourselves and were, of course, almost self-sufficient. Subsequently, our hopes seemed unattainable. We seem to be going deeper and deeper into the woods. The consensus is that it has been bad for Nigeria.

Due to the adverse economic condition prevailing in the country, many businesses have closed, and shops and even financial institutions are being declared distressed at an alarming rate. Businesses yet to be submerged or want to stay afloat employ various strategies. Some increase prices, adopt promotional tools, engage in aggressive marketing, etc.. In contrast, others go for an odd combination of activities and even undergo a different kind of small business to survive.

Any business or individual that wants to survive must make the right decision. The era of the mile of thumb is gone; employing it is a sure way to fail absurdly.

The price of any conceivable item from garri and bread to radio and book, not to mention petrol, has been soaring in geometric proportions over the year. The economy is truly in distress. These compounds and complicated intricacies are the problems of the organization vis-à-vis effective planning and decision-making processes. Other factors, such as stagflation, taxation, and economic and political problems, affect information and decision-making. The future orientation is what most companies and banks get from making accounting decisions. The computation and interpretation of analytical ratios from financial statements enable banks to determine their operation trends and provide a basis for management decision-making.

Other users of financial analysis are used in making financial decisions, and achieving the goal of sustainability determines compliance with regulatory requirements. Financial analysis is an investment that has a positive return in the future on how decisions will be made and how to manage the finances to achieve the institution’s strategic goals through decision-making.

Many people think that accounting is a highly technical field that professional accountants can only understand. Nearly everyone practices accounting in one form or another. Modern management requires a wide variety of information to accomplish its aim and objectives successfully.

This information is mainly determined by uncertainty about the future and a lack of knowledge about the present. Some of these decisions are of strategic importance, having a large impact on the business; others are routine operating decisions. Therefore accounting information is based on laws and regulations governing the handling of accounting reports contained in the organization’s financial reports.

Making the right decision depends on possessing appropriate, accurate, and up-to-date information provided and presented meaningfully. This study examined the contribution of a sound accounting system in providing the management with financial and other information for dealing with decision problems that arise from their organizational operations.


Basically, the nature of manufacturing business compels it to carry out a great deal of book-keeping records based on accounting principles and information provided with the perpetual increase in the number of consumers of manufactured products; it has become necessary to devise a systematic means of handling the resultant book-keeping and accounting activities.

Much criticism has always been made about the organization’s service; consumers complain of low-quality products, and employers complain of lack of promotion, inadequate salaries, and lack of training.

Furthermore, market relevance is the major challenge facing every financial institution business organization today. On-going fundament at changes in global politics, economy, and emerging competitions particularly challenges proper and adequate con-temporal accounting information for management decision-making. The company tries to coordinate all these challenges effectively and efficiently to minimize any anticipated and unanticipated pitfalls. If the manufacturing organization applies a sound and effective accounting system properly, the difference will be clear.

Improper attention to the accounting system and handling of accounting information has given birth to the under-mentioned problems. Poor planning results in poor decision-making.

Poor organization and control of business activities and unsatisfactory service to its customers. Poor decision-making in administrative activities of the organisation.


The objectives of the study are as follows;

1. To determine whether there has been problem in generating and utilizing accounting information necessary for management decision making.

2. To ascertain the extent in which accounting information generated by accounts departments has contributed in decision making process.

3. To ascertain the extent accounting information has effectively performed or fulfills the basic roles of cost minimization, proper allocation of scare resource and improvement in the production.


1. Are they problem in generating and utilizing accounting information necessary for management decision making process?

2. To what extent does accounting information generated by accounts department contributed in decision in making process?

3. To what extent does accounting information has improved effectively performed or fulfill the basic roles of cost minimization, proper allocation of scare resource and improvement in the production?



Ho: There are problem in generating and utilizing accounting information necessary for management decision making.

H1: There are no problems in generating and utilizing accounting information necessary for management decision making.


Ho: accounting information generated by accounts department has not contributed in decision making process.

H1: Accounting information generated by accounts department has contributed in decision process.


Ho: Accounting information has not improved effectively performed or fulfill the basic roles of cost minimization, proper allocation of scare resource and improvement in the production.

H1: Accounting information has improved effectively performed or fulfill the basic roles of cost minimization, proper allocation of scare resource and improvement in the production.


The research cannot treat all aspect and kind of accounting information because the field is simply too wide. So only those relevant to these studies were dealt with as per need- ratio analysis, cost-volume- profit analysis, absorption and marginal costing, the contribution margin standard costing and variance analysis, linear program.

The availability of correct and up to data is not easy, even when available; one still encounters wholly unnecessary bottlenecks due to our socio – cultural background vice versa disclosure of information and bureaucracy. So this constituted an impediment to this research work.

The researcher seriously encountered financial and time constraints. Computational procedures of various accounting information or tools are outside the scope of the work. However, those deemed necessary may be treated.

It is impossible to cover all the companies, firms and other business outfits in Nigeria

As a sample of the two companies in Enugu state were scheduled and inferences made from these.

Though deliberate effort is being made, to have a work wile study with sufficient validity and reliability. This work should not be viewed as a final solution to impact of accounting information on decision making process. There are limitations on resources for reference purposes especially responses on collection of data, many respondents give bias responses probably because of job protection, officer’s name and image protection, personal reluctance, unnecessary fear of legal implication and so forth.


This research study will help to maximise the beneficial impact of accounting information on the decision making process of an organization. This boosts the profitability of the organization as well as ensuring its continuity as a business entity.

It will help in the efficient allocation of scare resources that have alternative being use as well as increase productivity thereby uplifting the standard of living. It will review the improvement in the organization or company handling the accounting information and show equally the ways through which improvement could be accomplished.

In fact, all interested groups like shareholders, employers, investors, creditors, government etc will benefit immensely.

This project will equally serve as a reference to students who may be interested in embarking on research of this nature.


EFFECTIVENESS: The total or actual interest paid or earned in a year, expressed as a percentage of the principal amount at the beginning of the period.

EFFICIENCY: A measurement of an organization’s ability to produce and distribute its product. In accounting terms it is qualified by a communism of the standard hours allowed for a given level of production and actual hour taken.

ACCOUNTING INFORMATION: This is a system designed to obtain the financial position of an organization as at the end of the period.

INFORMATION: Is processed data used in obtaining detailed data about a particular person, thing or place.

LEVERAGES: They are used by companies of their limited assets to guarantee substantial loans to finance its business.

FINANCIAL INFORMATION: This is information summarized by a company’s activities over the last year. They consist of the profit and loss account, the cash flow statement, etc.

ANALYSIS: In standard costing and budgetary control, analysis of various in order to seek their causes. The total profit of various is analyzed into sub – variance indicating the major reasons for budget figures.

DEBT: A sum owned by one person or organization to a person showing that the debt to be required to be settled within one accounting period.

RATIO: To put the company’s performance in percentage. The use of accounting ratio to evaluate a company’s operating performance and financial stability.

DECISION MAKING: This is the end of deciding between alternative courses of action. Running of a business, accounting information and techniques are used to facilitate decision models such as discounted cash flow.

IMPACT: This means the duties, responsibilities and functions. As it has to do with work, it is that fundamental obligation incumbent on the public relations to attain democratic order in the organization policy.

Accounting: Is the process of producing needed information regarding primarily the financial activities of economic entities by Bartho N. Kezee 1996.

The wide scope of accounting can be recognized when one considers the diversity of economic entity which cut across sizes and bounders.

Accounting is the language used to cover the result of the entity’s endeavors, to the interested parties inform of financial statement and the financial statement has been identified as follows: Statement of accounting policy. Balance sheet. Profit and loss account (income statements). Notes on the accounts. Statements of source and application of funds. Value added statement. Five years historical summary.


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Edward, J B (1976); The Modern Accountancy Hand Book.

Okafor, A U (2000) Principles of Accounting: The professional approach. Owerri Hudson Jude Nigeria Publishers.

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