THE ROLE OF ACCOUNTING INFORMATION IN MANAGEMENT DECISION MAKING

CHAPTER ONE

• INTRODUCTION
  • BACKGROUND OF THE STUDY

Organization is included as part of the whole economy. It is a network through which people (managers) in authority order all action and obtains information they need to meet responsibility. Organization is broadly divided into two (2) parts.

• Non-profit oriented organization and
• Profit oriented organization

Information is the life wire of organization, the success of any organization whether profit or non-profit oriented depends particularly on how the information needs of the different levels of management are met. Information according to Anthony and Reece (1975 P290) is a fact, datum, observation, perception or any other thing that adds to knowledge”. Also Cox and Enis (1972) designed information as “any data which the manager believes will be successful to him in making a particular decision” information can either be quantitative or non-quantitative and accounting information happens to be one of the quantitative information. It is distinguished from other types of information because it is usually expressed in monetary terms. However, non-monetary information is also included in accounting reports in order to enhance the understanding of the managers. This study is about the role of accounting information in managerial decision making. It seeks to enquire into how monetary and financial information arranged in a professional accounting manner is used in decision – making.

USERS OF ACCOUNTING INFORMATION

Accounting information has so many users; these users have different decisions to make and their information often differ.

The users of accounting information have been identified to include: B.N Okezie (2008).

• Individuals financial institutions

Who may require accounting information determine the liquidity, profitability and viability of the enterprises.

• Managers in an enterprise who may need accounting information to measure performance, plan and control operations.
• Employees and customers of an enterprise who may need accounting information to assess the ability of the enterprise to produce goods or render services on a continous basis.
• Government and regulatory bodies need accounting information in order to be able to impose and collect taxes, to regulate certain business activities and to plan, execute, and evaluate performance, project and policies.
• Quasi – government establishments and agencies need accounting information in order to meet their statutory obligation (SAS P.4)

It can be seen from the above that accounting carters for a variety of interests and need, hence it must respond to the environment and accommodate the any of the environmental factors. These users constitute importantly to the stakeholders in any enterprise.

ACCOUNTING INFORMATION AND MANAGEMENT

• Decision making is the prime job of managers.
• It is convenient to classify management decision into two categories:
• Planning decision
• Control decision

These decisions could be routine or non-routine in nature

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