Accounting Department Research project Topic Chapter 1-5 titled – The Effect Of Financial Reporting On The Management Of A Business.
- Background of the Study
Financial report provides an overview of a business profitability and financial condition in both short and long term. They are necessary sources of accounting information about companies for wide variety of users. In every business, there are needs for information. This information needs ranges from financial, production, marketing etc. Generally, the larger the organization the greater the management need information. Financial report plays a vital role in decision making process of business organizations.
The main purpose of financial reports is the provision of financial information as a record making. It has been said that accounting is the language of business. It might also be said that the ability to apply accounting knowledge is vital to the success of a business: A business prepares various report at the end of each fiscal period. This report summarizes the changes that have taken place during the period. For this financial report to be useful, the data have to be presented in such a way that the user will recognize, Similarities, differences and trends form one period to another to enable them make decisions.
The accounting information contained in the financial reports enables management to make more useful decisions. Financial reportshould provide adequate information in all areas of an organization and economic activities; it should be able to disclose clearly the nature and accurate accounts of the transactions fund shows a true and fair view of the financial position of the organization to be ascertained. Financial reports serve a lot of useful purpose to different users namely, shareholders, Creditors, Banks, government agents, employees, potential investors and the management of the entity.
The above identified groups of persons rely on the information supplied by the given firm through financial reporting in which they have interest to ascertain thestateorganization‟soaffairswhichservesasimportant guide in deciding the extent to which they commit their fund. It is the“communication of financial information useful for decision making suchas investment, credit and other business decisions” suchinclude, general. Purpose financial statement, balance sheet, equityreport, cash flow reports and notes to these statements.
1.2 Statement of the Problem
The problem of this research is that, the management does not know the various ways of presenting financial accounting reporting, which often affects managerial decision making. There are no proper allocation of resources of the organization which leads to non-achievement of theprofit maximization objective. Also the inability of the management to recruit trained and professional personnel, as a result, the quality of the decision made by this organization are very poor.