Application of Accounting Methods and Techniques in Appraising Rival Projects in Situations of Risk and Uncertainty
CHAPTER ONE
Objectives of the Study
The objectives of this study will include the following:-
- An evaluation of the various accounting methods and techniques available for appraising projects in situations of risk and uncertainty.
- Ascertain the extent, if at all, company management use accounting techniques when appraising their rival projects in situations of risk and uncertainty.
- A comparative analysis of the performance of companies that use accounting techniques in appraising their rival projects in situations of risk and uncertainty with that of companies that do not.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Uncertainty and Controllability in Business Management
Until now, uncertainty has been debated in business management from the viewpoint of controllability. According to economists, balancing production and consumption was originally too uncertain and unforeseeable to be resolved by human hands alone. Marx (1867; reprinted 1965) stated that consistency in this area was as ‘the leap taken by value from the body of the commodity into the body of the gold’(Salto mortale der Ware). 1 Smith (1877, reprinted 1937) pointed out that an individual who intended only his own gain through production of the greatest value also was led by an ‘invisible hand’. No manufacturer can forecast changes in markets and business environments with complete certainty, which ultimately influence the sale of the products manufactured. A manufacturer must rely solely on the confidence in his or her own calculations of the probability of profit. Putting too much faith in one’s probabilities is precarious and pointless if technology and markets change suddenly and dramatically and become increasingly complicated. Although Smith dutifully acknowledged the difficulty of maintaining balance between production and consumption and entrusted its settlement to the ‘invisible hand’ (i.e. to the market itself), management scholars have long believed that management can maintain the balance in production and demand by using management knowledge, models, and information systems. Recently, some researchers have started to incorporate unforeseeable uncertainty into their research, although they also believe that it can be controlled through such a method as trial and error or selection-ism (Sommer, et.al, 2004; 2009; However, in the last decade, several large American manufacturing companies and banks have collapsed. In Japan, the 2011 earthquake, tsunami, and nuclear accident seriously damaged production lines, which have negatively impacted some large manufacturing companies. These events are truly unforeseeable and are those from which recovery is very difficult. In order to specifically define the relationship between uncertainty and profit, we should reexamine the management decision-making process so that uncertainty can be transformed into a certain condition, as has been stressed under the banner of the ‘managerial revolution’ and ‘managerial capitalism’ (Chandler, 1977, p.11). Further, the paper considers profit management under uncertainty, which should be the focus of the study of management accounting. We surveyed the views of management researchers who referred to the dissociation between production and market and proposed some countermeasures to control uncertainty.
CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
In this chapter, we described the research procedure for this study. A research methodology is a research process adopted or employed to systematically and scientifically present the results of a study to the research audience viz. a vis, the study beneficiaries.
RESEARCH DESIGN
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled. According to Singleton & Straits, (2009), Survey research can use quantitative research strategies (e.g., using questionnaires with numerically rated items), qualitative research strategies (e.g., using open-ended questions), or both strategies (i.e., mixed methods). As it is often used to describe and explore human behaviour, surveys are therefore frequently used in social and psychological research.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitutes of individuals or elements that are homogeneous in description.
This study was carried to examine application of accounting methods and techniques in appraising rival project in situations of risk and uncertainty. Dangote cement plc , Lagos form the population of the study.
CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of eighty (80) questionnaires were administered to respondents of which only seventy-seven (77) were returned and validated. This was due to irregular, incomplete and inappropriate responses to some questionnaire. For this study a total of 77 was validated for the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain application of accounting methods and techniques in appraising rival projects in situations of risk and uncertainty. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of application of accounting methods and techniques in appraising rival projects in situations of risk and uncertainty
Summary
This study was on application of accounting methods and techniques in appraising rival projects in situations of risk and uncertainty. Three objectives were raised which included: An evaluation of the various accounting methods and techniques available for appraising projects in situations of risk and uncertainty, ascertain the extent, if at all, company management use accounting techniques when appraising their rival projects in situations of risk and uncertainty and comparative analysis of the performance of companies that use accounting techniques in appraising their rival projects in situations of risk and uncertainty with that of companies that do not. A total of 77 responses were received and validated from the enrolled participants where all respondents were drawn from Dangote cement plc. Hypothesis was tested using Chi-Square statistical tool (SPSS).
Conclusion
In this study, we proved from the conceptual and methodological perspective that management accounting in the conditions of economic crisis processes is an independent account area. Its historical causality and the pattern forming the concept determined the influence of group factors: accounting and analytical institutional economic, information-technological etiology. The key and at the same time partially studied factor was the cyclic nature of economic development as the basic law of macroeconomic systems functioning, which determines the crisis processes. The latter, according to the author’s proven hypothesis, had the key impact on the accounting and economic thought evolution and determined the need for the management accounting methodology theory forming and development in the conditions of economic crisis processes.
Recommendation
The methodology of management accounting in the conditions of economic crisis processes is based on accounting and analytical procedures and methods, the use of which ensures the validity of decisions made, taking into account negative macroeconomic factors. The developed regulations of the study are recommended for use in conditions of macroeconomic instability and are presented in: the developed management accounting standard for information support for the implementation of the business model of an economic entity; accounting models; a set of reserve budgets for leveling the risks of unforeseen crisis and emergency costs. The developed regulations of the management accounting concept in the conditions of economic crisis provide a solution to an important economic problem – increasing the stability of the economic entities operations in conditions of macroeconomic instability.
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