Role of Accounting Concepts and Conventions in Financial Reporting
Chapter One
THE OBJECTIVE OF THE STUDY
The importance of accounting concepts and conventions in the preparation of financial statement could be seen in the assessment of financial viability of an organization. The accountant prepares the financial statement of most organization. Accounting concepts and conventions help the accountant in giving relevant financial report to the management of any organization as regards financial report to the management of any organization. In order to demonstrate the role of accounting concepts and convention producing a viable financial report of any going concern, the following objectives are set out in this study:-
- To determine whether accounting concepts and conventions serve as a guide in the preparation of financial statement.
- To ascertain if accounting concepts and conventions assist the provision of useful information for making economic decision.
- To determine whether accounting concepts and convention help in the understanding of how transactions are accounted for.
- To determine whether accounting concepts and conventions make financial reports more meaningful and reliable.
CHAPTER TWO
LITERATURE REVIEW
FINANCIAL REPORTING – AN OVERVIEW
Accounting began as a purely practical exercise of stewardship. Double entry bookkeeping evolved in Italy in the 13th century, but spread over Europe after Bacioli, a Franciscan Irion published sun made arithmetical in 1404 a book which include some chapters in accountancy.
The growth of large scale business in the 19th century and government legislation to control them had the development of accounting for income, expenditure and asset was required.
In the early 20th century, the information needs of share holders assumed an increasing importance especially in the wake of the Wall Street crash of 1929. In Britain, the legal requirement of set of published accounts were imposed by the companies’ act of 1948, while in Nigeria it was the 1968 companies’ act and the later adapted (CAMA) 1990.
Major items to be disclosed in these accounts were specified (ACCA study text 1987:3). The act did not state the study by which these items should be valued or treated. Accounts were expected to apply Generally Accepted Accounting Principles (GAAP) which is embodiments of rules, conventions and practice developed over time by the accounting profession. They serve as general guideline in the preparation of financial report.
DEFINITION OF ACCOUNTING
According to Ubaka (1998:13), Accountancy is defined as the measurement and communication system used to provide economic and social information decision leading to maximum allocation of resources and accomplishment of the entities’ objective.
John, (1974:19) One aspect of accounting involves the systematic recording, classifying and summarizing of the transaction that affect a business unit and this transactions serves as the basis for the company’s finance which are called financial statement.
Nwabueze(1997) includes that accounting is a systematic means of writing an economic history and plans of an organization in both quantitative and financial manner so that facts can be revealed and properly analyzed such that facts for the purpose for advising management.
The accountant is responsible for directing, controlling and coordinating the work of the book-keeping staff. It is a post of his duty to prepare periodical account such as trading, profit and loss account and other financial statement in a form, which will be of assistance to the management not only in appraising past result but in formulating future policy.
Mill champ (1990:482) defines accounting as a set of theories and techniques by which financial data are processed into information for reporting, planning, controlling and decision making purposes.
In the researchers view, accounting can be simply seen as a systematic recording of business transaction in such a way to show the financial position of the business at the end of the year (transaction year)
CHAPTER THREE
RESEARCH METHODOLOGY AND DESIGN
According to Osuala (1993:1) research is simply the process of arriving at dependable solutions to problem analysis through a planned and systematic collection, analysis and interpretation of data. Research is an important tool for advancing knowledge, for promoting progress and for enabling man to relate more effectively to his environment to accomplish his purposes and to resolve his conflicts.
Research is oriented towards the discovery of the relationships that exist among the phenomenon of the world. Research is devoted to finding the condition under which a certain phenomenon occurs in what might appear to be similar circumstance.
In the word of (Baryon, 1986) research methodology is the activity of investigating the phenomenon of human experience which leads to new knowledge using methods of enquiries which are accepted.
RESEARCH DESIGN
Research method adopted for this study is the simple survey method for collecting data.
This method was used because the population for the study as senior and management categories of staff in the company, who are to express their views in the concepts contained in the questionnaire. It also gave the respondent a chance of thinking out the answer at their own pace and convenience.
Since this study is intended to obtain reliable scientific data on the role of accounting concepts and convention in financial reporting of the Nigeria Breweries Plc Enugu, the various finance and accounting department were studied and that made the survey method most appropriate to the study.
POPULATION OF THE STUDY
The population which this study took was made up of 45 senior and management categories staff of the Nigeria Breweries Plc Enugu this being the overall population, a target sample was drawn from the population.
CHAPTER FOUR
PRESENTAION AND ANALYSIS OF DATA
This researcher topic “the role of accounting concept and convention in financial reporting “allowed for the use of questionnaire and personal interview for data collection. In analyzing the questionnaire all data co all the responses that have closer explanation to the study will be analyzed.
ANALYSIS AND INTERPRETATION OF DATA
The analysis of data is a vital part of the research work. It series as the core of research for the fact that it gives and sharp to raw data collected during the data collection stage.
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
SUMMARY OF FINDINGS
This project work was carried out to determine the role of accounting concepts and convention in financial reporting based on the extensive and intensive review of literature and careful presentation, analysis and interpretation of data collected through questionnaires and personal interview, the following facts were brought to light.
After detailed and comprehensive questionnaire analysis, it was discovered that the organization visited have accounting departments which are sectionalized. The companies prepare financial statements annually rather that quarterly and monthly.
It was also gathered that accounting concepts and convention are not new to the organization and they are being used by the organization without difficulties. The need of accounting concepts and conventions are relevant and serve as guide in the preparation of financial statements.
Accounting concepts and convention are seen by the organization as basis for the analysis of financial statement which make it more meaningful and reliable thus help in understanding how transaction are accounted for. It was also observed that there is consistency in the application of the accounting concepts and conventions.
The overall observations gathered centered on the gains of accounting concepts and convention as it provides the framework in constructing financial reports of the company. It also provides the basis for the preparation of financial statement that result in improved decisions made by the management of the Nigerian Breweries Plc Enugu.
CONCLUSION
For the foregoing, it is apparent that accounting concepts and conventions are the bedrock on which financial accounting rests. They ensure a high degree of standardization in financial reporting by narrowing down in limits within which the accounts can exercise judgment thus achieving objectivity in financial reporting.
When we recall that financial reports are user oriented, the conclusion is inescapable that these concepts and conventions are also of immense value of the various users in the interpretation of the reported figures and hence in the decision made.
Thus one can safely conclude that in the view of the centrality of accounting concepts and conventions in the reporting and decision making process, the financial roles of these concepts and conventions should be given the price of place in financial reporting.
RECOMMENDATIONS
In as much as information are the bedrock of any organization, accounting concepts and conventions should serve as information provider to help management in making vital economic decisions. The organization should follow the same method of accounting concepts and convention always and this could help in providing a framework in constructing financial report.
Accounting concepts and conventions should provide useful information for making economic decision and with this any organization that needs improvement in the economic decision making should make accounting concepts and conventions as a basis for financial report preparations.
Organizations should see accounting concepts and conventions as useful tools in understanding how transactions are accounted for. Organizations should make adequate provision so that financial report should be prepared annually and monthly.
It is very important to note that the use of accounting concepts and convention should act as a basis for the preparation of financial statements that result in improved decision making of the management.
BIBLIOGRAPHY
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