The Effect of Financial Reporting on the Management of a Business : Current School News

The Effect of Financial Reporting on the Management of a Business



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 report should 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 2 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 the state organization‟s of affairs which serves as important guide in deciding the extent to which they commit their fund.

It is the “communication of financial information useful for decision making such as investment, credit and other business decisions” such include, general. Purpose financial statement, balance sheet, equity report, 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 the profit 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.

1.3 Significance of the Study

The significance of this study is that, it shows the effect of financial reports in the operation of the organization.

This research is beneficial to internal and external users of financial report. The financial of this research will help managers determine the method of financial needs that will help in realization of their corporate objectives.

The study will help the management to know the experts (accountants) that will be able to prepare an annual report that will enable the management to make well-informed decision that will enhance profit maximization.

It will enable the external users to know whether the organization is 3 making profit in coder to invest more. Thi0s study will also serve us resource material for other researchers for further research in related areas


Bieman H. Jr and Diebin (1972) Financial Accounting: An Introduction. (2nd Edition New York Macmillan Publishing Co Inc.)

Black, Homer A. (1973) Accounting in Business Decisions 3rd Edition New Jersey: Prentice Hall Inc. Eagle wood Cliffs.

Montgomery A T (1978) Financial Accounting: An Introduction to its Preparation and use. Sydney Addison Wesley Publishing Co.

Mags W.B. John (1978) Accounting the Basis for Business Decision. New York, McGraw Hill Book Co. Harrison J.New Mary (1964) A direct Approach 3rd Edition Cheshine Longman. John, Barden (1973) Cost accounting and Financial Control System London Addison Wesley.

Glantier M. W E. (1977) Basis Accounting Practice London.Pitman. Gray J Kenneth (1977) Accounting and management Action 2nd Edition New York, McGraw Hill Book co.

Lynch R.M & Williamson (1976) Accounting for Management 2nd edition New York McGraw Hill Book Company.

Homgren C.T. (1978) Cost Accounting A managerial emphasis 2 nd edition New Jersey Prentice Hall Inc. Dearden John (1975) Financial Accounting and Reporting: A Contemporary Emphasis. New Jersey: Prentice Hall Inc.



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