CHAPTER ONE

INTRODUCTION

1.1      Background to the Study

Financial reporting covers those activities related to the preparation of certain reports which hark own as financial statement. These statement reports the financial status of a firm at a particular time, the firms activities and resulting profit or losses or during the most recent period and the flow of resources occurring within the firm during the same period.

The statement made by Glantier (2009) gives us an idea on the meaning of financial accounting. However this question arises, what are the effects of these financial accounting reports in the management of business enterprise? The answer poses a problem which the paper will seek to solve because not all business person understand the impact of financial reporting information on the management of their business, some manages business intuitively, others like defaulters who disobey road traffic, disobey the warning communicated by financial reporting information and end up in a ‘business accident’ (Rayan, 2007).

There are other sources of information which have impact on the management of business and the combination of those sources gives an information system in a complex nature “it must not be thought that accounting of any firm is the management control system, instead it is part of it! But accounting information is the only system through which both managers and external users get a picture of the organization as a total entity.

1.2      Statement of Problem

Finance is of fundamental importance to the business organization. The financial reporting system in most business enterprise does not portray fully the principle of accounting systems. The flows of information, the cost of collecting any information and the internal control procedures have some loop holes.

In reality, it would be impossible for the researcher to study all the organization. This study involves some typical financial reporting. It’s effect on the effective management of business enterprise. The researcher will carryout an empirical study and appraisal of a business financial reporting and see whether there is room for improvement to be made. It will therefore involve a review of the financial reporting and its related procedure.

1.3      Research Questions

Research question of the study have been formulated so that when answered the purpose of this research work is meant to achieve will be farfetched.

a.           Does the neglect of financial reporting information has a positive effect on the effective management of a business enterprise?

b.          Does the neglect of financial reporting information have a negative effect on the effective management of a business enterprise?

c.           What relevant is financial reporting to the business enterprise?

1.4      Objectives of the Study

The broad objective of this study is to ascertain financial reporting and its effect on effective management of a business enterprise. The sub-objectives are;

i.      To ascertain if financial reporting information has a positive impact on the effective management of a business enterprise.

ii.     To examine if the neglect of financial reporting information will have any effect on the business.

iii.    To ascertain the relevance of financial reporting to the business enterprise.

1.5      Statement of Hypothesis

Hypothesis One

Ho:  Financial reporting information has a negative impact on the effective management of a business enterprise.

HI:    Financial reporting information has a positive impact on the effective management of a business enterprise.

Hypothesis Two

Ho:  Neglect of financial reporting information do not affect business in Nigeria.

HI:    Neglect of financial reporting information do affect business in Nigeria.

Hypothesis three

HO:   Financial reporting has no relevance to the business enterprise in Nigeria.

HI:    Financial reporting has relevance to the business enterprise in Nigeria.

1.6      Significance of the Study

At the end of the research work, the following classes of people will find this work useful.

1.          To help managers of companies and any other firm enterprise know the asset base and liquidity of the enterprise.

2.          To help the government assess the tax base of the enterprise i.e. know what to tax the enterprise through their profit.

3.          Provide information about enterprise resources, claims to those resources and changes in the resources.

4.          To provide the information needed for actual and potential lender of money to business enterprise to know the profitability or profit margin and liabilities of the enterprise.

5.          Help the owners and shareholders ascertain the dividend, earnings per share and the gearing ratio of the enterprise.

1.7      Scope of the Study

A look into the document of the business and drawings heavily from such record is intended. Financial reporting is often regarded as “figure”. Such figures will be useful to both those who have knowledge of accounting and those who do not.

1.8      Limitations of Study

One of our main constraints in the course of this project work has actually been in the area of data collection and the authority to give out information.

The library and textbook could not provide sufficient information. I then had to check other libraries and information centers for data required.

Furthermore, this was not easy to coordinate due to large amount of work involved in combining class work with research.

1.9      Definition of Terms

a.           Effect: Is defined as “to cause something to come into use”, it can therefore be good or bad.

b.           Financial reporting: Is concerned with the recording and interpreting of transaction for a business enterprise or other economic unit and the periodic preparation of various report from such records is also a systematic gathering, summarizing and interpreting of business transaction in monetary terms such that it provides information which permits informed judgement by the users of the information.

c.           Management: This can be defined as the rational selection of causes of action to optimize the interrelationship of man, material and money for the survival and growth of the organization. It can be regarded as the process of getting things done through other people. A person who manages is called a manager.

d.          Business: This is a process whereby human, material and capital resources are combined to earn/satisfy human needs and wants. An entity which carries on such organized efforts is known as a business entity.

e.           Sole proprietorship: This is a business owned and operated by one person.