Accounting Systems and Financial Controls of Corporate Organisations (A Case study of Risonpalm Limited and Rivoc Nigeria Limited Port Harcourt Rivers State)
Accounting Systems and Financial Controls of Corporate Organisations (A Case study of Risonpalm Limited and Rivoc Nigeria Limited Port Harcourt Rivers State)
This study explored the basis for a uniform accounting system for companies in the manufacturing Industry, a sample size of two companies were selected for the study.
The purpose of the study which is to carry out a research to find the similarity of disparity of accounting system adopted by manufacturing industries situated in Port – Harcourt and thereafter verify the extent to which companies prepare their financial statement in accordance with the professional and statutory guidelines.
Chapter one (the Introduction) will explain the meaning, back ground of the study, state the purpose of the study, its significance, scope as well as definition of terms with respect to accounting system and financial control.
Chapter two will deal with the literature review. Explanation of selected accounting systems will be shown views of several writers on accounting system were extensively explored. Accounting, according to these writers is said to be a field of study needed to keep track or records of business activities and other records to provide useful financial information for planning and controlling business organisations.
Coming to chapter three, the technique | tools in collection of data were questionnaire and interviews. Statistical test used is frequency analysis and expressing the frequency in percentages. A percentage greater than 50% suggests that the situation is an established and common feature while anything less proves contrary.
Chapter four will show the analysis the data collected. The presentation and interpretation of data will be shown as well.
Finally in chapter five, the summary of the findings will be stated, the conclusion or be will inform users of the usefulness or benefits of good accounting system in evaluating performance of corporate organization and recommendation that a uniform accounting need to designed for companies in the same industry.
Chapter one
1.0 Introduction 1
Chapter Two
2.1 Introduction 19
Chapter Three
3.1 Introduction 54
3.7 Procedure for Data Analysis 60
Chapter Four
4.0 Data Presentation and Analysis 62
Chapter five
5.0 Summary of findings, conclusion and Recommendation
Reference 91
BIBLIOGRAPHY 91
CHAPTER ONE
Accounting is defined as a systematic method of presenting, evaluating, interpreting, analyzing and measuring the performance of assets employed in a business transactions.
Accounting is often characterized as the “language of business” which is used in recording and interpreting basic economic data for individual companies both private and public, government and other entities. Impeccable or sound decisions, based on reliable information are essential for efficient distribution and use of the nations scarce resources. Accounting therefore plays vital role in our economic and social system.
Accounting according to Brady (1970), is the body of knowledge and functions concerned with systematic, originating, authenticating, recording classifying of processing, summarizing, analyzing, interpreting and supplying of dependable and significant information covering transactions and events which are in part, at least of a financial character, required for the management and operation of an entity and for the reports that have to be submitted thereon, to meet fiduciary and other responsibilities.
Accounting information include financial statements or financial information such as Balance sheet, statement of income or profit and loss, for use by investors, creditors, government agencies, and other interested external person. It also include budgets and special planning and control reports for internal and private use by the entity concerned.
However, the use of accounting information is not limited to business transaction. It is rather an integral part of the social system. The social system is patterned according to the interaction of its members. This interaction is governed by structured symbols and expectations which the members share. Accounting therefore supplies an essential subset of the structured symbols that make the social organization to function and survive. In the economic area of the social system the structured symbols may include negotiations resulting in investments, granting of loans or credits or other similar transactions.
As adumbrated above, that accounting information is not narrowed to corporate organisations, it also cuts across other areas like the political subsystem and other social organization. Consequently Gaibling(1974) suggested that “Accounting theory is concerned with the semantics of welfare”
Whether we speak of individual or whole society welfare is culture bound. Therefore accounting system to be adopted by any organization in influenced by the Cultural valve and aspirations of such group and since every event in computation of accounting information great and clearly noticeable while the impact of other events are not so noticeable and therefore, not significant it is the variance in objectives among organization in which corporate organization are subsets that led our quest for understanding of accounting system inherent in corporate organisations.
In accounting history, those events that have had significant impact on accounting though and practice may be grouped into four classes:
a development of new features of the economy.
b development of new forms of business transactions.
c Perverse behaviours of business.
d Recognition of new assets and liabilities
Accounting systems emerged on the business on the scene for two or more reasons. The challenge of new problems and opportunities in the economy or other sectors of the Society. For example, the opportunity for profile through leasing arrangement was much limited because of inadequate knowledge of the advantages of employing this method of financing the acquisition of fixed assets. Leasing as a new opportunity for project maximization has now become significant. Thus, the issue of accounting for leasing has become interesting and significant, Calling for the action of the accounting establishment in Nigeria in providing guidance to the professions. The other reason for the emergence of new transaction form in accounting system is to provide efficient means of meeting currently existing problems and opportunities. For instance defined benefit pension schemes are relatively new in Nigeria. The older system [Pension Scheme] were contribution based. The response of the Nigeria accounting statements to the emergence of the defined benefits plans gives considerable attention to the accounting for such plans in both the sponsoring company’s financial statements and in the books of the trustee managing the funds, the pension scheme.
Another major development necessitating the evolution of
accounting system is inflation. It is acknowledged that at high rates of inflation which Nigeria is currently experiencing accounts prepared under the historical cost convention fail to maintain real Capital and thus may not provide sound decision basis which is a Sine-quanon for effective and efficient accounting System. In such situation it has been recognized that a cost convention that admits price adjustment of some sort would be desirable.
Individual Nigeria accountants have argued in the past the desirability of price adjusted accounting yet no official steps were given on the matter until enactment of the Companies and Allied matters Decree[CAMD] 1990.
Although mandatory, it does admit its relevance in Nigeria by making it a recognized alternative to historical cost accounting,. The admissibility of the current cost alternative of valuation rules represent an evolution in the accounting history to meet a change in the feature of Nigeria accounting systems.
As organizations differ in goal targets, product processing and or operational systems, so the accounting system is bound to differ in order to be realistic and ensure uniformity in the accounting system. It is therefore the aim of this work to explore the accounting systems and financial Control of Risonpalm Limited and Rivers State Vegetable Oil Company [RIVOC].
Accounting system therefore makes it possible for the accounting data to be collected, classified for immediate and future use. Accounting to Hongreen [1982] accounting system is a set of records, procedures and equipment that routinely deals with the events affecting the financial performance and position of the entity. Accounting system is considered generally to embrace the entire network of information flow in an organization to facilitate the decision process since decision makers rely on accounting information supplied by the accounting systems of organizations. The soundness of such decisions are to a great extent dependable on the accounting systems evolved by the organization.
Effective and efficient accounting system should ensure availability of data required by management in Conducting the affairs of an enterprise and in reporting to owners, creditors, government etc. Consequently, a properly designed accounting system must provide for.
i Efficient accumulation, recording and reporting of data
ii Measurement of all phases of a firm’s operations.
iii Timely report and dependable financial statements prepared in accordance with the professional requirement.
Beyond these fundamental requirements, there are an infinite number of variations in the details of accounting systems. Each system is designed to fit the nature of the organization, volume of transactions of various types, the number and the capacities of the personnel of the organizational structure.
Accounting practices no matter the organization involved are performed within the framework of legislature and professional guidelines, these include:
a Section 14o(1) of the Companies act of 1968
b The international Accounting standard Committee which is responsible
Conformity with the General Accepted Accounting Practices [GAAP] and statements of standard Accounting Practices [SSAP]
Conformity with the General Accepted Accounting Practices [GAAP] and statements of standard Accounting Practices [SSAP]
c The Nigeria stock Exchange Commission [NSEC]
d Auditing standards
e The Nigeria Accounting Standard Board [NASB]
It can be concluded therefore, that the quality of accounting information depend to a large extent on the degree of Compliance of the organisation’s accounting system with the standard set by the statutory and professional bodies in the preparation of its financial statements. It is therefore imperative for the researcher to evaluate the extent of Compliance of the processing companies at Port – Harcourt with the standards of these statutory and professional bodies.
1.1 Background of the Study
One school of though view accounting system as entirely concerned with the processes recording business transaction or economic events of organizations. These views are consistent with the following accounting mechanisms:
a The traditional double entry book – keeping system.
b The three-dimensional integrated system as proposed by Chakrovority
(1984, B.24). He review the existing accounting systems and
classifies them into three on the basis of double entry as follows :
i The one dimensional financial accounting system
ii The two dimensional integrated accounting system of finance and cost
data
iii The non-integrated accounting system of finance and cost data.
The second school of though views accounting system as an integrated information system. Meigs and Meigs (1979,P.175) sees accounting system to include accounting forms, records, flow charts, instruction manual, computer programs and reports suitable to the particular need of the business organization.
The information system approach to the concept of accounting system is generally accepted. This includes all functions of accounting working together to achieve a defined objective. The substance of accounting systems consists of financial data, non – economic data and other sections to execute accounting functions, example Computer sections, etc. The methodology consists of the manual and technological means of measuring and Communicating accounting information including the double entry mechanism reporting forms, charts of accounts etc.
From the foregoing, the theoretical and empirical views, the Concept of accounting system has been outlined but no generalised conclusion about the nature and operation of accounting systems applicable to any industry were made which is of great concern to the researcher.
1.2 Statement of the Problem
For Corporate organizations to be reliable in economic decisions there must be a high quality accounting information which depends on the degree of Compliance with the accounting standards and policies, the need for high quality accounting information calls for the establishment and enactment of accounting and auditing standards prescribed for the preparation of financial statements. However, where financial statements are prepared from different but acceptable accounting basis, uniform standards may not be achieved.
The statements of Nigeria Accounting standards Board [NASB] recognizes the important matters under which different bases may be applicable and that where more than one accounting base is acceptable, in financial Statements. The method used must be fully disclosed and explained, if financial Statements are prepared on different but acceptable accounting bases and policies there may arise!
a The problem of incomparability of the financial statements of
different periods.
b An unpleasant situation where financial statements with the same cost
data but prepared by different accountants will produce different
results of reported profits or losses.
c A tendency among accountants to worry on the degree of subjectivity in the selection of accounting bases and policies in their respective establishments. There is therefore a strong need for uniformity in accounting practices although the complexity and diversity of business may render the uniformity accounting base impracticable.
Therefore, it can be stressed that the need for accountability, the minimization of losses arising from pilferages, wastes, fraud and errors, efficient operation in order to survive the world of today which is highly competitive and the increased complexity have made at imperative to adopt a sound and effective accounting system to ensure judicious movement and control in terms of general administration and finance among all categories of staff.
1.3 Purpose of the study
The purpose of this research work is to carry out a study on the accounting system and financial control of production companies with Risonpalm and Rivoc as a case study, with a view to determining the extent to which the system in operation conforms with the accounting standards recognized in the profession and also to some extent ascertain the strength and weakness of the operating systems.
The extension of the study on financial control is to understand how top management regulate assets movement in and out of the Company.
As already stated from the preliminary pages that financial statements prepared from different but acceptable accounting bases often in incomparability, although it is widely acknowledged that no single accounting system can be followed by all organizations even in the same industry. This assertion has not been statistically tested and empirically verified. The focus of this study therefore is to investigate.
a The similarity or otherwise of the nature and operation of the
accounting systems of selected production companies in Port-
Harcourt
b The similarity in the procedure of internal control in the
accounting systems of these companies
C The extent these organizations accounting systems comply with
the standards prescribed by the statutory and professional
bodies in the preparation of its financial statements.
For the [purpose of this investigation, the following questions are relevant and imperative:
1.5 Definition of Terms
a Accounting Bases: These are methods which have been developed for expressing the fundamental accounting concepts to specific financial transaction and items. There are often more than one recognized accounting basis dealing with particular items. Fie example different but equally acceptable methods of depreciation.
b Accounting Policies: These are specific accounting base considered by the entity or business enterprise to be most appropriate to the circumstances and adopted by the business concern to the purpose of preparing their financial accounts.
c Internal Control: These are the procedures adopted by management to control the operation of the organization. Internal control as used in this work is classified into administrative and accounting Controls. Administrative control consist of procedures and records that assist management in achieving target objectives while accounting control consists of procedures records that are primarily conceived with the reliability of financial reports and safe guarding of assets.
d Entity: Entity is best though of as a set of resources or assets owned by one or more person for business purposes.
Accounting systems and control organization differs, there is an increasing tension among accountants as to which system to adopt in their organization especially where financial statements are based on different accounting practices. It is hoped the results of the study, will among other things
a provide information on the nature and operation of the accounting systems of organizations under study, this information will identify loopholes and enable the Companies adopt meaningful reforms.
b As industrialization awareness is being preached as a break through to Nigeria economic problem, this study will provide useful information at a glance for designing the accounting system of new incorporated Companies in the production industry.
c Contribute significantly towards the uniformity of accounting reports at least by Companies operating the same industry, and
d Provide a basis for further research on the subject of accounting systems by increasing the number of organizations to be studied which will invariably contribute tremendously to the existing knowledge in the field of accounting.
1.7 Scope of the Study
Only two production Companies at Port Harcourt were chosen for this study, the restriction to the state rather than other States was entirely for the convenience of researcher. Emphasis on the study portrayed the nature and operations of the accounting systems and the internal Control procedures of the organizations.
The accounting systems include inter – related sections that make up the entire accounting unit. These include management accounting subsystems, cost accounting subsystems, Computer /decision support and internal audit department. The operation of these sections are defined to achieve a unified production of dependable financial information of the organization.
Elongated bureaucratic processes inherent in these organizations constituted major problems encountered during the study, the effect of the longish bureaucratic process delayed access to information.
Another fundamental problem encountered in the course of the present study was inadequate fund. The researcher studied under “Want and penury”, and same affected the sample size.
Again, the choice of organizations of Port Harcourt was for the convenience of the researcher. The researcher could not sponsor tripes to outside States.
Further, a sample size greater than one may perhaps yield better and dependable results.
Also, the non challant attitudes of most officers cannot be overemphasized, always saying “may friend, you see I don’t have chance now, please bear with me and try another day”
Finally the “YES” or “NO” method of questionnaire has its own limitations. Responses may be influenced by the temperament of the respondent.
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PROPOSAL
This study explored the basis for a uniform accounting system for companies in the manufacturing Industry, a sample size of two companies were selected for the study.
The purpose of the study which is to carry out a research to find the similarity of disparity of accounting system adopted by manufacturing industries situated in Port – Harcourt and thereafter verify the extent to which companies prepare their financial statement in accordance with the professional and statutory guidelines.
Chapter one (the Introduction) will explain the meaning, back ground of the study, state the purpose of the study, its significance, scope as well as definition of terms with respect to accounting system and financial control.
Chapter two will deal with the literature review. Explanation of selected accounting systems will be shown views of several writers on accounting system were extensively explored. Accounting, according to these writers is said to be a field of study needed to keep track or records of business activities and other records to provide useful financial information for planning and controlling business organisations.
Coming to chapter three, the technique | tools in collection of data were questionnaire and interviews. Statistical test used is frequency analysis and expressing the frequency in percentages. A percentage greater than 50% suggests that the situation is an established and common feature while anything less proves contrary.
Chapter four will show the analysis the data collected. The presentation and interpretation of data will be shown as well.
Finally in chapter five, the summary of the findings will be stated, the conclusion or be will inform users of the usefulness or benefits of good accounting system in evaluating performance of corporate organization and recommendation that a uniform accounting need to designed for companies in the same industry.
Chapter one
1.0 Introduction 1
- Background of the study 8
- Statement of the problem 10
- Purpose of the study 12
- Research Questions 13
- Definition of terms 14
- Significance of the study 16
- Scope of the study 17
- Limitations of the study 18
Chapter Two
- Review of Related Literature 19
2.1 Introduction 19
- Theoretical framework of Accounting systems 24
- The Need for an Accounting system 31
- Designing of Accounting 33
- Empirical Research on Accounting 38
- Financial Controls 45
- Means of Achieving Financial Controls 49
Chapter Three
- Research Design and Methodology. 54
3.1 Introduction 54
- Research Design 54
- Population 55
- Sampling and Technique 56
- Sources of Data 57
- Instrumental of Data Collection 57
- Questionnaire Design 58
- Personal Interviews 59
3.7 Procedure for Data Analysis 60
Chapter Four
4.0 Data Presentation and Analysis 62
- Introduction 62
- Tabulation of frequency results 62
- Presentation of data 65
- Analysis of data 77
- Interpretation of data 77
Chapter five
5.0 Summary of findings, conclusion and Recommendation
- Summary of Findings 80
- Conclusions 81
- Recommendations 83
Reference 91
BIBLIOGRAPHY 91
CHAPTER ONE
- Introduction
Accounting is defined as a systematic method of presenting, evaluating, interpreting, analyzing and measuring the performance of assets employed in a business transactions.
Accounting is often characterized as the “language of business” which is used in recording and interpreting basic economic data for individual companies both private and public, government and other entities. Impeccable or sound decisions, based on reliable information are essential for efficient distribution and use of the nations scarce resources. Accounting therefore plays vital role in our economic and social system.
Accounting according to Brady (1970), is the body of knowledge and functions concerned with systematic, originating, authenticating, recording classifying of processing, summarizing, analyzing, interpreting and supplying of dependable and significant information covering transactions and events which are in part, at least of a financial character, required for the management and operation of an entity and for the reports that have to be submitted thereon, to meet fiduciary and other responsibilities.
Accounting information include financial statements or financial information such as Balance sheet, statement of income or profit and loss, for use by investors, creditors, government agencies, and other interested external person. It also include budgets and special planning and control reports for internal and private use by the entity concerned.
However, the use of accounting information is not limited to business transaction. It is rather an integral part of the social system. The social system is patterned according to the interaction of its members. This interaction is governed by structured symbols and expectations which the members share. Accounting therefore supplies an essential subset of the structured symbols that make the social organization to function and survive. In the economic area of the social system the structured symbols may include negotiations resulting in investments, granting of loans or credits or other similar transactions.
As adumbrated above, that accounting information is not narrowed to corporate organisations, it also cuts across other areas like the political subsystem and other social organization. Consequently Gaibling(1974) suggested that “Accounting theory is concerned with the semantics of welfare”
Whether we speak of individual or whole society welfare is culture bound. Therefore accounting system to be adopted by any organization in influenced by the Cultural valve and aspirations of such group and since every event in computation of accounting information great and clearly noticeable while the impact of other events are not so noticeable and therefore, not significant it is the variance in objectives among organization in which corporate organization are subsets that led our quest for understanding of accounting system inherent in corporate organisations.
In accounting history, those events that have had significant impact on accounting though and practice may be grouped into four classes:
a development of new features of the economy.
b development of new forms of business transactions.
c Perverse behaviours of business.
d Recognition of new assets and liabilities
Accounting systems emerged on the business on the scene for two or more reasons. The challenge of new problems and opportunities in the economy or other sectors of the Society. For example, the opportunity for profile through leasing arrangement was much limited because of inadequate knowledge of the advantages of employing this method of financing the acquisition of fixed assets. Leasing as a new opportunity for project maximization has now become significant. Thus, the issue of accounting for leasing has become interesting and significant, Calling for the action of the accounting establishment in Nigeria in providing guidance to the professions. The other reason for the emergence of new transaction form in accounting system is to provide efficient means of meeting currently existing problems and opportunities. For instance defined benefit pension schemes are relatively new in Nigeria. The older system [Pension Scheme] were contribution based. The response of the Nigeria accounting statements to the emergence of the defined benefits plans gives considerable attention to the accounting for such plans in both the sponsoring company’s financial statements and in the books of the trustee managing the funds, the pension scheme.
Another major development necessitating the evolution of
accounting system is inflation. It is acknowledged that at high rates of inflation which Nigeria is currently experiencing accounts prepared under the historical cost convention fail to maintain real Capital and thus may not provide sound decision basis which is a Sine-quanon for effective and efficient accounting System. In such situation it has been recognized that a cost convention that admits price adjustment of some sort would be desirable.
Individual Nigeria accountants have argued in the past the desirability of price adjusted accounting yet no official steps were given on the matter until enactment of the Companies and Allied matters Decree[CAMD] 1990.
Although mandatory, it does admit its relevance in Nigeria by making it a recognized alternative to historical cost accounting,. The admissibility of the current cost alternative of valuation rules represent an evolution in the accounting history to meet a change in the feature of Nigeria accounting systems.
As organizations differ in goal targets, product processing and or operational systems, so the accounting system is bound to differ in order to be realistic and ensure uniformity in the accounting system. It is therefore the aim of this work to explore the accounting systems and financial Control of Risonpalm Limited and Rivers State Vegetable Oil Company [RIVOC].
Accounting system therefore makes it possible for the accounting data to be collected, classified for immediate and future use. Accounting to Hongreen [1982] accounting system is a set of records, procedures and equipment that routinely deals with the events affecting the financial performance and position of the entity. Accounting system is considered generally to embrace the entire network of information flow in an organization to facilitate the decision process since decision makers rely on accounting information supplied by the accounting systems of organizations. The soundness of such decisions are to a great extent dependable on the accounting systems evolved by the organization.
Effective and efficient accounting system should ensure availability of data required by management in Conducting the affairs of an enterprise and in reporting to owners, creditors, government etc. Consequently, a properly designed accounting system must provide for.
i Efficient accumulation, recording and reporting of data
ii Measurement of all phases of a firm’s operations.
iii Timely report and dependable financial statements prepared in accordance with the professional requirement.
Beyond these fundamental requirements, there are an infinite number of variations in the details of accounting systems. Each system is designed to fit the nature of the organization, volume of transactions of various types, the number and the capacities of the personnel of the organizational structure.
Accounting practices no matter the organization involved are performed within the framework of legislature and professional guidelines, these include:
a Section 14o(1) of the Companies act of 1968
b The international Accounting standard Committee which is responsible
Conformity with the General Accepted Accounting Practices [GAAP] and statements of standard Accounting Practices [SSAP]
Conformity with the General Accepted Accounting Practices [GAAP] and statements of standard Accounting Practices [SSAP]
c The Nigeria stock Exchange Commission [NSEC]
d Auditing standards
e The Nigeria Accounting Standard Board [NASB]
It can be concluded therefore, that the quality of accounting information depend to a large extent on the degree of Compliance of the organisation’s accounting system with the standard set by the statutory and professional bodies in the preparation of its financial statements. It is therefore imperative for the researcher to evaluate the extent of Compliance of the processing companies at Port – Harcourt with the standards of these statutory and professional bodies.
1.1 Background of the Study
One school of though view accounting system as entirely concerned with the processes recording business transaction or economic events of organizations. These views are consistent with the following accounting mechanisms:
a The traditional double entry book – keeping system.
b The three-dimensional integrated system as proposed by Chakrovority
(1984, B.24). He review the existing accounting systems and
classifies them into three on the basis of double entry as follows :
i The one dimensional financial accounting system
ii The two dimensional integrated accounting system of finance and cost
data
iii The non-integrated accounting system of finance and cost data.
The second school of though views accounting system as an integrated information system. Meigs and Meigs (1979,P.175) sees accounting system to include accounting forms, records, flow charts, instruction manual, computer programs and reports suitable to the particular need of the business organization.
The information system approach to the concept of accounting system is generally accepted. This includes all functions of accounting working together to achieve a defined objective. The substance of accounting systems consists of financial data, non – economic data and other sections to execute accounting functions, example Computer sections, etc. The methodology consists of the manual and technological means of measuring and Communicating accounting information including the double entry mechanism reporting forms, charts of accounts etc.
From the foregoing, the theoretical and empirical views, the Concept of accounting system has been outlined but no generalised conclusion about the nature and operation of accounting systems applicable to any industry were made which is of great concern to the researcher.
1.2 Statement of the Problem
For Corporate organizations to be reliable in economic decisions there must be a high quality accounting information which depends on the degree of Compliance with the accounting standards and policies, the need for high quality accounting information calls for the establishment and enactment of accounting and auditing standards prescribed for the preparation of financial statements. However, where financial statements are prepared from different but acceptable accounting basis, uniform standards may not be achieved.
The statements of Nigeria Accounting standards Board [NASB] recognizes the important matters under which different bases may be applicable and that where more than one accounting base is acceptable, in financial Statements. The method used must be fully disclosed and explained, if financial Statements are prepared on different but acceptable accounting bases and policies there may arise!
a The problem of incomparability of the financial statements of
different periods.
b An unpleasant situation where financial statements with the same cost
data but prepared by different accountants will produce different
results of reported profits or losses.
c A tendency among accountants to worry on the degree of subjectivity in the selection of accounting bases and policies in their respective establishments. There is therefore a strong need for uniformity in accounting practices although the complexity and diversity of business may render the uniformity accounting base impracticable.
Therefore, it can be stressed that the need for accountability, the minimization of losses arising from pilferages, wastes, fraud and errors, efficient operation in order to survive the world of today which is highly competitive and the increased complexity have made at imperative to adopt a sound and effective accounting system to ensure judicious movement and control in terms of general administration and finance among all categories of staff.
1.3 Purpose of the study
The purpose of this research work is to carry out a study on the accounting system and financial control of production companies with Risonpalm and Rivoc as a case study, with a view to determining the extent to which the system in operation conforms with the accounting standards recognized in the profession and also to some extent ascertain the strength and weakness of the operating systems.
The extension of the study on financial control is to understand how top management regulate assets movement in and out of the Company.
As already stated from the preliminary pages that financial statements prepared from different but acceptable accounting bases often in incomparability, although it is widely acknowledged that no single accounting system can be followed by all organizations even in the same industry. This assertion has not been statistically tested and empirically verified. The focus of this study therefore is to investigate.
a The similarity or otherwise of the nature and operation of the
accounting systems of selected production companies in Port-
Harcourt
b The similarity in the procedure of internal control in the
accounting systems of these companies
C The extent these organizations accounting systems comply with
the standards prescribed by the statutory and professional
bodies in the preparation of its financial statements.
- Research Question
For the [purpose of this investigation, the following questions are relevant and imperative:
- To what extent does corporate organizations, the following in
Port- Harcourt comply with the guidelines set by the statutory bodies in the preparation of financial statements ? - Do corporate organizations in the state operate similar accounting systems ?
- Do such organizations operate similar procedures in financial control of the Company ?
- Is there any significant disparity in the financial control procedure between the two Companies ?
- Do ogranisations maintain similar or different accounting forms ?
- Do organizations have different processing technique ?
- Does financial control procedure conform to the Standard auditing principles ?
1.5 Definition of Terms
a Accounting Bases: These are methods which have been developed for expressing the fundamental accounting concepts to specific financial transaction and items. There are often more than one recognized accounting basis dealing with particular items. Fie example different but equally acceptable methods of depreciation.
b Accounting Policies: These are specific accounting base considered by the entity or business enterprise to be most appropriate to the circumstances and adopted by the business concern to the purpose of preparing their financial accounts.
c Internal Control: These are the procedures adopted by management to control the operation of the organization. Internal control as used in this work is classified into administrative and accounting Controls. Administrative control consist of procedures and records that assist management in achieving target objectives while accounting control consists of procedures records that are primarily conceived with the reliability of financial reports and safe guarding of assets.
d Entity: Entity is best though of as a set of resources or assets owned by one or more person for business purposes.
- Significance of the Study
Accounting systems and control organization differs, there is an increasing tension among accountants as to which system to adopt in their organization especially where financial statements are based on different accounting practices. It is hoped the results of the study, will among other things
a provide information on the nature and operation of the accounting systems of organizations under study, this information will identify loopholes and enable the Companies adopt meaningful reforms.
b As industrialization awareness is being preached as a break through to Nigeria economic problem, this study will provide useful information at a glance for designing the accounting system of new incorporated Companies in the production industry.
c Contribute significantly towards the uniformity of accounting reports at least by Companies operating the same industry, and
d Provide a basis for further research on the subject of accounting systems by increasing the number of organizations to be studied which will invariably contribute tremendously to the existing knowledge in the field of accounting.
1.7 Scope of the Study
Only two production Companies at Port Harcourt were chosen for this study, the restriction to the state rather than other States was entirely for the convenience of researcher. Emphasis on the study portrayed the nature and operations of the accounting systems and the internal Control procedures of the organizations.
The accounting systems include inter – related sections that make up the entire accounting unit. These include management accounting subsystems, cost accounting subsystems, Computer /decision support and internal audit department. The operation of these sections are defined to achieve a unified production of dependable financial information of the organization.
- Limitations of the Study
Elongated bureaucratic processes inherent in these organizations constituted major problems encountered during the study, the effect of the longish bureaucratic process delayed access to information.
Another fundamental problem encountered in the course of the present study was inadequate fund. The researcher studied under “Want and penury”, and same affected the sample size.
Again, the choice of organizations of Port Harcourt was for the convenience of the researcher. The researcher could not sponsor tripes to outside States.
Further, a sample size greater than one may perhaps yield better and dependable results.
Also, the non challant attitudes of most officers cannot be overemphasized, always saying “may friend, you see I don’t have chance now, please bear with me and try another day”
Finally the “YES” or “NO” method of questionnaire has its own limitations. Responses may be influenced by the temperament of the respondent.
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