THE IMPACT OF THE MANAGEMENT ACCOUNTING ON ORGANIZATIONAL PROFIT MAXIMIZATION
ABSTRACT
The management accountant is identified as one of the key officers in the accounting department of any manufacturing company. He has the duty of providing the required professional information relate to achieving the organization goal. Some of his functions include planning and controlling activities formulation of strategy decision taking optimizing the use of resources etc. In his planning function he quantifies and interpreters, the effect of planned transaction and other economic event of the organization. The management accountant by virtue of his duties participants indirectly in the management process. This research work aims to bring to the knowledge of its user the role the management accountant plays in the achievement of the goal of every manufacturing outfit which is profit minimization. The work is organized in five chapters, chapter one is the introductory. Part which include the background of problems, significance, scope and limitation of the study. Chapter two is the literature review this is where the opinions of various author’s in related subjects are reviewed chapter three deals with the research design and methodology. This could be seems as a framework or a plan that is used in collecting analyzing the data for the study. It reveals the sources of the data the sample used and the method of investigation. In chapter four the data are being presented and analyzed the hypotheses stated were adequately tested and decision taken. Finally in the fifth chapter the finding of the research work is disclosed and recommendations and suggestions are give for the benefit of the user.
CHAPTER ONE
1.0 INTRODUCTION
1.1 Background Of The Study
Modern business organization operates in an environment that is considerably complex. Since the 1970’s managers have had to cope with rising interest rates, materials, shortage crises, inflation and environment regulations to mention a few. And the traditional method of analyzing problems and making decision have been found in capable of effectively handling this increasing complexities due to the change that exist within the environment it becomes an important characteristics of a good management to be able to evaluate the past changes to react to current changes and to be able to predict the future changes. In this direction management needs information continually which will help in the planning and controlling of the operation of the organization.
The need for accountability has given rise to cost accounting system, which provides information that is useful to management for internal reporting objectives. Due to the complexities in the system of most organization the system of cost accounting is equally becoming complex and resultantly a body of professional with special expertise in this is created. This body of professional is called the management accountants and the area of study is know as management accounting.
Lucey (2007) define management accounting as the process of identification, measuring, accumulating, analyzing, preparation, interpretation and communication of financial information used by management to plan events and control within an organization and to ensure proper use and accountability of its resources form the above definition it means that the management accountant has a range of function to carry out in organization.
According ICMA “management accounting is the presentation of accounting information in such a way as to assist management in the creation of policies and in the day-to- day operation of an undertaking”. To achieve this aim the management accountant is interested in the past, the present, and the future. Useful information can be extracted form past result which together with report of current performance can point the way to immediate management action. In the same vein forecasting the future enable the management to evaluate current result more readily and may also reveal areas of business which requires corrective actions.
According to David (2005) defined management accounting as “The application of professional knowledge and skill in the preparation and presentation of accounting information in a way to assist the management in the formulation of polices and in the planning and control of operating of the undertaking it is designed to provide information for internal problem solving. The management accounting system of planning and control is designed to spur-up and help chief executive search for and selecting short run and long run goals and implementing plans apprising performance and pin- pointing deviations from plan.
To be able to do all these the management accountant must posses some knowledge of account. He must have a through understanding of the operations of the organization in which these system are implemented and the appropriate technology to apply in each case for the provision of management information. Information provision depends solely on the type of business. It is obvious that the management of a manufacturing company will need information that will enable them consider the factor affecting cost of production, cost of classification, cost reduction, product pricing market shares of the products choice of the product lines diversification and investment. However a trading company needs information that will concentrate decision on customers demands advertisement and product branding.
The management accountant uses data from the financial and cost accounting system to perform his task. He conducts special investigations and uses accounting and other appropriate techniques from statistic and operation research. He considers the human element in all activities so that at all times he will be provided with information which is relevant for carrying out his work effectively so as to maintain his value or even enhance it. In addition he interprets data and communicate same to the management.
The inability of the management accountant to perform his duties would result in shortage of in information for long and short run planning system and the necessary control to be made the basic objective behind the continuous existence of business organization is the need to increase its wealth through profit making. It actually ranks lightest among the objectives of business organizations and the management needs accurate and timely information for decision making in order to achieve this noble objective.
Weldi (2006) opines that profit maximization can only come about through an efficient and effective management process and Nigeria being a developing country it is clear that the cost of running a business is increasing at a very high rate. Many manufacturing companies in Nigeria has this as a problem them struggle to maintain reasonable amount of earning in a situation where costs are rising there by making profit margin more and more difficult to sustain mean while the Nigeria manufacturing companies as reported by the manufacturing association of Nigeria (MAN) in its 1997 economic review are faced with escalating costs of production arising from the adoption of macro-economic policies which are inflationary in nature. This trend reinforces the imperativeness of the application of sound management accounting technique in the manufacturing companies.
According to Adewumi (2009) posits that management practice is yet to have its rightful place in Nigerian manufacturing companies. The implication is that the principle of management is rarely applied in most manufacturing firms in Nigeria. A careful study of Nigeria manufacturing companies shows as decrease in productivity. This is as a result of gross incompetence and lack of motivation on the part of the top management and their subordinates consequently there has with the general planning and control of the firms resources thus profit maximization is firmly rooted in the effectiveness of the planning and control of the firms resources. Generally speaking the role of a management accountant is based on his technical knowledge experience and judgment in contributing to the success of the manufacturing industry.
1.2 Statement Of Problem
There has been a considerable lack of appreciation by many as to the intrinsic value of management accountants. Manufactures like other business executions have had to appreciate where such value have stimulated the development of management accounting as an information tools in business organization. Such events includes the increased competition in business and rapidly developing technology. The resultant changes that have emerged have intensified managers need for information that is continually for financial information beyond that contained in the traditional income statement and balance sheet.
Over the last three decades product have become obsolete as an alarming rate. The advent of scientific breakthrough have resulted in the development of many new basic components such as the transistor and electronic “chip” which have literally revolutionalized many industries and their products. Scientific researcher reports that this revolution is only the beginning. Drastic changes have taken place in production method over the last three decades the term ‘Automation’ has crept in and today many product are produced ritually untouched by human hands. For example oil refinery operations are controlled by massive computer networks machine tools are electronically controlled and there are even some entire manufacturing plan where workmen do little more than monitoring instrument panel modes of management and method of decision making have been affected by the development of new and powerful quantitative tools such as linear programming, probability, analysis and decision theory. These new tools which have come to be from the mathematical and statistical sciences are becoming indispensable in day- to- day- decision making.
The problem of increase cost of production have forced the companies involved to make many adjustment which include modification of product changes in the methods of production and even marketing and the discovering of new sources of financing production some company go as far as reducing the quality of raw material and end up producing less quality producing which cannot help matters in the long run.
The economic impact of these and other factors have been far reacting as manger of companies are now competing and cost of production escalating these has in effect expanded the role of management accountant as an information tools over the years. There is also the problem of poor inventory management which leads to overstocking there by tying down the company’s working capital. Another kind problem that is facing some companies is the installation of improper plans to reduce cost of production so as to maximize profit e.g. making use of low quality raw material.
1.3 Objective of the study
The aim of this research work is to examine the impact of the management accounting on organizational profit maximization with particular reference to Emenite limited Enugu. The general objectives of this study includes the following;
1. To examine the role of management accountant in the development of Emenite limited Enugu.
2. To evaluate the impact of management accountant in the profit maximization an Organisation.
3. To determine the various challenges militating against the role of management accountant. And also proffer possible solutions to the problems identified.
1.4 Research questions
1. What are the role of management accountant in the development of Emenite limited Enugu?
2. What are the impacts of management accountant in the profit maximization an Organisation?
3. What are the various challenges militating against the role of management accountant?
1.5 Research Hypotheses
Ho: Management accountant do not play any role in the development of Emenite limited Enugu.
H1: Management accountant plays significant role in the development of Emenite limited Enugu.
Ho: Management accountant does not have any impact in the profit maximization an Organisation.
H2: Management accountant has significant impact in the profit maximization an Organisation.
Ho: There are no challenges militating against the role of management accountant in Emenite Limited Enugu.
H3: There are so many challenges militating against the role of management accountant in Emenite Limited Enugu.
