ACCOUNTING PROCEDURE IN A HOTEL (A CASE STUDY AT ZODIAC LTD)

CHAPTER ONE

1.0     INTRODUCTION

Accounting is an information system that is used for communication purposes and for the purpose of aiding decision making.

According to Bello (2009), accounting is believed to be an information infrastructure used by economic units to achieve various economic decision. Corporate organizations use accounting to communicate to all stakeholders about their operation performance and position at a particular time period. The process through which companies communicate to the public about their operation is called financial reporting. Corporate financial reporting is the medium through which companies communication to the external society about their operational performance in term of profitability, efficiency and responsibility (Abubakar, 2010, Nzekwe, 2000) financial reporting of a corporate entity constitutes a combination of qualitative and quantitative financial reports, which are referred to as a firm’s bill of health. Various stakeholders their decisions relative to a firm’s performance and position based on the accounting information supplied by if in its annual financial reports accounts.

Financial reporting by companies is effected via the preparation and publication of financial statements. These financial statements are required to exhibit certain degree of quality in term of their information contents. Mines & Wahlen (2006) and Belkaoui (2002) opined that accounting information contained in the financial reports should possess certain qualities as relevance verifiability, understanding, neutrality, timeliness, comparability, and completeness. When the financial reports disclose quality accounting information according to Benston (2007), the decision of the users (investors, management, government, employees, creditors, analysis) of the report could as well be qualitative are informed. The users of the financial reports use the reports frequently in passing judgements on the viability of a company. According to Ghofor & Saraswat; (2008), investors in many cases are too dependent on the quality of information disclose in the financial reports of companies has been an area of debate by both accounting theoreticians and those in practice (Van Beest, Braim & Boelens, 2009).

New Economy firms are defined as telecommunication, media and technology firms (TMT).

A large part of the assets in these firms are intangible since they are rely strongly  on intellectual capital, research and develop, and other intangible assets (Lopes, 2001). In many cases TMT firms majors assets is the human capital and the intellectual ability of their work force. Although all firms need strong and competitive human resources to succeed, the success of TMT firms largely depends on the quality of human resource. The characteristics that differentiate successful organization from their less successful counterparts in almost every industry is the quality of the people they are able to get and keep. These TMT firms do invest heavily in employee training to make sure that their employees skill levels are kept current (Robbins, 2001). Robbins (2001) added that money spent on improving employees capacity is one of the best investments that business executives could make.

A more recent debat in the financial accounting literature regards the relevance of accounting information for firms of the so-called New Economy (Lopes, 2001). Due to the failure of traditional accounting measures to recognize and measure the intangible assets especially relevant for TMT firms it is argued that accounting will lose relevance for valuation and users investment decision purposes (Barth, Landsman & Lang, 2008; Lu & Clowes, 2004). Where a firm is listed in the stock exchange market various stakeholders of the firm accord more attention to the accounting information revealed by the firm in its financial reports. Can we say that the accounting information of new economy firms contained relevant information for decision making purposes? To what extent does the accounting information of listed new economy firms in Nigeria, dictate or influence the share price of the firms?  This study therefore investigates empirically the value relevance of accounting information of new economy firms in Nigeria. In achieving so a null hypothesis is formulated and tested during the course of the study.

The hypothesis reads

Ho:  The accounting information published by the listed new economy firms in Nigeria does not significantly posses value relevance for investment decision purpose.

1.1     BACKGROUND OF THE STUDY

Reynolds  et al, have defined “Accounting as the systematic recording, analysis and appraisal of financial data which results from activities. Undertaken in pursuit of the objectives of the firm.

Thus, accounting systems monitor revenues and expenditures and quickly establish the firms position at particular lines.

Furthermore, firms need to know the values of their fixed Assets (land, building, vehicles, plant and equipments) and current asset (Stocks, debtors, work in progress, and cash in hand). Because every transaction contributes to an increase or decrease in assets it must therefore be recorded accurately and stored in easily retrievable form. From the going accounts should show areas of inefficiency, and reveal the exact lost of al the firms activities as accurate and detailed accounts, will make policy formation easier and facilitate the well organized implementation of corporate plans.

Accounting has also been seen by Meigs (1975) consisting of gathering of financial and other economic data, just as physical measurements are provided by the metric system, economic measurements are provided by the accounting system,  and are stated in financial terms.

These economic measurement are put together in report of operations, and for decision making by business units.

Thirdly, accounting provides financial reports that  are needed by outside persons who invest in business units lend money to them, or extend credit to them. It also furnishes reports to be used by government agencies which regulate business and by tax authorities such as internal revenue services profit must ensure that the correct amount of tax is collected. When the unit of consideration is a non profit organization (such as school, hospital, church or other charitable group), its members of those who contribute to it need to know for what purposes and in what proportions their money is being used.

This important information is furnished by accounting

Thus accounting can be referred to generally as a set of rules and methods by which financial and economic data are collected, processed and summarized into reports that can be used in making decisions, relating to the accomplishment of organizational goals.

It is important that the accounting systems for one man business should fulfill such functions as providing essential financial information for the owners and mangers in order for them to be able to manage the business in a competitive environment, and to make informed decisions to prevent business failure and to expand the business. However, owners of one man business may have particular needs and conditions, so that accounting systems need to be flexible in order not to impose unnecessary operative burdens because of the importance of appropriate accounting information for owners and managers of one man businesses and their different stakeholders, it is therefore important to this study to analyze the types and amount of financial and various accounting system applied in small businesses and its non-regulation in Nigeria.

The practice of accounting came into existence many years ago though, there was no acceptable definite record as to when accounting developed. It should be noted that with the advent of colonial rule in Africa, the European system of accounting was introduced in most of the African countries such as Nigeria.

Then, different kinds of people were employed to take care of farms and properties of the white man and after that, they have to account for their success so far to their masters because there is a saying that “for every responsibility, there is a saying that “for every responsible, there is always an accountability.”

1.2     STATEMENT OF THE PROBLEM

This research study entitled “Accounting procedure in Hotels will try to look into the nature, process, system by which various hotels in Enugu State operate will use of accounting systems and techniques taking a case study of Zodiac Hotel Limited Enugu sub problem.

As we all know that accounting is a living, practical course, there is need to know the present practices of the profession in such areas, among other as:

1.          Working capital management

2.          Preparation and Payments of salaries and wages

3.          Books of account

4.          Sales income

5.          Financial report and statement

6.          Assets

1.3     OBJECTIVE OF THE STUDY

I have particularly involve myself in the operation of a hotel. Sit is known that the researcher’s particular interest in hotel administration cannot be over emphasized.

The purpose or objectives of this research work is as follows:

(i)                 To examine the forms they (Zodiac Hotel Limit Enugu) take in presenting their transactions with other parties.

(ii)               To determine the accounting system by which the hotel operates in terms of the “accounting concepts and conventions.

1.4     RESEARCH QUESTIONS

1.          What is the accounting procedure in most hotels is adequate

2.          What is the accounting procedure used by hotels affect the financial statement of the hotels.

1.5     SIGNIFICANCE OF THE STUDY

I promise that at the completion of these project it will help others who have not been opportuned which the hotels use.

For the future researchers, the work will be useful and helpful to them because they can make reference to it as they carry out their own work. It is worthy of note that presently, the researchers work load is lessened because of the guidelines on this topic that was made available for him.

1.6     SCOPE OF THE STUDY

Due to time constraint and financial, the researcher has decided to confine himself to accounting procedures in Zodiac Hotels limited Enugu. If not because of the above reasons, I wanted have like to make comparison of many hotels.

1.7     LIMITATIONS OF THE STUDY

There are many problems encountered by the researchers during the course of writing of this project, the problem encountered were:

a.          Refusal of Respondent:  The refusal of respondents to answer some of important question that is relevant to the study.

b.          Financial:  The shortage of funds also affected the number of times: the researcher would have to visit the organization in order to be through in examining all the areas. Finance restricts the researcher from conducting accounting procedures of other hotels within Enugu metropolis.

c.           Time:  The time delighted to this work was very short as a result of other commitment; the researcher must have gone different places to get more samples about the study.

1.8     DEFINITIOIN OF TERMS

(a)     Accounting:  The art of recording, classifying and summarizing in a significant manner and in terms of money, transactions  and events which are in part at least of a financial character, and interpreting the results there to.

(b)     Liability: Debt which is owned by a company for goods and services supplied to her which are not liquidated at the time of preparing the balance sheet.

(c)      Asset: Anything which is acquired by a business entity either for a long term use within the company for the generation of income or for short term run used for the purpose of convention into cash within a year.

Profit the excess of the selling price over all cost and expenses incurred in marketing the sale

(d)     Financial statement:  A summary of figure, facts showing the financial condition of a business.