RELEVANCE OF ACCOUNTING SYSTEM ON THE PERFORMANCE OF MANUFACTURING COMPANY

CHAPTER ONE

INTRODUCTION

1.1       BACKGROUND OF THE STUDY

In any organization, manufacturing or non-manufacturing that knows its functions requires an effective accounting system for it continues in existence. In the past, use have heard of how firms up due to one reason or the other. When properly investigated as to what constitute their folding up, one may not be surprised that it was due to negligence in operating on effective accounting system. Even the greatest book on earth “The Holy Bible” makes it own judgment on this, in Mathew 25:14-30. Which in this illustration, we heard of a master who, while away, entrusted various sum of money to his three servants, on return, he called them to “account” for the property entrusted to them, out of the three servants, one could not give a god account of the property entrusted to him, hence he was unsuccessful (and fold up).

            Each of the manufacturing company needs an effective accounting system to determine its profitability position by at least break even. The shareholder is “interested in seeing his invested fund yielding profits, thereby increasing their shareholdings. The creditor wants to be sure that his fund is adequately guaranteed; However, penitent to highlight out this juncture that accounting system is a means of obtaining all relevant information, which is needed by management in decision making.

1.2       STATEMENT OF THE PROBLEM

When considering the problem that relates to an unsound accounting system, what easily comes to mind is the possibility of frauds, either by senior managers or other staff, to occur. Such fraudulent practices may include with holding of cash receipts, misuse of funds, falsification of documents of higher levels, purchasing Keck balks, padding of payrolls, diversion of securities, removal of materials or products of staff etc. Another problem is allowing the accounting function in the authority of incompetent personnel who has shallowed or no knowledge of accounting.

            However, where there is negligence in keeping an effective accounting system, the management will definitely find it practically impossible to make for reacting decisions for the actual performance of the company.

1.3       OBJECTIVES OF THE STUDY

The study tends to achieve the following objectives:

            To ascertain, assess and evaluate how relevant accounting system is on the performance of manufacturing firms.

To examine the extent to which accounting system can supply management with needed information for decision-making.

To bring to lime light the role of interview controls in making the company’s accounting system effective.

1.4       SIGNIFICANT OF THE STUDY

The significance of this study is primarily to course an important of the manufacturing companies via the provision of accounting system that is adequate and sound with this, management of manufacturing companies will have no course to worry, to make rational and profitable decisions.

            Apart from manufacturing firms, other non-manufacturing firms like banks, private organizations, textile, agriculture and constitutions etc; will equally find it very significant in evaluating their performance and suggest ways that will help management accomplish its objectives. It will also of immense importance to the writer as it will enable him has a foresight as he approaches his area of specialization.

            Faunally, and student who may want to research into a similar work may find it very useful.

1.6       DEFINITION OF TERMS

FOLD-UP: The closure of a firm due to mismanagement of it fund or due to poor sales.

BREAK-EVEN: Is also known as break-even point and it is that level of volume of which the total revenue equals the total experiences. On this note, the business neither makes profit nor suffers a loss.

SHARE HOLDER: These are the owners of the company, by acquiring the share of the company.

FUND: A sum of money saved or made available for a particular purpose.

CREDITOR: A person, company etc to whom money is owned.

SYSTEM: A group of things or points working together as a whole.

TAX: Is a compulsory levy on individual income, company and property by government liability; is the state of being required to do something or accept responsibilities for something