Assessment of Factors Responsible for Budget Failure in Nigeria.

THE EFFECT OF HISTORICAL COST ACCOUNTING ON THE REPORTED PROFIT OF A COMPANY: AN EVALUATION OF CURRENT COST ACCOUNTING  AS AN ALTERNATIVE REPORTING METHOD

 

 

ABSTRACT

This study evaluates the effect of historical cost accounting on the reported profit of a company: An evaluation of current cost accounting as an alternative reporting method. In a high – inflationary and distorted economy like Nigeria with high uncertainties, the conventional historical cost method of profit reporting has misled many companies into liquidation since it has been found inadequate in accounting for the uncertainties. The persistent nature of this phenomenon has called for a fair and suitable reporting method of profits in times like this. The profits retained by the company are affected by costs and appropriations of income. A higher cost will leave little income for appropriation and to be retained in the company. The amount of profit will depend on the reported method in operation. The historical cost method makes low depreciation to be charged while leaving high profit for tax and dividends payments. In the light of the above, the objectives of the study were to determine the nature of relationship between historical cost methods and reported profits of manufacturing companies in Nigeria, ascertain the extent to which current cost method affects the overstated profits made by manufacturing companies in Nigeria and to determine how current cost accounting can be used to remedy the inherent deficiencies in the historical cost methods. An ex post facto research design was adopted in this study. The population of the study comprises forty-eight ( 48) manufacturing companies in Nigeria under 24 industrial classifications. Financial statements of these companies are published annually for public consumption. But due to time lag, ten(10) manufacturing companies quoted in the first tier securities market were  randomly selected . Secondary sources of data were used in the study. The data were obtained from the statistical bulletin of the Central Bank of Nigeria and Annual Reports of the Nigerian Stock Exchange. Depreciation charge served as the independent variables while Profits of the firm served as the dependent variables and were used to measure the profitability, capital adequacy ratio and improvement of shareholders` equity in the selected sampled manufacturing companies. The Pearson Product Moment Correlation Coefficient was employed to test the hypotheses one while Chi-Square were employed to test the hypotheses two and three. These were done at the alpha level of 5% with the aid of the SPSS 17.0 statistical software. The results of the study discovered that there is a positive significant relationship between historical cost method and the reported profits of   companies  in Nigeria , Current cost methods does not significantly affects the overstated profits made by these companies and the study recommended that: there should appropriate decision for current cost accounting method to be adopted so as to improve their capital maintenance level, and there should be further research on the causes of further research on the effect on historical cost accounting on the reported profits of companies in Nigeria.

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ACCOUNTING INFORMATION, CONCEPTS AND APPLICATION FOR PLANNING AND DECISION MAKING (ACASE STUDY OF AZ PLC)

CHAPTER ONE

GENERAL INTRODUCTION

• INTRODUCTION

Accounting is a body of knowledge which does not have a gingle definition, vicarious and several actions have come up with different definitions which reflects the period in the evolutionary  stages of accounting thoughts during which definitions were made.

There are several definitions of the concept as the number of people that attempt to define it.

According to A. H. Mill Champ in his book, Foundation Accounting (An instructional manual for Accounting Students) submitted that “Accounting is the process of identifying, measuring and communicating economic information to permit informed judgement and decisions by the user of the information and also explained further to mean and in terms of money transactions and events which aid, is part at least of a financial character, and interpreting the results thereof.

1. Soyede accorded that “Accounting is concerned with providing information to decision making within an organization to enable management to take decisions about the level of output, the most optimal choice of reflecting competition and other changes in the economy.

Accounting system has become a major quantitative information system in almost every organization just as a well designed information system has become an integral part of organizational activities. Information for economic decision making is the main product of accounting.

The origin of financial accounting dates back to the 15^th Century when a Franciscan MONK, Rev. father Luca Pacioli wrote his famous book “Summa de Arithetica, Geometrica, proportion et proportionality” in Venis in 1914. The first known book on book-keeping enunciated most of the principles on which today’s book keeping is kept. The main emphasis was on the stewardship function. The regular calculation of profit, and thus the preparation of a profit and loss account, was not yet seen to be important and profitable when calculated was usually at the end of particular contribution. Father Pacioli accorded him the recognition of Father of Accounting.

 

The whole purpose of ancient accounting was not to measure the rate of profit or loss but to keep accurate records of acquisitions and out goings in money and kind and expose any losses due to dissolute on negligence. This seemingly laudable objective of engaging the services of book-keeping to keep accurate records of their wealth, business concerns and value possible expose frauds. However, the increase in the number of multiple ownership, joint ventures, partnership etc.

 

The profit and loss account grew in importance the extension of credit transaction and the requirement of tax collection systems increased the need for the measurement of profit.

 

1.1       BACKGROUND OF THE STUDY/STATEMENT OF PROBLEM

Haier Paterson Cussons Nigeria Plc is a joint Venture between PZ Cussons Nigeria Plc over 120 years of commercial experience in Nigeria has been the proud manufacturer of Thermocool brand for over 37 years. Over the time, THERMOCOOL has won the trust and loyalty of Nigerian consumers.

Haier is the world’s fourth largest white goods manufacturer and is the official home appliances sponsor of the Beijing 2008 Olympic Games. As of 2008, the Haier Group has established a total of trading companies (19 located overseas) 29 manufacturing plant (24 overseas), 8 design centres (5 overseas) and 16 Industries parks (4 overseas) consistent with Haier’s position as a global brand, the company employs over 60,000 people ground the world. In addition, Haier boasts a 58,800 story sales network which last year accounted for a global turnover of 122.billion RMB (17.5 billion USD).

 

The Partnership between these two  world famous companies through Haier-Thermocool brand aims to deliver reliable quality in all products that are manufactured. This is achieved by producing products that are specifically designed to meet the needs of the Nigerian environment.

 

The elegant new designs and innovative technologies all Haier Thermocool products are tropicalized (Nigerian used) to deliver optimum value for cool. Haier Thermocool has a world-class after sales services centres which dedicated customer care line: 01-7303333 Pan-Nigeria-Name.

 

The organization as related to Haier Paterson Cussons Nigeria Plc is organized into six (6) sections, namely: production, personnel, packaging, finance, sales and purchases and each of these sections headed by a manager except finance which is headed by a Chief Accountant. All these heads of the sections reported directly to the Chairman. The line of authority/responsibility are depicted in the organization chart.

 

Every individual in HPY has an assigned responsibility in which their performance is judged on how well they meet up with these responsibilities. The sum of the responsibility structure is allocated among people at several levels of management . division of responsibility and authority among several levels of management enables the enterprises strike effectively in achieving their objectives.

 

1.2       SCOPE AND LIMITATION OF THE STUDY

The scope of this research will be restricted to the accounting information provided by Haier Paterson Cussons Nigeria plc manufacturing of refridgerators, chiller/freezer, air-conditioner, washing machines etc.

The study would also embrace all the accounting concepts and their application in operation and preparation of the financial statement of the company.

The study would automatically be limited to the uses and effect of the Accounting information, concepts and application for planning and decision making in an organization.

TIME CONSTRAINT: The time available for the conduct of this research work has to be shared between the institution academic programme, family contentment and the project research, office work and thereby given little time for the researcher to visit most of the available library and the case study as it would have done.

FINANCIAL CONSTRAINTS: During all these, there is much cost involved and in view of economic dispensation there is inadequacy of money thereby limiting the work to have been done. The cost of embarking on this research is expensive thereby could not lay my hands on the available data which are supposed to be used for this research work.

DATA COLLECTION: The  workers in this organization could not release some data needed for this research work and some answers to the questions I asked about the organization were not answered likewise some questionnaires given to them were not returned as expected.

ACCOUNTING: the organization does not use all the appropriate books of accounts the use of required accounting principles, concepts and convension provided by the National Accounting Standard Board and Company and allied Act 2004 is also not appropriately used or embibe on.

SUPERVISORS: The supervisor of this project is another great problem encountered due to the fact that before the researcher could see the supervisors for appropriate connection and supervision, it takes a lot of time and when seen, several connection demand for more information, proper presentation and demand thereby lot of energy and time were consumed at the end of this project writing.

 

1.4. PROJECT OF THE STUDY

A wide range of users of users accounting information rely on periodic financial state to assist them in making a variety of economic decision. The quality of accounting information before them, therefore directors are constantly concern with  assessing the quality of their management and to effectively do this they have again to rely heavily on accounting information and statement.

Accounting  information affect the way the society allocate resources and also how it distributes income. The aggregate economic development of a society has become a function of the quality of accounting information available to it. In the light of the above mentioned this research will try to:

1.To examine the weakness of the accounting information and the result and effect of this on the other sector of the economy.

2.To examine the concept of accounting information as indispensable economic factor.

3.To show in clean terms the need for accounting information as well as the contributions to meeting societal requirements.

4.To mention the extent to which accounting information has been able to adapt to the ever changing societal requirement.

5.To comprehensively highlight the role of accounting as a societal function, societal fund and accounting information as well as social issue in accounting.

6.To take on current method of and suggest further improvement of financial reporting.

1.5   SIGNIFICANCE OF THE STUDY

Due to the global economic depression in general and the Ngeria depressed economic climate in particular, only the astute business manager will try. However for a business manager to be successful, he/she needs accurate and timely information to perform his/ her managerial function. Every individual business company or entity, engaging in economic activity is faced with several questions e.g what are the available assets or resources, what is the return or expected return of the funds invested elsewhere, etc? the answers to all these questions involves the rise of accounting information and therefore it’s  relevance can not be over-emphasized.

 

1.6   RESEARCH QUESTIONS FOR HYPOTHESIS

1. H0: That the rapid progress of the organization could not be attributed to the level of decision made by the management staff.

H1: That the rapid progress of the organization could be attributable to the level of decision made by the top management staff.

2. H0: that the accounting report is not an essential instrument in planning.

H1: That the accounting report is an essential instrument in planning.

3. H0: That instrument of the accounting personnel could affect the accounting report of the organization.

 

1.7       RESEARCH METHODOLOGY

This as stated above is the techniques and strategy which the researcher concluded on to use in order to be able to carry out an objective investigation in an organized and efficient manner to help in decision making.

 

In this case, I had intention in my own study, to rather information through oral interviewing and questionnaire which shall be directed to the following classes of people with Haier Paterson Cussons Nigeria Plc.

1. the management staff
2. the technology staff

• shareholders

I also conducted relevant textbooks, magazines, write-ups, seminar papers etc.

 

1.8   DEFINITION OF TRECHNICAL TERMS.

The following terms shall be used in the context of the research and the reacher could make little explanation as follows:

TAX: This is a compulsory levy imposed by government on the income of individuals, companies, co-operate individuals and or value of purchases, which is also paid to the same government for public purposes.

WORK IN PROGRESS: This is the value of job that is currently witnessing further production i.e value of yes to the completed job, it can also be referred to as value of uncertified job.

TURN OVER:  This is the net value of goods and/or services sold within a particular  a particular year. It is calculated as total sale less return.

PRODUCTION: This is the action of manufacturing, grnizawing, extracting things, especially in large quantities such as oil, garri, egg, energy production. Goods that transform our wants are produced by organization and individual entrepreneur. These transform inputs (raw materials, money, machine, labour, information into goods and services. This is the process of transforming input into output (goods and services) using production system.

ORGANISATION: this is a structure for the enterprise to conry out its activities in a systematic manner. Organization provides a frame work while dukes are identified, definite task a allocated to suitable person and inter relations between jobs made clear. The joint effort made by different persons sources more productive, effective and economical. If a well knit organizations is provided by the management.

EFFICIENCY: this means improvements in energy efficiency of the factory, organizations or individual. This is the ability to work well or without wasting time or resources    competent such as efficient managers, secretary e.t.c. it is the ability of tools, machinese of time, system e.t.c producing a satisfactory result without wasting time and resource such as official database, software or heating equipment.

TECHNOLOGY: the scientific study and use of applied sciences e.g engineering. The application of this to pratical task in industry such as recent advance in  technology and new computer technology.

DEPRECIATION: This is the permanent decrease in value of the asset through wear and tear in use or passage of time.

ACCOUNTING CONVENTION: This is general custom, tradition practice in which an account based on the preparation of financial statement.

ACCOUNTING PRINCIPLE: This is the basic truth on general rule guiding the preparation of financial statement.

ACCOUNTING CONCEPT: This is the accounting practice found in certain bases of assumption.

STOCK: This can be refered to stock of goods available for sales, distribution, or use, especially goods kept by a trader or shop keeper. This can be stock of materials available for production of goods.

TURNOVER: This is the net value of goods and /or services sold within a particular year. It is calculated as total sales less return.

RESOURCES: This is the wealth, supplier of goods, raw materials which an organization has or can use which helps in or that can be turned to for support in production.

DEFERRED TAXATION: This is the taxation on the timing difference between the treatment of certain items for accounting purpose and their treatment for taxation is only provided in respect of liabilities which are expected to become payable in the forseable future.

FOREIGN CURRENCIES: This is the currency of the foreign countries. Transaction arising in foreign currencies are converted into Naira at the current rates of exchange as at the time they arise.

 

1.9       SUMMARY OF CHAPTERS

Chapter one of this research work will centre on the general introduction while chapter two review the relevant literature which is the importance of Accounting information, concepts, principles of Accounting. The chapter three will focus on the methods used in this research work while chapter four will have to analyze and present the data accordingly. The chapter five of this research work will summarize, recommend and conclude the whole project then finally give you the references of the project research.

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IMPLEMENTATION OF STATE CIVIL SERVICE PAYROLL ACCOUNTING SYSTEM

ABSTRACT

Ever since man discovered the computer and hence computer science, attempt have been made to computerize every facet of human life. This project work experts the issue of designing and implementing a state civil payroll accounting system which inherent advantages (speed and accuracy over the more tedious inefficient and time consuming manual system. This system encountered the following problems. Late receipt of raw data each month. Regular break down of the accountant machine presently used for data processing, irregular power supply, many errors resulting from the manual methods of data processing and the office caused by bulky files and constant complaints for errors from the workers. Consequently a computerized payroll accounting system when designed to take care of the above problems. ORGANIZATION OF THE WORK The study is being organized in seven chapter Chapter one contains the introduction of the project at hand. The problem is being stated. It also contains the purpose of the study, aims scope or delimitation or constraints, assumptions and definition of terms. Chapter two is the literature review. This is where the related work about payroll is reviewed. Chapter three in the description and analysis of the existing system. The design of the new system is the content of chapter four. Chapter five involves the implementation of the new system. It also includes the program design. Program flowcharts, pseudo codes, course program and test run. Chapter six is the documentation of new system. Chapter seven, contains the recommendation and references.

 

 

 

 

CHAPTER ONE

1.0     INTRODUCTION

1.1  BACKGROUND OF THE STUDY

Computer, the versatile data processing machine has been found very useful in every human endeavor since its incursion into many fields of study, industry, business, sciences and technology in general. Payroll is being prepared by organization, committees, governments and other business firms, it is also part of account department, many organization concern. It is used for the preparation of worker’s salary daily, weekly or monthly.

The payroll module which helps in data processing, processes monthly pay of all the employees in state civil service commission. The module maintains staff loans, advances, tax and other deductions from staff pay. It also performs annual increment on the salary of qualified staff each month. The payroll list every employee for whom the computer has produced a payroll chewue and shows for each employee what deductions are subtracted from gross earnings to arrive at net pay. This report is reviewed by the manager of the payroll department before the cheques are released for distribution.

1.2  PROBLEM DEFINITION

Over the years, manual method of payroll has been used. This method has its problems. It has been proven to be very ineffective and inefficient. Some of the problems are

1. The job of preparing salary payment manually is tedious causes delay
2. As a result of the problem above, manual method have a lot of discrepancies.
3. This method encourage fraud figures are easily manipulated and changed.
4. The manual method requires people who are competent in mathematics related computation to do a reliable job. As a result people of such are very scarce.

In XP, the user story serves the purpose of the problem statement and the specifications. The user story provided by the client was as follows:

“You are to design and implement a payroll system that should accept employee hours worked, compute net pay and record all the payroll data for subsequent processing. The system should prepare pay cheques and a payroll ledger, and maintain data on a sequential payroll file. Non-statutory deductions such as union dues and pension plans to be made.

“The payroll data are employee number, employee name, pay rate, and union member flag. The year-to-date total should contain earnings, federal tax, pension plan, and union dues”

To accomplish these tasks, we had to meet with the client to find out exactly what the program is meant to do. Here are the sub stories that we were able to get from the client:

 

1.3  OBJECTIVES OF STUDY

The study aims at designing a payroll accounting system that will help to eliminate mistakes, delay and frauds associated with manual calculation of workers salaries and entitlements

 

1.4  ASSUMPTIONS

If the designed new system is implemented it may improve and to a large extend enhance the activities of processing staff salary payment in state civil commission Enugu Office

The workers will be relived by the tedious tasks facing them in the discharging of their duties. They will have more time to themselves and also increase their standard of work.

The version of the software that has been released can still be improved depending on user response. So far, we have succeeded in completing the desired goal of from the user stories given to us. The beta software has been released about three times and we have been able to get good ideas from the various users on how to improve the functionality, reliability and robustness of the software.

 

1.5 DEFINITION OF TERMS

This section gives a definition and explanation of some of the terms used in the project:

Employee Data: This is the employee’s information in the company. It consists of the employee identification number, employee name, pay rate, pension plan flag, and union member flag.

Payroll Records: The payroll records are used to store each month’s hours worked, and the rates for that month.

Rates: Rates consists of the percentage that would be deducted from the gross pay depending on union membership status, pension plan, state and federal tax. Each employee can have a unique hourly rate.

Payroll Ledger: This is a table that shows the calculated pay of employees and the month in which they earned the pay. The ledger can be filtered by name, identification number, year and month.

Hours Worked: This is the number of times that an employee work in a month. The hours worked is used to calculate the pay that an employee will receive for that month.

Net Pay: The net pay is the final salary amount that would be given to the employee after all the deductions are subtracted from the gross pay. The deductions include among others taxes, union member dues and pension plan.

Gross Pay: The gross pay is the amount that the employee earns before the deductions are subtracted.

Deductions: Deductions are made up of taxes, union membership dues, pension plan. They are subtracted from the gross pay to give the net pay which is the employee’s final pay for the month.

Taxes: The taxes consists of the state dues and federal dues. A percentage of the employee’s salary goes to state and country.

Union Membership Dues: This is meant for employee’s that are union workers in the company. They get to pay a percentage for union dues. An employee can be a union member and later change status to be a non-union member.

Pension Plan: Employees that opted to use the pension plan of the company get to pay a particular percentage of their pay in preparation for their retirement.

Payslip: These are similar to pay cheques. They allow the employee to have his or her pay printed out on paper so that they can cash it.

Year-To-Date Total: The year-to-date total is the summation of all the previous earnings till the month before the current month

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