CHAPTER 1
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The business of banking focuses mainly on acceptance of deposits from members of the public (i.e. bank customers) and matching the deposits available to borrowers in the form of loans for investments and consumption purposes. Constraints of accounting measurement provide practical guidelines to reduce the volume and cost of reporting accounting information without reducing its value to decision makers. Thus, lending is one of the key functions of commercial banks. Loans represent investments and usually constitute the largest assets of banks. Both individuals and institutions demand for loan. The households seek lendable funds from bank when the excess of income over expenditure is negative (Mbat, 1995:89). The beauty of this role is that credit control principles are the same whatever industry you work in and you can move into different sectors, with enough experience you could even become a consultant and share your experience with others.
The need for loanable fund is a result of the non-synchronization between receipts and payments during the normal course of business transactions. The bank in granting loans to household, individuals or business firms takes into consideration factors such as liquidity risk, repayment method, and the purpose of such loans (Mbat, 1995). Loans and advances are mostly short-termed. The quality of loan portfolio depends on credit analysis undertaken by the loan officer. The credit analysis function is to ensure that loan granted has a good qualitative composition. The qualitative element of bank loans include high liquidity quotient, minimum risk, and appropriate maturity structure. These quantitative elements are necessary to guarantee repayment on demand or on maturity. Accounting services are indispensable in any organization. Whether big or small, profit oriented or non-profit oriented, all organization require judicious management of scare researches in order to achieve targeted plans and objectives. Hence, they all need the services of an accountant. Neither a firm of medical doctors nor that of lawyers can obtain a reasonable magnitude of loan from a bank without being required to present its audited accounts to the bank to analyze its ability to repay the debt.When credit controls exit, the bank requires effective and efficient management strategies, otherwise, the said loans degenerate into debt. In this study, the main focus is on the management of loans/credit control in commercial bank. In order to facilitate this research, UBA, PLC has been selected for a case study.
1.2 STATEMENT OF THE PROBLEMS
As observed above, loan is an investment to a bank. Just like any other investment, there are inherent risks. These risks include the risk of default and inflation or purchasing power risk. Thus, there would be need decisions to be guided by professional advice (Ejiogu, 2002). In agreement with the opinion of Ejiogu above, Edimnce (2004) opine that the accountant as a professional is necessary in loans and credit controls and management. However, Mgbada (2007) question the unique role played by the accountant in loans and credit control and management by saying that banks still achieve better control and management of loans and credit without the services of the accountant. Are accountant necessary in loans and credit controls and management? What role do accountant play in the control and management of loans and credit? This research is designed to answer these questions.
