CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
In recent time, financial accounting on business performance of organization has been increasing due to increase in need and desire of people. This increase is also attributable to the present economic situation in the country, which prevent people from going into large-scale business. Financial accounting is the field of accounting is concerned with the summary, analysis and reporting of financial transactions and interpretation, and recording etc. pertaining to a business. This involves the preparation of financial statements available for public consumption. Stockholders, suppliers, banks, employees, government agencies, business owners, and other stakeholders are examples of people interested in receiving such information for decision making purposes.
Financial statement are prepared detailing information about the business operations since there are many users of accounting information such as Government, Bankers, Auditors, Other organizations, individual stock holders and many stakeholders, it becomes imperative to render such financial statement in order to assist those who are not accountants. So many stakeholders use accounting information to make decisions whether to buy shares or sell them. The above provides useful guide if such financial statements are decoded for understand ability and decision making .Financial accountancy is governed by both local and international accounting standards. Generally Accepted Accounting Principles(GAAP) is the standard framework of guidelines for financial accounting used in any given jurisdiction.
It includes the standards, conventions and rules that accountants follow in the preparation of financial statements. On the other hand, International Financial Reporting Standards(IFRS) is a set of relevant accounting standards stating how particular types of transactions and other events should be reported. International Financial Reporting Standard (IFRS) are issued by the International Accounting Standards Board(IASB).With IFRS becoming more widespread on the international scene; consistency in financial reporting has become more prevalent between global organizations .While financial accounting is used to prepare accounting information for people outside the organization or not involved in the day-to-day running of the company, managerial accounting provides accounting information to help managers make decisions to manage the business. The impact of financial accounting on business performance of organization is becoming more apparent to users, of financial statement. Accounting is not an exact science neither a business operation without some subjectives and judgmental errors when it comes to reporting them.
Financial accounting is a specialized branched of accounting that keeps track of a company’s financial transactions. Using standardized guidelines, the transaction are recorded, summarized and presented in a financial report on financial statement such as an income statement or a balance sheet. It’s important to point out that the purpose of financial accounting is not to report the value of company. Rather, its purpose is to provide enough information for others to assess the value of a company for themselves, financial accounting information is characterized by the following:
a)Relevance
b)Understandability
c)Reliability
d)Completeness
Objectivity
Timeliness Financial accounting information of an organization is to contain the information requires to prepare a financial report which shall have the above characteristics then the transaction doing the period must be recorded promptly and accurately and interpreted in conformity with the Generally Accepted Accounting Principles (GAAP), National Accounting Standard Board(NASB), international Accounting Standard Committee and the Companies and Allied Matters Act (CAMA). Financial accounting becomes necessary with the obvious need for accounting of stewardship from which investors entrusted their financial resources.
1.2 STATEMENT OF THE PROBLEM
The study “The impact of financial accounting on the business performance of organization” aims to investigating the financial accounting information of selected company in Oyo State with a view to determining the following;
a. The extent to which financial accounting contributes to the growth or performance of a business organization
b. The extent to which the financial accounting of business organization comply with statutory provisions
c. The uniformity and conflict which exist in the financial accounting regulation given the multiplicity of regulators.
