CHAPTER ONE
INTRODUCTION
- BACKGROUND OF THE STUDY
According to Eneje (2005) Accounting is the measurement , processing and communication of financial information about economic entities . It was developed by the Italian mathematician Luca Pacioli , in the end of the 15th century. Accounting, which has been called the “language of business”, measures the results of an organization’s economic activities and conveys this information to a variety of users including investors , creditors , management and regulators. Practitioners of accounting are known as accountants . The terms accounting and financial reporting are oen used as synonyms. Adeniji (2008) opined that Accounting can be divided into several fields including financial accounting, management accounting, auditing, and tax accounting . Financial accounting focuses on the reporting of an organization’s financial information, including the preparation of financial statement , to external users of the information, such as investors , regulators and suppliers ; and management accounting focuses on the measurement, analysis and reporting of information for internal use by management. The recording of financial transactions contains the summaries of the financials that is presented in financial reports, is known as bookkeeping, of which double-entry bookkeeping is the most common system. According to Batty (2009) Accounting is facilitated by accounting organizations such as standard-setters, accounting firms and professional bodies. Financial statements are usually audited by accounting firms , and are prepared in accordance with generally accepted accounting principles (GAAP). GAAP is set by various standard-setting organizations such as the Financial Accounting Standards Board (FASB) in the United States] and the Financial Reporting Council in the United Kingdom . As of 2012, “all major economies” have plans to converge towards or adopt the International Financial Reporting Standards (IFRS). Without the application of management accounting techniques, no business can succeed in its operations and to attain the set objectives. Moreover, the decision making will not be guided as management accounting techniques provide adequate guide to management decision making. The Chartered Institute of Management Accountants (CIMA) defines management accounting as “an integral part of management concerned with identifying, presenting, and interpreting information used for formulating strategy, planning and controlling activities,decision making, optimizing the use of resource disclosure to shareholders and other external entity, disclosure to employees, safeguarding assets.
