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CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND TO THE STUDY

Accounting Information is a Quantitative Information of a financial nature. Information according to Authony C. Reeco in Management Accounting Principle is defined as any fact that adds to knowledge. The accounting Information is a Quantitative financial data, which adds to knowledge. Information is the current that runs through the communication network of an organization. It is therefore very vital for the survival of business organization making as regards the allocation of scarce resources among competing ends. The business environment is never stable and for business organization to survive in a rapidly changing environment, management must keep a breast with trends and information that would enable it plan for this attainment of predetermined objectives.

The accounting function helps in the accumulation of accounting data which help management in the planning process. It also provide management with financial accounting information which serves as an important tool for projecting into the future.

In order to make a desired projections for planning purposes, management need three basic types of accounting information which are integrated in the different stages of the planning process. They are score-keeping information, Attention, Directing information and Problem solving information.

Commercial banks have to a great extent the need to plan as the financial environment in which the operate is dynamic. They require adequate information for the purpose of operating their business efficiently since their profitability depends principally on the amount of loans and advices granted. The study therefore aims at accessing the extent to which commercial banks in Nigeria utilize accounting information presented to them by their customers/clients.

1.2  STATEMENT OF THE PROBLEMS

Studies were shown that commercial bank do not place as much emphasis on the viability of projects as on collaterals and chattels presented by customers. It suffices to say that not much use is made by commercial banks of information on the viability of propose projects as could be observed from the financial statement provided by prospective borrowers.

1.3  OBJECTIVES OF THE STUDY

The major objectives of the study are:

To determine the type of accounting information made available to commercial banks by their loan applicants.

To find out the extent to which banks are utilizing these information.

To find out the extent to which the incidence of bad-debt be reduced.

1.4  RESEARCH QUESTIONS

The Research Questions are:

1.     What type of accounting information made available to commercial banks by their loan applicant?

2.     To what extent does banks are utilizing these information?

3.     How can the incidence of bad debt could be reduced

1.5  RESEARCH HYPOTHESES

There are null form (H0) and Alternative form (H1)

H0:   There is no way to determine type of accounting information made available to commercial banks.

H1:   There are types of accounting information made available to commercial banks.

H0:   There is no way the incidence of bad debt could be reduced.

H1:   There is a way the incidence of bad debt could be reduced.

 1.6  SIGNIFICANCE OF THE STUDY

This research work would be immense significance to the following.

COMMERCIAL BANK:  The quality of lending decision by commercial banks would be improved as a result of the knowledge acquired from this research work. 

OTHER LENDING INSTITUTIONS Lending institution like finance house, insurance companies and development bank will avail themselves of the importance of scrutinizing accounting information from prospective borrowers before making lending decision. This will reduce the incidence of loan defaults and improve credit expansion. 

1.7  SCOPE OF THE STUDY

The work will find out the impact of accounting information on bank lending decision.  The researcher will carry out a corporative study of the commercial banks. 

1.8  LIMITATION OF THE STUDY

The demanding schedule of respondents at work made it very difficult getting the respondents to participate in the survey. As a result, retrieving copies of questionnaire in timely fashion was very challenging. Also, the researcher is a student and therefore has limited time as well as resources in covering extensive literature available in conducting this research. Information provided by the researcher may not hold true for all businesses or organizations but is restricted to the selected organization used as a study in this research especially in the locality where this study is being conducted. Finally, the researcher is restricted only to the evidence provided by the participants in the research and therefore cannot determine the reliability and accuracy of the information provided.

Financial constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint: The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

1.9  DEFINITION OF TERMS

·       Accounting:    Accounting has been defined as the process of identifying, measuring and communicating economic information to permit informed Judgment and decisions by the users of the information.

·       Accounting Information: This is data organized for the special purpose, that is, decision making.

·        Central Bank: Central bank known as banker’s bank may be defined as an apex financial institution which is charged with the responsibility of managing costs. Volume availability and direction of money and in an economy with a view to achieving desired economic objectives.

·        Control: control is concerned with the efficient use of researches to achieve a previously determined objectives or a set of objectives, contained within a plan.

·       Data: The term data can be defined as groups of non-random symbols, which represent quantities event, actions and things.

·       Decision Making: A decision-making can be defined as making choices between futures, uncertain alternatives.

·       Effectiveness: The accomplishment of a desired objective as goal or action

·       Efficiency: The accomplishment of a desired objective goal or action with the minimum, resources.

·       Financial Management: This is the managing of the funds of the firm most wisely with a view to maximize the wealth of shareholders.

·       Financial Accounting: This is concerned with such matters as financial record keeping, the preparation of final account, the raising of financial and dealing with all aspects of taxation

·        Financial Risk: The uncertainty as to the future ventures to a firm’s owner resulting from the use of debt.

·       Information: Information is data which have not been processed into a form which is meaningful to the recipient purpose which, as far as the management account is concerned, is likely to be for planning, control or decision making.

·       Investment: Investment is referred to as the amount of current output that adds to the national stock and productive resources.

·       Long-term Strategic Planning: Long term planning or strategic planning which covers periods is defined as “The formulation evaluating and selection of objectives of an organization, the environment in which it is to operate, an assessment of its strengths, weaknesses, opportunities and threats for the purpose of preparing a long term strategic plan of action which will attain the objective set.

·        Liquidity: This refers to the firm’s ability to its maturing obligation.

·       Motivation: The factors which influence an individual to act.

·       Organization: An organization is network of interacting control system which, in the ideal would, should complement one another and should help to steer the activities of the organization towards meeting the corporate objectives.

·        Planning: Planning can be defined as “the establishment of objectives, and the formation, evaluation and selection of policies, strategies, tactics and action required achieving these objectives.

·       Risk: This variability firm is expected returns.

 System: A system can be defined as a set of parts Co-ordinated to accomplish a set of goals.

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