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Product Category: Projects

Product Code: 00005720

No of Pages: 72

No of Chapters: 5

File Format: Microsoft Word

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This project work was carried out in order to determine whether financial reports are prepared accordingly to accounting concepts and conventions. It also aim at pointing out the benefits of adopting accounting concepts and conventions in preparing financial statements. In gathering data relating to the research questionnaires were administered and personal interviews were equally conducted. While related literature on accounting concepts and conventions in financial reporting were reviewed. It was discovered that accounting concepts and conventions are the bedrocks on which financial accounting rests. Finally, it was recommended that financial information should therefore be reported in a way which users will easily understand, interpret and apply.




Title Page                                                                                 i

Certification                                                                     ii

Dedication                                                                       iii

Acknowledgements                                                          iv

Abstract                                                                           v

Table of Contents                                                             vi


Chapter One: Introduction                                            1

1.1      Background to the Study                                                 1

1.2      Statement of Problems                                             2

1.3      Research Questions                                                 3

1.4      Objectives of the Study                                            4

1.5      Statement of Hypothesis                                          6

1.6      Significance of the Study                                                 7

1.7      Scope of the Study                                                   8

1.8      Limitation of the Study                                            9

1.9      Definition of Terms                                                  10


Chapter Two: Review of Related Literature                  14

2.1      Introduction                                                             14

2.2      Nature of Financial Reporting                                  15

2.3      Uses of Accounting Information System Shareholder or Investors  17


Chapter Three: Research Method and Design               38

3.1      Introduction                                                             38

3.2      Research Design                                                      38

3.3      Description of Population of the Study                    38

3.4      Sample Size                                                             39

3.5      Sampling Techniques                                              39

3.6      Sources of Data Collection                                       39

3.7      Method of Data Presentation                                   41

3.8      Method of Data Analysis                                          41


Chapter Four: Data Presentation, Analysis and Interpretation  43

4.1   Introduction                                                             43

4.2   Data Analysis                                                           43

4.3   Hypothesis Testing                                                  50


Chapter Five: Summary of Findings, Conclusion and Recommendations       57

5.1   Introduction                                                             57

5.2   Summary of Findings                                              57

5.3   Conclusion                                                              59

5.4   Recommendations                                                   60

        References                                                               63

        Appendices                                                              65





1.1      Background to the Study

Financial accounting includes the accumulation of historical records technically referred to as stewardship accounting. These historical records form the embodiment of financial statement.

Financial accounting like any  other subject rest on the foundation of certain fundamental rudiments, assumptions, concepts, conventions  and principles which provide the essential frame for expressing accounting information.

These concepts and conventions which includes entity concept, going concern, accrual, periodicity, consistency and historical cost concept etc, are seldom disclosed on the financial statements, because they are generally accepted as being the bedrock underling the period of preparation and presentation of financial statements.

However, where there are squarely acceptable alternative methods or approaches that may be accepted or adopted in preparing the financial statement to where the foundation concept on which the financial statement is based must be disclosed. Unless financial statements are reviewed against the background of these fundamental concepts and principles the user would be in a twilight world, where some things are clear while others are not. It is therefore essential to the understanding, interpretation and meaningful analysis of financial statement that these basic concept assumption principles and convention used in preparation must be constantly borne in mind.

1.2      Statement of the Problem

Accounting is primarily concerned with the preparation of financial information for the various parties connected with the enterprises for the purpose of improving their decision making process.

However, the following problems are encountered in achieving these objectives. As the information need to these various interest groups, do not tally, there is conflict of interest among the various users of financial statement.

This is also the problem of subjectively in preparing the financial statements, thus it becomes necessary that in preparing the financial statements, the accounting should be guided by some basic assumptions in order to ensure a high degree of standardization in financial reporting.

1.3      Research Questions

In order to access whether or not that these accounting concepts and conventions are being applied by entities in preparing financial statements, this research work will be answering the following questions:

1.          Does financial institution use accounting concepts and conventions in evaluating financial position?

2.          Do management of bank and other financial institution use accounting concept and conventions in presenting their financial report to shareholders?

3.          Does accounting concept and conventions serve as a guideline in preparing financial statements?

4.          Do annual reports of companies and other financial institution present their accounts base on accounting concept and convention?

1.4      Objectives of the Study

Businesses are often owned by more than just one person, more so, there are many users of accounting information which includes shareholder, creditors, potential investors, bankers and the government.

The financial statements are prepared for the benefit of them all. If different financial statement were to be prepared for separate purpose so that one type is given to the bankers, another to the owners etc, then accounting would be different from what it is today.

However, it is deemed necessary to give copies of the same financial statement to all the various parties so that the bankers, owners, the tax officer and other people involved see the same financial statement. This is not an idea situation as the interest of each party are different and really demand different kinds of information from that possessed by others.

Yet only one set of financial statement are multi-purpose document and to be of any use, the various parties have to agree to the way they are drawn up. The use of measures which gains a consensus of opinion rather than the uses of one’s own measures might conflict with people, is said to be objective. The desires to provides the same set of account for any different parties and thus to provides a measure that gain their consensus of opinion means that objectivity is sought in financial reporting. The purpose of this study is therefore to access the relevance and importance of accounting concepts and conventions in financial reporting and the effects which are derived from these concepts and conventions may have on the financial statements.

The objective of this study is therefore:

1.          To find out how accounting concept and conventions, can help in resolving the conflict of interest among the various users of financial statements.

2.          To examine the extent to which accounting concepts and conventions can assist in solving the problem of subjectivity and hence in achieving the objectivity in financial reporting.

1.5      Statement of Hypotheses

The following hypotheses are to be tested.

        Ho:   Null hypothesis

Hi:    Alternative hypothesis

H0:   Financial institutions do not use accounting concepts and conventions in evaluating financial transaction.

H1:   Financial institutions use accounting concepts and conventions in evaluating financial transaction.

H0:   Management of banks and other financial institutions do not use accounting concepts and conventions in presenting their financial report to shareholders and creditors.

H1:   Management of banks and other financial institutions uses accounting concepts and conventions in presenting their financial report to shareholders and creditors.

H0:   Accounting concepts and conventions do not serve as guideline in preparing financial statements.

H1:   Accounting concepts and conventions serves as guideline in preparing financial statements.

H0:   Annual report of companies and other financial institutions are not presented based on accounting concepts and conventions.

H1:   Annual report of companies and other financial institutions are presented based on accounting concepts and conventions.

1.6      Significance of the Study

As stated earlier, the understanding of the basic principles, concepts assumptions and conventions and their relevance to the preparation of financial statement is essential to the understanding, interpretation and meaningful analysis and importance of these concepts and conventions in financial reporting, thus enhancing a better understanding of the usefulness of financial statement to the various users of accounting information.

Secondly, it is fervently hope that at the end of this study, many of the apparent contradictions will be cleared. This stems from the fact that this study will provide a better understanding of this desires for objectivity which is often at the heart of the financial accounting methods in use at the present time.

The study would also be of great use to the intending researchers in this aspect of accounting. From the foregoing, one can affirm that this project work will be of immense use to various parties within the business and academic setting.

1.7      Scope of the Study

In this study, the researcher will take a look at the historical development of financial statement,  development of financial statement, the meaning and objective of financial statement, the various principles, assumptions, concepts and conventions and their relevance in the preparation of financial statement and their uses. The study will also look at some written down legislative and regulatory principles in Nigeria which assist the accounting, concepts and conventions in achieving standardization and enhanced objectivity in financial reporting.  

1.8      Limitation of the Study

In the course of this study, a number of problems were encountered. In the first place the study was carried out in a tight academic schedule, thus frequent interactions with lecturers, text and private readings was not uncommon.

Consequently, only a limited time was available for this study. Secondly, financial constraint was a major setback, my financial means were grossly inadequate as a result, and the compass of my movement and the study was circumscribed. Thirdly, in the course of personal interviews conducted, it was difficult to obtain some information as they were deemed to be confidential by the companies and persons visited.

In the faces of the above limitations, it was virtually impossible to carry out an in-depth study. However, every attempt possible has been made to capture the main purpose and objectivity of this study.

1.9      Definition of Terms

For the purpose of clarity and understanding, it is deemed expedient to define some technical terms used in this project work.

a.           Accounting Concept: A concept is defined as general assumptions which are taken for granted in the preparation of periodic financial accounts.

b.           Accounting Convention: The concept of accounting having becomes accepted in the business world. However, the concepts are capable of being interpreted in many ways. Therefore, what has grown up in accounting are generally accepted approached to the application of the concept.

c.           Asset: Assets are economical resources which are owned by a business and expected to benefit future operations. Assets may have definite future physical forms such as building and machinery. On the other hand, some asset exist in form of valuable legal clams or rights as amount due for customer, investment etc.

d.          Non Current Assets: They are assets of a relatively permanent in nature, used in the operation of the business an not intended for resale, such asset, include land and building, plants and machinery furniture and fittings etc which are expected to always carried out in the financial statement at cost less accumulated depreciation.

e.           Intangible Assets: These are assets without bodily substance and whose values i.e. only with owner. Intangible assets include goodwill, patient right, trade-marks and other similar asset, having value because of the right inherent in them.

f.            Current Assets: These are asset which are expected to be converted into cash within a year on the normal operating level or cycle whichever is longer. The operating cycle varies from one form to another. Current assets includes cash, marketable securities, account receivables, stock and prepaid expenses. Current assets are listed in the balance sheet (statement of financial position) in their order or liquidity.

g.           Liquid Assets: These include debtor temporary investment and cash. They re called liquid asset because they are equally realizable.

h.          Liability: A liability is the obligation of a business to other entities or person in respect of monies owing, for goods and services already received.

i.            Current Liabilities: These are obligation whose liquidation (settlement) is reasonably expected to require the use of current asset or the substitutions to be paid within one year are classified as current. In general, they are listed in their portable order of liquidation. Example includes account payable and accrued.

j.            Non-Current Liabilities: These are some falling due for payment after one year from the statement of financial position. Examples are items of bank loan or overdraft, trade creditor or taxation not falling within one year.

k.          Capital: The term capital has many connotations, it is therefore considered necessary to discuss the importance.

l.            Owners Equity: This kind of equity results from funds received from investors, either shareholders of a corporation owner of a partnership or proprietorship. Also earnings of the forms that did not pay out dividend are added to this equity.

m.        Capital Employed: This is the amount of capital that is available for production, it represent the total asset less current liability employed in the business.

n.          Working Capital: This capital is the available amount for day-to-day running of the business. It represents the difference between the current asset and the current liability, the solvency or insolvency of an enterprises depend on the size of its working capital.

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