THE EFFECT OF ACCOUNTING INFORMATION IN PUBLIC CORPORATION
CHAPTER ONE
1.1 INTRODUCTION
Public corporation can be defined as the types of business organization that are established by a special act (or ordinance) of the parliament. Public corporation and business owned and finance by the federal, state and local government, as the case may be in the public interest.
They can be explained and described also as the type of business) organization thoroughly and solidly established by act of parliament to provide public utilities. This participation in the productive and commercial part of a country’s economy.
There are some area in the economy where it is felt that the free enterprises system and private sector competition should not allowed, as they would exploit the public such art should be run by the government in the public interest. Therefore, in Nigeria, where there is a three-tier system of government; the local government, state government and federal government do run certain enterprise so as to provide essential service for the people.
TYPE AND FORMATION
Public enterprise can be categorized into public corporations or boards or quasi government department.
Government Corporation are enterprise that has commercial functions, which are normally established of level by an act parliament or decree, which specially refers to the corporation. Each corporation, board or authority had a particular or decree establishing it. The cart will take the objective and of the corporation and specify its power and how it is to be run and managed. At the state level, public corporation are established by a state judge at the local government level are established by social edicts.
For instance, the National insurance corporation of Nigeria (NICON) was established. decree 22of July, 1969 to ‘write all classes of insurance such as fire, motor accident, workmen’s compensation, marine and aviation, i did Risk.....Among others.
The Nigeria port authority (NPA) was established in 1955 to ’’identify and satisfy the demand for port facilities and services at minimum cost to the nation’’.
While the Nigeria enterprise promotion board was established in 1972 to advance and promote enterprise in which Nigerians are encouraged to participate fully and play important roles’’.
Others corporations and boards the federal level includes:
i. The federal radio corporation of Nigeria (FRCN)
ii. The Nigeria railways corporation (NRC)
iii. The central bank of Nigeria (CBN)
iv. The national electric power authority (NEPA)
v. The Nigerian telecommunication limited (NITEL)
vi. The Nigerian national petroleum corporation.(NNPC)
vii. The Nigerian coal corporation (NCC)
viii. The Nigerian cost corporation (NCC
Mention may be made to the universities, polytechnics, college of education and the research institute which is public sector educational enterprise established by relevant federal act, decree or state laws in the case is.
Public corporations are to be independent of the central government as possible. Thus, they are by boards or councils each of which has the board of directors of a company. Each corporation also have general manager or similarly placed officer who is the chief executive reporting to the board and council.
THE FEAURES OF PUBLIC CORPORATION
One of the main feature of the public corporations is that a manager s put in as supervisor in the running to the business. The board of directors in responsible to the minister of the government and he parliament. This is one reason why the public corporation type of business is described a being controlled by the government.
Another special feature f the public corporation type of business to that it is sot-up and are financed, by the government initially. Only some have issued stock to the public obtain large capital and long-term capital. This means that the corporation has on shareholders except in some cases.
One other feature in that public corporation is no aimed at malign profit. This does not mean that they do not aim at making profit. The government can supplement the public corporation with government grants. If the earning of the business fall. The government can do this by taxing the citizens in order to meet its expense.
The public corporation does not share or distribute profit but they have and meet or pay interest on state issue to the previous owners of the business on their fixed rates.
The feaster of the problem corporation in that it deals with those economic activities that the community may be benefit from but which offer. The businessman may was the fact that such a commodities or service is renewed essential to exploit the consumer. An example of such is electricity.
Restriction of then commodities supplied and feature of the public corporation. An example is the services of the Nigerian Railways Corporation (NRC) whose services are available only to the area that are covered by real, the electricity corporation of Nigeria can only supply areas where their electric cable and wires reach.
Local monopolies are also brought by the business of the public corporation this important feature means that is difficult for other business to compete with the corporation. An example of this is that no other form of business may or will install in electric power station in a dies where the Electricity Power Authority of Nigeria has setup its station. In fact, paramagnet will not approve the move. Another characteristics of public is discriminating services render or goods supplied. For example the NEPA can charge less on the supplied to factors or industries than on power supplied to private domestic consumers. This possible because their services generated cannot be transferred from one customer to another.
The last main feature of the public corporation is that it always operates below full capacity. This is so because the establishment needs large fixed capital. Therefore, the existing demand of the public as a whole to be able to meet any future increases in demand.
SOURCE OF CAPITAL
Public corporation are normally set up by the government and financed wholly by it. Thereafter, they are expected to generate fund through their services to the public to be paid to government account. The major aims of establishing them is not to make profit although, the ones that have purely commercial functions are required nowadays to generate enough fund to cover their services and make profit for the government. The three sources of capital that can be identified in the financing of the public corporation are government financial grants, bank loans and internally generate revenue.
1. Government Financial Grant: the government makes budgetary provision for the government department and financial grant to the statutory corporation which rendered social services and is prevented from charging the full price for their services. Subsidies became imperative to make up the deficit in internally generated revenue.
2. Loans from Banks: public corporations through their boards and councils are empowered to negotiate and dices loans from the local hank to executive certain project.
3. Internally Generated Revenue: statutory corporation, boards and authorities utilize their internally generated revenue to finance part of the operations.
REASONS FOR THE ESTABLISHMENT OF PUBLIC CORPORATION
⦁ Essential Services: the establishment provide services which are vital to the citizen end which should to provide without the motive of profit for the overall god of the masses.
⦁ Avoidances waste And public publication: it should be more economical to run water and electricity undertaking as states monopolies because laying water pipes and power lines across the roads and in people’s houses would be wasteful. Such activities would also give rise to public relationship problems, which are more easily solved by the government botches than the private enterprises.
⦁ Capital requirement: the local needed to establish most of the public utilities are so large that it cannot be afforded by private enterprises.
⦁ Good infrastructural base: a good network of road and railways, powers, communications etc. Will lay a solid foundation for paid economic development land progress of the country. They are strategies to the government and the people. Therefore, only the government can run them in the public interest.
⦁ Even development: the policy of most government is encourage even development and bring about equitable distribution of the country wealth, to achieve these objectives the key industries and organizations should be in the ranks of the government.
⦁ Social cost: the social cost of some undertaking make the government the most suitable candidate to establish and run them. For instance, to lay a rail or pipeline across towns, citys and village would result in the destruction of cash crops and dispossession of the citizens’ land; the establishment of a claim wouki involve the destruction of cash of crops and displacement of villages. Under these circumstances, the government in the only organization that can carry out the undertaking because of the coercive power, which it possess.
CONTROLS AND MANAGEMENT
The activities of statutory (public) corporation are checked by the following measures adopted by government policy.
The government department are responsible to the government through the appropriate minister of commissioner.
The government is to appoint member of their various boards and councils. The boards and councils run the corporation according to their government policy.
Public influence plays some parts too. The public maintains an eye on the activities of the public utilities and usually ready to voice their opinion and dissent through the press anytime something goes wrong.
PROBLEMS FACED BY PUBLIC CORPORATION
⦁ Poor condition of service for staff: it is often that the unified grading system makes it difficult for the public corporation and companies to attract staff with exceptional quantity.
⦁ Poor management: many board and council members see their appointments as opportunities to take a slice to the public take. It is often alleged that many board member spend all their time pursuing contracts and arranging for distributorship.
⦁ General laxity on the party of staff: in the private sector, staff work hard because they know that if the company fails to breakeven, it sold probably liquidate and they would lose their job, the situation does not occur in the public service where customers who have come to buy goods or services might be turned away or asked to’’ come tomorrow’’. Because the staff concerned might be busy doing other work.
⦁ Bad economic condition: the worldwide economic recession and the consequently poor condition of the Nigerian economy also affect the public corporation to the same extent.
⦁ Exclusive centralization: the lack of decentralization of public utilities like PHCN makes their management weak and decision making slow.
⦁ Frequent change of board members: the frequency with which the boards and councils are reconstituted tends to defeat the purpose for which they are appointed.
1.1 STATEMENT OF PROBLEM
The statement of this study in the use of accounting information in public corporation, NNPC as a case study considering the behaviour relationship the use of accounting information in public corporation.
1.2 THE PURPOSE OF THE STUDY
The purpose of this study was to examine how useful accounting information is in public corporation.
1.3 RESEARCH QUESTION
1. Will the accountant/cashier of the NNPC District office Ibadan not be able to tell what kind of accounting record is maintained in their corporation?
Table
Staff No. of respondent % of Respondent Type of accounting record
Accountant 4 50% i.petty cash book
ii.credit or debtor control account
Cashier 4 50% i.impress account
ii.Remittence account
iii.General account
Total8100%
2. Will accountant/cashier of the selected start ‘1’ the NNPC no table to state the various kind of management accounting techniques used in the corporation?
TYPES OF MANAGEMENT ACCOUNTING TECHNIQUES
Staff No of Respondent % of respondent Type of accounting record
Accountant 14 60% i.Budgeting and budgeting control
ii.standard costing
Cashier 4 40% Standard costing and Budgeting
Total18100%
3. Will the account/cashier not be able to mention the final account prepared in the organization
Table
Staff No of Respondent % of respondent Type of accounting record
Accountant 4 50% i.Trial balance
ii.operating ladger
Cashier 4 50% Trial balance
Total8100%
4. Will the accountant / cashier of the corporation not able to state the uses and uses of their trial balance (final account).
Table
Staff No of Respondent % of respondent Type of accounting record
Accountant 9 50% i.investors in rate cases
ii.in ascertain thetotal expenses account and remittance account
iii.To determine the financial position of the corporation
iv.Board of director’s management use final account creditor debtor control
Cashier950%
Total18100%
This table above present the reviews of the staff in the corporation of the various use of final account. All the respondents in each of the staff being question i.e. 100% agreed and common on the uses or user of the final accounts as shown on the table above.
5. Will the accountant/ cashier not able to state the problems encountered in the accounting information of their corporation?
Table
Staff No of Respondent % of respondent Type of accounting record
Accountant 6 65% i.imbalance of accounting record and books
ii.inadequate accounting record
Cashier 2 35% i.obsolescence machine used/inadequate facilities
ii.shortage to complete the assignment schedule
Total8100%
1.4 OBJECTION OF THE STUDY
The purposes of the study were to examine how useful accounting information is in public corporation.
1.5 RESEARCH HYPOTHESIS
Accounting information generated by accounting system of any business organization serves various users with divers need and user such information.
1.6 SIGNIFICANT OF THE STUDY
This study is deducted; the result could help the management and board of directors to show its stewardship and Accountability in the operational activities of their workers.
1.7 SCOPE OF THE STUDY
Accounting information, its usefulness is draw from four types of accounting viz: Financial accounting cost accounting, management accounting public sector accounting, more also, the derivation function of accounting in Bus,
FINANCIAL ACCOUNTING
Lucey (1988) define accounting as that part of accounting which covers the classification end recording of actual transaction of an entity in monetary terms in accordance with established concept, principles, accounting standard and legal requirements and present of accurate as possible of the effect of the transaction over a period of time and end of the time ‘’Degrees (1984) state that financial accounting specializes in stewardship function and concern mainly with financial statements. Hornggren (1985) has placed accountants task of supplying information into the compartment store keeping attention directing and problem solving arid that financial accounting specialize in store keeping describe both internal and external parties to evaluate organization performance and position.
MANAGEMENT ACCOUNTING
Statement of management, accounting board number one defined management accounting as ‘’the process identification, measurement, accumulation, analysis, preparation, interpretation of plan , evaluate and control with an organization and to ensure appropriate use of an accountability and to ensure appropriate use of an accountability for is management in operational activities.
Management accounting is also concerned which measuring the economic consequences and implication of management decisions it concern itself particularly with money as measure of economic performance and with using the measure to help managers to manage the affair of the business.
Blasker [1986] assets that cost and management accountants specialized acknowledge and experience is directed to collection, interpreting and communication a wide range of information and advice regarding costs, cost trends measurement of performance against standard budget, pricing and the effect of change in volume of sales and production and other information needed for sound day-to-day control resources.
Decoster (1982) in their view of control firm operation decisions which begins when resources have been committed to the firm, emphasized management needs to make special intra-firm resources allocation.
The stress that the goal of management accounting is to optimize the use of these financial resources committed to business.
COST ACCOUNTING
The institute of cost and management accountant defined cost accounting as that act of management accounting which established budgeted and standard cost and actual cost of operation, processes, department or products and the analysis of variance, profitability or social use of fund (lucey 1988)
Cost accounting is an aspect of management accounting, which is concern need with measuring the economic performance value of the resources consumed in producing goods and service.
It is also a process of collection, summarizing and made the information to the management showing cost and benefit of pursuing each of the available course of action open to the management P.F. Bourke in his book titled ‘’what does it cost state that’’ it is generally accepted that the purpose of cost accounting is to provide data to enable products costing for investor, valuation: and profit determination and for planning and controlling’. Anderson (1978).
PUBLIC SECTOR ACCOUNTING
K.Oshisanmi and R.N Dean (1985) in this book titled ‘’financial management in Nigeria public sector’’ also defined public sector accounting, otherwise known as governmental accounting, as the process of recording.
Analysis, summarizing , communicating and interpreting financial information about government in aggregate and in details, reflecting all transaction involving the receipt, transfer and disposition of government funds and property of P.S.A. can be defined as an information system involving identify, recording, classifying in marketing terms.
THE USE OF ACCOUNTING INFORMATION IN PUBLIC CORPORATION
The uses of accounting information in public corporations are:
(i) Evaluating business performance
(ii) Assessing the effectiveness in achieving the corporation’s objectives.
(iii) Assessing the liquidity of the corporation, its present or future requirement for additional capital and long-term loans.
(iv) Estimating remuneration capacity
(v) Evaluating employment opportunities
(vi) Assessing position and prospects of individuals department in the corporation.
(vii) it is used by board of direction to make both the short-term and strategic decision within the organization
(viii) It is used for classification and recording which items are stationary score items are categorically identified in monetary terms.
(ix) It is enable the lender of supplier to the organization to know the financial soundness of the indebtedness.
(x) It is used as financial instrument to portrayed the stewardship and accountability of the corporations.
(xi) It is used to show the degree of fairness achieved in the allocating or distribution of the organization surplus.
1.8 PLAN OF THE STUDY
This project work comprise of five chapters; chapter one of the project works deals mainly with the intro diction of the study, which comprises of background of Accounting information in public corporation, the arms and objections of the study, scope and limitation of the study, the statement of problem of research and plan of the study. Chapter two of the project also deals with the review of pest, the view and findings other person and text books that have previously researched and the subject of the study. The purpose of this study has been defined as the examination of the uses of accounting information in public corporation in Nigeria. Chapter three of this project deals with the brief history of some companies like mobil,Gulf (now chevron), Agip, Esso and Texaco, satrap (now Elf) which are into the country to take up concessions that had deed relinquished by shell. And some after comprise like Organization of Petroleum Exporting Countries (OPEC). Nigeria National Oil Corporation (NNOC).
Chapter four of this project deals with the data presentation with the data presentation with the data analysis and interpretation of the study. Chapter five of this project deals with summary of finding the project, conclusion and recommendation of the study.
1.9 DEFINITION OF TERMS
I. Budget: Accounting to the terminology of the institution of cost and management accountability, budgeting is a plan, quantified in monetary terms, prepared and proved prior to defined period of time, usually showing planned income to be generated and or to be employed to attain give objectives.
2. Budget control: is the establishment of budget relating to responsibility of executive to the requirement of a policy and their compassion of actual budgeted result either to cure by individual action, the objection of the policy or to provide a basis for it revision.
OBJECTIVE OF BUDGETARY CONTROL
The objective of budgetary control is to:
i. Combine the ideals of all levels of management doing budgetary preparation.
ii. Centralize control
iii. Show management when action is needed to remedy a situation.
iv. Plan and control income and expenditure
.