CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Making decisions is part of our every day’s lives and it is often one of the main functions of on the best option, management has to judge the effectiveness of various alternatives based on some decision making in today business word. Nowadays, organizations try to have efficient AIS in our performance. In addition, accounting information system (AIS) plays the key role in management decision making process in today’s turbulent world. For this reason, they often depend on financial and economic information management. Indeed, management and decision-making are often considered as an integrated tasks and Process involves the selection of the best course of actions (Emmanuel et al., 1990). In order to decide gathered by management accounting. Management information system is indispensable tool for management usually makes the major decisions of the organization (Young, 1982). Decision making information technology tools as it improves their efficiency, effectiveness and their overall business activities.

In recent years, the advancement in information system modules all over the world has helped business information. This statement sustained by the fact that the accounting information systems include in recent years, is considered as a system of information, which is not limited to the data and financial information underlie the decision making both inside and outside the enterprise. Accountants play a produce results which enhances decision making. Hence, it can safely be concluded that AIS is not an Accounting information also may help managers understand their tasks more clearly and reduce uncertainty before making their decisions (Choe, 1996). Thus, AIS is vital for all organizations and end in itself but a tool to an end i.e. decision making to improve corporate performance. AIS is capable enterprise management, and an external one, for the third parties. Internal decision-making and analysis information, but it includes data and descriptive and quantitative information which is useful in decision tools implemented vary from one firm to another. One tool that proved to be very effective in one firm. Based on the accounting information function, which is used to provide information components and elements of an organization, which provides information for users by processing for making substantiate decisions, and considering the two components of accounting, financial and crucial role in providing information for making economic and financial decisions. These decisions are might fail for another one. Different information is needed for these diverse purposes, therefore customers, governments and the public in conjunction with the administration, which is its atmosphere of global uncertainties, high competition levels locally and internationally and of achieving the firms’ objectives. Hence the role of AIS for effective decision making cannot be decisions. In order to circumvent financial disasters through false and ineffective decisions, there is a big pool of Essential elements for the organizations. Implementing the wrong ones can affect the company in a very unprecedented change in the economy. Hence, a great demand is often placed on from the managers of organizations have to concentrate on various accounting tools to support their decisions-making of producing comprehensive accounting information, which are invaluable basis for making important responsibility to prepare the accounting programs and displaying it, this information must be capable financial tool, which are available to support the decision making process. Never the less, accounting managerial accounting, we can assert that accounting has an internal information function, for the and informal channels for decision making (Zare et al., 2013), and because financial accounting these organizations to make suitable and informed decisions (Copeland &Dascher, 1978). Counterparts, more effectively. Today, most modern business organizations find themselves in every organization, either profit or non-profit, needs to maintain an AIS, carefully. Accounting system, making for users. Such users include present and potential investors, suppliers, lenders, creditors, Zare and Shahsavari (2012) mentioned that most parts of information in organizations are accounting negative way and may sometimes lead to its bankruptcy. The information of the economic systems is mostly provided by the economic evidences or databases disregarded. It is noteworthy to mention here that AIS derives its source from accounting data. AISs of cause and effect relationships can require very specific models and accounting information.

The dynamic and competitive environment of the business world make high demand on the timelines and reliability of the information use for decision making. The success of a business largely depends on the   quality of decision made, and the quality of further decisions depends on the relevance and timeline of the information. Decisions are made throughout various department of the organization and are usually based on the information prepared and stored by those departments themselves. These financial information is produce by an accounting information system. The accounting information system record events and transactions, and produce information for the evaluation of the overall success of a business entity that is information on financial position, financial performance and cash flow. It also set a basis for facilitating future decisions. The role which the accounting information plays in measuring the success of an entity and providing information for decision making, makes it the backbone of the information system of the organization. This is illustrated by the fact that implementing their Enterprise Resource Planning (ERP) system nearly all company adopt financial and accounting modules. A potential important rule of the internal accounting information system is to generate information about subunit performance for used in personnel’s and compensation decisions.

The past years has seen measure transition in the nonbanking sector with a number of microfinance institutions obtaining micro deposits from customers. This transitions have really change the way these organisations conduct their activities.  This has not only let to benefit in terms of clientele term base growth but their activities are being more closely monitors by COBAC. One such microfinance institutions is the Ngoketunjia cooperative union limited (NGoCCUL) is a credit union situated in Bamenda Municipality, it was introduce in Bamenda Municipality plain with the aim of helping famers to save money for future, short term loan for their development. Also aim at helping members save regularly, borrow wisely and pay promptly with relatively low interest rate. Ngoccul head office is located in Bamumka Bamenda Municipality a small village in the Northwest region of Cameroon along the ring road from Bamenda. Bamunka village the sub divisional head quarter of Bamenda Municipality central subdivision and the divisional head quarter of Ngoketunjia division. The population of the subdivision is about 30467 following the last population of 2015. The sub division is the administrative and commercial head quarter, it owns the most administrative offices and securities stations, it equally has microfinance establishment of which Ngoccul is one and with other sending and receiving money agencies. The organization has gone through a number of growth and transitional phase in creating numerous branches. The organisations can now, among other benefits, collect deposits from client and grant loans6

According to (Waterfield and Ramsin, 1998) as more and micro finance institution scale up their activities, managers are becoming increasingly aware of the need to improve their accounting formations systems (Okeeffe and Fredrick, 2002) explain that transformations places new demands on the institution in terms of its ability to centralize information from different operating locations. Regulatory reporting requirements and liquidity management requires head office to be aware of the position and performance of their branches with greater frequency and reliability.  The microfinance phenomenon is not new in Cameroon. In fact, it has been existing in Cameroon for over a century under its traditional form of tontine. Since 1940, loan and thrift associations existed in the Northwest region of Cameroon alongside cooperatives. also the central fund for economic cooperation, saw the light in 1950 and began operating in it formal formed in 1963 thanks to Antony Jasen Holland nationality, who introduced credit union in the Northwest region of Cameroon and during the first year, the institution benefited from the American expertise and management. The growth of this credit union saw the creation of the Cameroon Cooperative Credit Union League (CamCCUL). Camccul is the largest network of MFIs in Cameroon and the CEMAC sub region. This network has created since 5 years a commercial bank; the union bank of Cameroon. But the micro finance only became formal and diversified in Cameroon during the 1990s thanks to law no 19/053 of 19^th December 1990 on the freedom association and law no 92/006 of 14^th august 1992 relative to comparative societies and common initiative groups. According to Wanda (2007), the rigorous crisis during the late 1980s and early 1990s as well as the lightening up of conditions of access to credit by restructured banks are the main factors that lead to the exposure of MFIs in Cameroon.

1.2 Statement of the Problem

A decision is essential for an organization’s survival and development, since it is prior to any action (Socea, 2012). A manager is an individual responsible for an organization or a set of entities. Any manager is invested with formal authority in accordance with his assigned statute. In their role, managers have to make effective decisions to keep the organization flourishing. Hence, as long as there is management, there will be the “problem” of how to manage better. Therefore, as Greenberg & Baron (2008) say, to make decisions is one of the most important and critical activities of organizations. Since, organizations as systems build themselves up by making decisions. Every made decision creates and leads to a new decision. These decisions might involve the strategic direction of the organization or simply just deal with the day-to-day activities of employees. Thus, management is constantly confronted with the problem of alternative decision- making, especially knowing that resources are relatively scarce and limited. This necessitates doing the right things, the appropriate use of resources and the need to set different things in the order of importance. However, as we live in an age of data abundance. Business managers have today access to far more data than any previous generation of managers, and that is transforming the way many business decisions are made.

Therefore, it is pertinent that quality accounting information is made available for proper and precise decision- making, maximization of profitability and optimal utilization of scarce resources. Because accounting information is not only required for evaluation of the past and keeping the present on course; it is useful in planning the future of the organization. (Nnenna, 2012) Given these conditions, the accelerating pace of business changes and the significant amounts of information available to businesses using modern technology, the challenge is to filter out useful information and present it in a manner that makes it useful for managers. The future management of a company is determined by its past and present performance as reflected in the financial statements available to stakeholders like creditors, investors, suppliers and employers who use financial statement information differently. Most companies do keep accounting records but most often fails to respect the double entry principle, some keep single entry and incomplete records which creates serious problem in determining net profit or loss for the period as well as in preparing the balance sheet. For this reason, it is very important for the researcher to carry out a proper study and research on this issue, to point out the alarming signal on the influence of the financial statement in decisions in an organization. Incidentally, bookkeeping as a practice is a necessary pointer of strength and weakness in a business entity, however, the level of business management expertise and financial reporting skills necessary for sound decision making has been way below the conventional standards expected. Also, most Micro finance institutes(MFI) complying with the bookkeeping principles have fallen short of living up to the laid down standards, but to satisfy the obligatory and statutory requirement. Subsequently, this has further raised the urgency to provide technical support and management training needs, to the operators in this sector to cope with the ever-growing demand for new and existing players in the industry because of competition, creativity and innovation.

Some prepare these financial statement but are on able to interpret them and make good decisions. The non-preparation and interpretation of these financial statements in most cases are the result of incompetent persons employed by companies to take care of these financial statements forgetting to realise that, it will affect company decisions (Ali and Soheila, 2009).

Despite the attempt put in place by OHADA, International Accounting Standards (IAS) and International Financial Reporting Standards (IFRSs) to solve the above problem, decision making in most MFIs companies in Bamenda municipality in general is not encouraging (Atch, 2008) because accounting information is the backbone of MFIs, however most of these institutions have not yet understood this point. It is in this light that the researcher is out to know the role played by accounting information on decision making in MFIs and answer the following question.

1.3 Research Questions

1.3.1 Main Research Question

• What is the influence of accounting information on decision making in micro finance institutions?

1.3.2 Specific Research Questions

• What influence does a balance sheet have on decision?
• What influence does the cash flow statement have on decision making?
• What influence does the income statement have on decision making?

1.4 Objectives of the Study

The purpose of this study is to establish the relevance of accounting information on decision making in micro finance institution in Bamenda municipality.

The subsidiary objectives to this study are to:

• Know if the balance sheet has an influence on decision making in micro finance institutions in Bamenda municipality
• Know if the cash flow has an influence on decision making of financial institution in Bamenda municipality
• Know if the income statement has an influence on decision making in micro finance institutions in Bamenda municipality.