Role of accounting information in investment decision making (Assignment 1 Project Context and Proposal) Professional Project (BUSN20019) (Term 1) Submitted by: Prakash Kumar Bhusal s0279764 Submitted to: Dr. Nazila Razi Due date: 23/04/2017 Date Submitted: 22/04/2017 Table of Contents Executive summary 1 Project context 2 Project Proposal a. Project Title b. Background c. Problem definition d. Aim and Objectives e. Literature Review 3. Project Plan a. Proposed data collections and analysis approaches b. Milestones and schedule c. Conclusion Reference Appendix Executive summary Accounting is the field which can be considered as a pillar of the economic world. They understand the business well and take required step before deciding on the business decision. They analyses the data collected from the past and forecast the future events. Decision makers analyses the fact considered in returns on their investment such as dividends and increase in the value of their investments. Dividends and increase in the value of shares of company determine profitability of the organization. Thus, investors are interested in future profitability. Past relevant data of income and dividend are major indication to predict or forecast dividend and share price fluctuation. The main aim of this project is to understand the necessities of using the different source of accounting information also to elaborate the need of companies financial data to make investment decisions and to explain the reliability of companies financial information used by the creditors, investors and other user. 1 Project context Profession is a return oriented occupation where someone is paid for doing the special job which need field specific knowledge, training and formal academic qualification .It is accepted that “accounting profession is an essential element of our society” (Wyatt, 2004, p 53). It is a profession which requires formal education, has specialized standard code of conduct. Accounting professionals are basically, accountable for recording, analyzing, managing, rectifying and reporting of the accounts in an organization Duska et al. (2011) . Accounting profession is composed of accountants, accounting firms and regulating bodies which are engaged on accounting work. This includes substantive external audit, service from professional bodies such as tax and corporate, finance and accounting in an economy. Wessels and Steenkamp (2009) express that being great with numbers and efficient is not sufficient to be a skilled accounting professionals. There is a scope of abilities that an accountant needs to create which incorporates: critical thinking aptitudes, relational abilities, vital considering, IT abilities, and detailing and introduction aptitudes. They are involved in creative decision making which qualifies them with good brainwave and decisive skills (Carnegie & Napier (2010).Accountants mainly rely on following the rules and regulations of accounting instead of focusing on the good, and unbiased display of accounting and financial information (Frederick, 2008). Accounting is a root of information for many different users.They are the internal users and the external users. Internal users consist of managers and decision-maker , the employees. They apply information from the latest financial accounting, from financial statements and also from the management accounting (internal management), The external users comprises of investors, financiers, creditors, suppliers and customers, social partners and the financial analysts, the judiciary system and also the public. Regarding the accounting information users involved in the decision-making process regarding the realization of an investment, they can be found both in the category of internal users ( m anagers, board members) and external users, on positions such as investors, and creditors. Therefore, accounting information must be understandable, relevant, reliable, comparable, consistent and objective, forming the internal sources of information. Accounting professionals play very essential role in decision making, especially investment related decision. for instance, they are involved in preparation of financial statements, budgets, finding out required outcomes and other quantitative information or statements (Rawlinson, D. and B. Tanner, 1989).By generating necessary quantitative evidences ,business data (financial statements and other disclosure) accountants play important role in required relevant decision makings (Gray, 1990, Owen and Bebbington, 1993). 2 Project Proposal f. Project Title : Role of accounting information in investment decision making. g. Background Accounting information is a crucial part in today’s life which helps to understand the financial situation of the organization and used as the basis of making any decisions. As strategic decisions have both short and long-term effects on the business it is important to analyze and understand accounting information for making strategic decisions of organisation. Accounting information aid managers to understand their work more clearly reducing uncertainty in making their decisions (Chong, 1996). Accounting systems can aid in decision making providing information relevant to the decision also to the decision maker (Gray, 1996). Accounting and financial data are among the most important data globally used in the managerial decisions (Royaee, Salehi, & Aseman, 2012). Financial statement provided by accountants are very essential information for decision making, investors extract information from the statement of the firm in which they find returnable for their investment. Decision makers analyses the fact considered in returns on their investment such as dividends and increase in the value of their investments. dividends and increase in the value of shares of company determine profitability of the organization. Thus, investors are interested in future profitability. Past relevant data of income and dividend are major indication to predict or forecast dividend and share price fluctuation. h. Problem definition The focal point of this research is to analyses the role and usefulness of accounting information for business investment decisions . Accounting information are used to prepare firm’s balance sheet and income statement which gives the required information for analyzing the investment indicators such as Net present value, return on assets, equity ratio, Internal rate of return. i. Aim and Objectives The aim of this research is to justify the role and importance of accounting information in the investment decision making process. The objectives of this particular study are as follows: • To understand the reasons behind professionals using different types of accounting information. • To identify and analyses how the company use the financial data provided by accountants to decide their investment. • To provide reliability of financial information which can be used by creditors, investors and other financial information users. j. Literature Review Information minimizes the uncertainty and intricateness of task which helps to highlight the required possibilities and limitation of alternate solution. An information helps decision making process in three different heads. It helps decision making process before by preparing the decision, during, by imitating the decision options and after, by communicating the information derived from decision to employees and managers to execute the decision made. Collier (2015), says decision maker should take account of accounting information as they are the crucial while deciding in business firm. Accounting information light the candle in a dark room giving the bright overview of financial stableness and its financial ranking in business. While taking a specific choices like, implementing new IT programming, the business association will require distinguishing its money related ability of the organization and this can be recognized by breaking down the accounting data. accounting data incorporates the data about the money related articulations, income, accounting strategies and approaches and valuation of assets and liabilities of the organization (Bouwens, 2014). Griffin (2014) remarked that the changes of the business activities of the organizations rely upon the nature of the accounting data. In support of this, Baker and Haslem (2015) said that quality information provides detail and through information required by decision makers. If the higher management receive detailed information about the business transaction or financial activities of the company, then they can take the companies objectives to fulfill. 3. Project Plan a. Proposed data collection and analysis approaches Methodologies used in the research are combination of qualitative and quantitative approach. Moreover, data are collected from different sources like journal, articles, blogs,websites and brochures. Collected information will be thoroughly studied and analyzed to elaborate the impact of accounting information in business decision. Ideas and knowledge gathered from literature review will be used to develop the findings of the report. Secondary data as a cost effective method of collecting data will be collected from company’s websites or financial report published in articles. b. Milestones and schedule The following Gantt chart shows the time taken for the completion of assignment. GANTT CHART Task Performed Start Date End Date Time period Project context/Proposal 19/03/2017 24/03/2017 5 days Literature Review 24/03/2017 31/03/2017 7 days Data Collection 1/4/2017 7/4/2017 6days Data Analysis 8/4/2017 15/4/2017 7days Compilation 16/4/2017 21/4/2017 5days Final Report Submission 22/4/2017 c. Conclusion Thus, the major objectives of the research proposal was to build a framework to develop the research project on the topic “Roles of accounting information in investment decision making”. The project context and project proposal gives the clear idea of accounting profession and their knowledge in generating accounting and financial information for making the effective and efficient decision making. Reference • Accounting information “A basis for achieving the decision for the realization public investment project. (2012). Annals of the University of Oradea : Economic Science, 1(2), 716-721 • Bouwens, J. (2014). Understanding investment decisions: the role of cost accounting. Harvard business school discussion paper. • Collier, P. M. (2015). Accounting for managers: Interpreting accounting information for decision making. John Wiley & Sons. • Chong, V. K. (1996). Management Accounting Systems, Task Uncertainty and Managerial performance: a research note, Accounting, Organizations and Society, Vol. 21, No. 5, pp. 415–421. • Carnegie, & Napier. (2010). Traditional accountants and business professionals: Portraying the accounting profession after Enron. Accounting, Organizations and Society, 35(3), 360-37 • Gray (1996), ‘Accounting will only be relevant in 35686’”,http://www.oppapers.com/essays/accounting. • Griffin, P. A. (2014). The market for credit default swaps: new insights into investors' use of accounting information?. Accounting & Finance, 54(3), 847-883. • Rawlinson, D, and B, Tanner (1989), Financial Management in the 1990s (Longman) Frederick, R. (2008). A Companion to Business Ethics (Blackwell companions to philosophy). Hoboken: Wiley. • Royaee, R., Salehi, A., and Aseman, H. S. (2012), Does Accounting Play A Significant Role In Managerial Decision-Making? Research Journal of Business Management and Accounting, Vol. 1, No. 4, pp. 057- 063. • Wessels, P., & Steenkamp, L. (2009). An investigation into students' perceptions of accountants. Meditari Accountancy Research, 17(1), 117-132. • Wyatt, A.R. (2004).“Accounting Professionalism - They Just Don’t Get It!”, Accounting Horizons, Vol. 18, No. 1, pp 45 – 53. Appendex .