‫بسم هللا الرحمن الرحيم‬
Islamic University – Gaza
‫الجامعة اإلسالمية – غزة‬
‫كلية التجارة‬
Faculty of Commerce
Department of Accounting
‫قسم المحاسبة‬
The Impact of Accounting Disclosure on
Administrative Decisions
Case Study: The Bank of Palestine in Gaza Strip
A Graduation Project Presented to the
Faculty of Commerce
The Islamic University of Gaza
In Partial Fulfillment for the Degree of
Bachelor in Accounting
by:
Yehia F. Al- Hirsh
Hatem A. Badawy
Dr. Salah R. Shubair
Supervisor
2012
II
Dedication
We lovingly dedicate the
research
To our parents
To our teachers
To our friends
To our University
The researchers…
III
List of Content
Averse of Quran
Dedication
List of Content
List of tables
Table of Figures
II
III
IV
V
V
CHAPTER 1: RESEARCH PROPOSAL
Abstract
Introduction
Research Problem
Research Objectives
Significance of the research
Scope and limitations of the research
Research hypotheses
Research methodology
Related works
Time table and budget
2
3
4
4
5
5
5
6
6
9
CHAPTER 2: LITERATURE REVIEW
Section 1: Accounting and Accounting Information
Introduction
Accounting definition
Uses of accounting
Accounting as a service activity?
Accounting as an Information System
what is an accounting information
Qualitative characteristics of accounting information
Sources of accounting information
Types of financial statements
Accounting information and user needs
Users of accounting information
Purpose of using accounting information
Section 2: Decision Making Process
Introduction
Accounting department
Nature of accounting information
Decision making process
Types of decision making
Classification of decision
Condition for making decision
IV
12
12
13
13
14
15
15
20
21
21
22
24
27
27
27
28
30
31
33
The decision making process
Factors affecting the decision making process
Section 3: The Palestinian banking sector
Introduction
The emergence of the Palestinian banking sector
Classification of banks operating in Palestine
Distribution of Palestinian banking sector employees
34
35
37
37
38
38
CHAPTER 3: METHODOLOGY
Introduction
Research approach
Research phases
Data collection
Society and sample of the study
Interview
Content of the interview
Advantages and disadvantages of the interview
Summarized the interview
41
41
41
42
43
44
44
44
44
CHAPTER 4: APPLIED STUDY
46
47
Introduction
Summarized the interview
CHAPTER 5: RESULTS AND RECOMMENDATIONS
52
52
54
58
Results
Recommendations
References
Appendix
List of Tables
Table 1.1: Time Table
Table 2.2.1: Levels of decision making
Table 2.2.2: Types of decision making model
Table 2.2.3 phases of decisions
9
28
32
34
List of Figures
Figure 2.1.1: Accounting as Information System
Figure 2.1.2: Qualitative Characteristics of Accounting Information
Figure 2.1.3: Fundamental Qualities (Relevance)
Figure 2.1.4: Fundamental Qualities (Faithful Representation)
Figure 2.1.5: Enhancing Qualities
Figure 2.1.1: Types of decision making
Figure 4.1: Research phases
V
14
16
17
18
19
33
42
Chapter -1Research
proposal
1.1Abstract:
The research aims to explain the advantages of using accounting
Information and the role of these Information in decision making process.
This study aims at identifying the level and extent of practicing
administrative decision-making process by the administrative managers
of departments and sections in the Banking Sector in Gaza Strip, through
an empirical study we have tried to identify the level of reliance by the
Banking sector on the accounting information to make administrative
decisions.
The two researchers depend on the primary sources and secondary
sources in collecting data, to achieve the goals of the study and in
answering its questions. Through this approach they obtained the
secondary data which formed the theoretical frame for the study.
Meanwhile the practical frame depended on an interview which was
designed for the subject goal.
The study came to a group of results and recommendations, which are
related to explain the important of using accounting information in
decision making process in the company, and the most important points,
are:
 The accounting information helps decision makers in the commercial
banks to reduce the uncertainty surrounding the decision - making
process.
 There is a positive relationship between the extent of using accounting
information in decision-making and the decision taken, if the
accounting information is correct the decision taken is correct.
 Errors found in the information leads to errors in the decision to the
detriment the interests of the company.
 management knows the role of accounting information in the
rationalization of the decision making.
And the recommendations are :
 management must participate all the departments in the decisionmaking process.
 Joint employees who specialize in preparing financial reporting and
accounting information in training courses to acquire skills and
practical experience and knowledge of accounting information.
2
1.2 Introduction:
A
ccounting system represents as the language of business because
cost, price, sales volume, profits and return on investment are all
accounting measurements and the purpose of accounting is to
provide information that is useful for decision making.1
Accounting Information are considered the key factor in the success or
failure of any businesses.
Information has become an important element of the production ,and has
an important role in improving the effectiveness and efficiency of the
entity, so the entities have tended to design and build Information
systems in order to control the unlimited amount of information necessary
to manage the facility.
Accounting information systems are considered the most important and
oldest Information systems and a major source of information in the
facility.
Today the world is facing a rapid development in the company need of
information both in terms of quantity , quality and speed of getting
information, in order to make the best decisions and to improve the
relationship of these facilities with the surrounding environment, which
has emerged the increased importance of information systems and its
ability to satisfy the facilities need of information .
And as we are today in a world that speaks about information age
and for the third generation of information technology, the trend is
moving towards developing the entity relationship with the market in
order to get new opportunities based on the optimal use of available
information from suppliers, customers and competitors, in order to
maximize the competitiveness and achieving the company goals.
Many different users have a need for information in order to make
important decisions. These users include investors, creditors,
management, governmental agencies, labor unions, and others.
Where management in all different levels needs this information to
perform its administrative functions for planning, coordination, directing,
controlling and decision-making.
The major benefits of information are a reduction of uncertainty,
improved decision and better ability to plan and schedule activities.2
1
Williams, J. & et al, (2007), P.28.
2
Romney. M & Steinbart. P, (2008), P 5.
3
This study was conducted on service sector in Gaza strip which
represented by Banking Sector.
The two researchers take the Banking Sector in Gaza Strip as a sample of
service sector.
1.3 Statement of the problem:
This study aims to identify the extent of using accounting Information
and accounting disclosure to obtain and provide information for
decision-makers, whether inside or outside the facility.
We can formulate research problem in the following questions:
 Are the managers in the banking sector aware the importance
of accounting information contained in financial statements for
the investment decisions?
 Is the accounting information contained in financial reports sufficient
to take the administrative decisions?
 Are managers uses the accounting information for guiding in
administrative decisions?
 Is there other information affecting administrative decision?
 What are the main barriers in using the accounting information in the
rationalization of administrative decisions?
1.4
Research Objectives:
The research aims to achieve the following:
 To identify the extent of using advanced technology in obtaining
information, and providing information for internal users.
 Determine the importance of using accounting information in
decision-making process.
 To clarify the properties that must be provided in the accounting
information used in decision making process.
 Make recommendations to the company about the importance of using
accounting information in decision- making process.
4
1.5 Significance of the research:
The Importance of research come from two factors:
 The increasing importance of using accounting information
in decision-making in the business world.
 The lack of previous studies on the subject of research especially the
Palestinian business environment.
1.6
Scope and limitations of the research:
 Subject of the study is limited to clarify the impact of using
accounting information in decision-making process.
 The study will applied on the Banking Sector in Gaza Strip in
Palestine.
 The study will take place from 15th Feb. to 15th may, and it is a short
period, to complete this research
1.7 Research hypotheses:
First Hypothesis:
Financial report is the main source to obtain accounting information
which is necessary for decision-making process.
Second Hypothesis:
Modern information technology provides Decision maker's with
information that required for decision making.
Third Hypothesis:
The managers use the accounting information that available in
decision-making.
Fourth Hypothesis:
Decision makers have the ability to use the modern Information
technology.
Fifth Hypothesis:
Accounting information contributes in the quality and effectiveness
of administrative decisions.
5
1.8 Research methodology:
The two researchers will use the descriptive analytical method to
conduct the study, for being the most appropriate methods to study the
phenomenon in question.
Sources to collect information:
1. Primary sources:
The primary source concentrated in interview, which has been designed
and prepared specially to meet the research purposes.
2. Secondary sources:
The secondary sources consist of books, specialized scientific magazines
and previous researches.
1.9
Related works:
1. Dumitrana, Radu & et al (2008):
(The use of the accounting information in decision making in the
hospitality business).
The study aimed to analysis the accounting information in hospitality
business, to know how financial transactions affect performance and
financial position, how to provide financial information for external users
and how resources were used.
They suggested that a hospitality managerial accounting must be
organized to provide information for planning alternative short or long
term courses of action and to decide the best course of action to be
implemented and without management’s understanding of the
information being provided, management’s effectiveness will be greatly
reduced and it is necessary the organization of a managerial accounting
system to analyze the performance of each department and to decide how
to increase the profit and the quality of all services.
The study found that accounting system and especially managerial
accounting provide useful information for decision making.
Information is the product of accounting and that means that the quality
of accounting information influences the quality of decisional process that
will influence the customers’ satisfaction, the development of accounting
information to support marketing decisions making in hotels offers
opportunities to improve the quality of decisions made.
6
The study recommends the development of knowledge in order to
maximize the resources available to hotel managers. The focus of this
paper is thus the application of knowledge to develop appropriate
accounting information for managers in hotels making marketing
decisions.
2. Sharayri & Momani study (2011):
(The Impact of Reliability and Relevance of Financial Position's
Information on Decision Making).
The study aimed to achieve these objectives:
1. Recognizing the impact of relevance property of the balance sheet on
decision making.
2. Recognizing the impact of reliability property of the balance sheet on
decision making.
3. Recognizing the impact of balance sheet’s information on decision
making.
The study deals with two properties of the balance sheet’s reliability and
relevance, as well as their relation to the decision making in Jordanian
Electric Companies.
A questionnaire has particularly been prepared for this purpose and
distributed on the study sample to answer the research questions and
hypotheses in order to complete the study.
The researchers found that:
1. The degree of reliability and relevance of the financial position
statement is high in Jordanian Electric Companies.
2. Reliability and relevance of the financial position information
influence decision making.
The researchers provide some recommendations such as the necessity of
guiding the administration of the company regarding taking into
consideration the reliability and relevance of the balance sheet, which are
the most important means to develop decision making and therefore to
render the company a success.
3. (Hopkins and et.al,1998)
This study aimed to measure the impact of using information in decision
making in the Pharmaceuticals companies in the United Kingdom,
The study applied on 24 companies operating In this area.
The study concluded that the information have specific impact
on decision-makers, as they have updated their memory and provide
them with some facts and enabled them to Make many decisions
that were stuck, and has helped to support specific strategies, and reduced
7
the time required for the development of projects and removed
the ambiguity and lack of understanding in some of the Medical theories,
as well as managers made more aware of what happened around them,
and the findings of the study also contributed in Improving
the
relationship Improving the relationship with customers and improved the
company's image, and that the greatest impact based on this study is that
information enabled them to avoid negative impacts, weaken decisions
and wasting work time.
8
Time table and budget:
Week Number
1
2
MAY
MARCH
Activity
FEB
The research has a time limit; it should be done in 11 weeks. The
following chart describes the way we will spent the research time.
Table 1.1 time table
APRIL
3
4
5
6
7
8
9
Generate Topic
Read
books
and
related
researches
Writing research proposal
Literature review
Interview
Summarize the interview
Results & recommendations
Discussion the Search
The estimated research budget could be 300 NIS. This budget will be
spent on copying, typing and other expenses related to this research.
9
10 11
Chapter -2Literature
review
10
Section -1Accounting and
accounting
information
11
2.1.1
Introduction:
his chapter deals with accounting information and its importance
in guiding the administrative decision in the banking sector.
In the business world, accounting is one discipline of study that
all people, regardless of job position, should have some
knowledge of. Its concepts can be applied to all job specialties, its
importance has been promoted in recent years, and it is useful in people’s
everyday lives.
T
‫ى‬
‫ى‬
‫ل‬
‫ر‬
N
N
Also In business, accounting system play a very important role in the
companies and the success of any company depends on the performance
of the company's accountants, because the management relay on the
accounting information in making its decisions that produced by the
accounting system. Therefore, accounting information has a great
importance in any company.
In this chapter the two researchers will talk briefly about accounting, but
they will focus more on the accounting information (definition,
characteristics, sources and users of accounting information).
2.1.2 Accounting definition:
Accounting has been defined as the process of identifying, measuring,
recording and communicating economic information to permit
Informed judgments and economic decisions.
The primary purpose of accounting is to help persons make economic
decisions.
In our society resources must be allocated among and within
all kinds of entities. Accounting information provides the basis for
making decisions about resource allocation.
To be useful, data must be identified measured, recorded, classified,
summarized and communicated to potential users.
Accounting information is financial information about economic
activities.
All economic entities (e.g. businesses, government agencies, families,
charitable entities) need such information because it is used for making
economic decisions about those entities.
An economic event of an entity is referred to as a transaction, transactions
are of two types: external and internal.
12
Computers have had a significant impact on the accounting process and
hence the recording process is much more efficient and reliable.1
2.1.3
Uses of accounting:2+3
 Accounting provides a vital service by supplying the information
decision makers need to make reasoned choices among the alternative
uses of scarce resources in the conduct of business and economic
activities.
 Accounting helps on making decisions concerning more rational
acquisition of limited resources through better decision choices.
 Accounting helps for efficient use of available resource through
prompt detection of inefficiencies.
 Accounting helps for more equitable distribution of resources.
 Accounting helps to make policy decisions relating to change in the
system.
 Accounting helps discharge of the social responsibilities of the
business and industry.
 Accounting Provides accounting information to the Government for
taking decisions on excise duties, sales taxes etc.
 Evaluation of financial performance by managers, inventors, creditors,
government agencies, analysts and other users.
 Planning and control of internal operations by decision makers.
2.1.4
Accounting as a service activity?
One way of viewing accounting is as a form of service, accountants
provide economic information to their client, who are the various users of
accounting information.
The quality of the service provided would be determined by the extent to
which the information needs of the various user groups have been met. It
can be argued that, to be useful, accounting information should possess
certain key qualities, or characteristics.
1 Hoggett, J.R., Edwards, L., & Medlin, J., Accounting in Australia, Fifth Edition,
Chapter 1.
2
3
http://answers.yahoo.com/question/index?qid=20070616052244AA2bHOV
http://accountlearning.blogspot.com/2009/10/objectives-of-accounting.html
13
2.1.5
Accounting as an Information System:1
Accounting is an information system that measures, processes, and
communicates financial information about an economic entity; an
economic entity is a unit that exists independently, such as a business, a
hospital, or a governmental body.
Accountants focus on the needs of decision makers who use financial
information, whether those decision makers are inside or outside a
business or other economic entity. Accountants provide a vital service by
supplying the information decision makers need to make “reasoned
choices among alternative uses of scarce resources in the conduct of
business and economic activities.” As shown in Figure 2.1, accounting is
a link between business activities and decision makers.
Figure: 2.1.1 Accounting as Information System.2
Business
Activities
Action
Data
Decision Makers
Information
Accounting
Measurement
Processing
1
Communication
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2
14
2.1.6 Accounting information?
There are many definitions for accounting information:
1. Accounting information: it is the data that have been processed
properly to give a full meaning and can be used in ongoing
operations and future decision-making.1
2. Accounting information: all quantitative and non quantitative
information that concern with the economic events that are
processed and reported by information system in the financial
statements that presented to external and internal users.2
All these definitions can be collected in one definition which is:
Accounting information: is the data that have been organized and
processed by accounting system to provide a full meaning to users. 3
2.1.7
Qualitative characteristics of accounting information:4
The IFRS identified the qualitative characteristics of accounting
information that distinguish better (more useful) information from
inferior (less useful) information for decision making purposes.
As shown in figure 2.2, qualitative characteristics are either fundamental
or enhancing characteristics, depending on how they affect the decision
usefulness of information. Regardless of classification, each qualitative
characteristic contributes to the decision usefulness of financial reporting
information.
1
Shubair,Ahmed,(2006).
Alhubaity, K., & Alsaqah, Z. (2003), page 27.
3
Romeny, M & Steinbart. P, (2008), page 5.
4
Kieso, D. & et al. (2011), pages 43, 44, 45, 46, and 47.
2
15
Figure: 2.1.2 Qualitative characteristics of accounting information.1
Decision usefulness
Relevance
Predictive
value
Confirmatory
value
Faithful representation
Completeness
Comparability
Verifiability
2.1.8 Fundamental Qualities:
A. Relevance:
Timeliness
Neutrality
Free from
error
Understandability
Relevance is one of the two fundamental qualities that make accounting
information useful for decision making, relevance and related ingredients
of this fundamental quality are shown below.
1
Kieso, D. & et al. (2011), page 44.
16
A. Relevance:
Relevance is one of the two fundamental qualities that make accounting
information useful for decision making, relevance and related ingredients
of this fundamental quality are shown below
Figure: 2.1.3 Fundamental Qualities (Relevance).1
Relevance
Confirmatory value
Predictive value
The accounting information To be relevant it must be appropriate and
convenient for decision makers, and this property can be achieved by
knowing the extent of the benefit of using accounting information by
decision makers, when this information help to reduce the alternatives
and choose the best alternative which represents the optimal decision,
accounting information is capable of making a difference in a decision
when it has predictive value, confirmatory value or both.
1
Kieso, D. & et al. (2011), page 44.
17
1. Predictive value:
Accounting information has the ability to achieve the benefit from using
it in the predictive decision and expectation about the future.
2. Confirmatory value:
Relevant information also helps users confirm or correct prior
expectations.
B. Faithful representation:
Faithful representation is the second fundamental quality that makes
accounting information useful for decision making. Faithful
representation and related ingredients of this fundamental quality are
shown below.
Figure: 2.1.4 Fundamental Qualities (Faithful Representation).1
Faithful representation
Completeness
Neutrality
Free from error
Faithful representation means that the number and descriptions match
what really existed or happened, it is necessary because most users have
neither the time nor the expertise to evaluate the factual content of the
information.
1. Completeness:
All information that is necessary for faithful representation is provided,
and accounting information must be presented without omission of
essential information.
2. Neutrality:
The company can't select information to favor one set of interested parties
over another, not influence the process of obtaining the information and
preparation the information in specific form to serve specific person
1
Kieso, D. & et al. (2011), page 45.
18
without the other. Unbiased information must be the overriding
consideration.
3. Free from error:
An information item that is free from error will be a more accurate
representation of a financial item. However, Faithful representation does
not imply total freedom from error this because most financial reporting
measures involve estimates of various types that incorporate
management‘s judgment.
C. Enhancing Qualities:
Enhancing qualitative characteristics are complementary to the
fundamental qualitative characteristics. These characteristics distinguish
more useful information from less useful information. Enhancing
characteristics are shown below.
Figure: 2.1.5 Enhancing Qualities.1
1. Comparability:
Information that measured and reported in a similar manner for
different companies is considered comparable, comparability enable users
to identify the real similarities and differences in economic events
between companies and between the fiscal period and other at the same
economic entity and with other economic entities at the same activity.
1
Kieso, D. & et al. (2011), page 46.
19
2. Verifiability:
Verifiability occurs when independent measures, using the same method,
obtain similar result, and access to the same results by more than one
person, if we not use the same techniques and methods that are used to
measure the accounting information.
3. Timeliness:
Timeliness means having information available to decision makers before
it loses its capacity to influence decision; accounting information must be
available at the right time for the decision making process.
4. Understandability:
Understandability is enhanced when information is classified,
characterized and presented clearly and concisely, and it is the quality of
information that lets reasonable informed users see its significance.
2.1.8
Sources of accounting information:
Accounting information comes from internal sources in the organization,
because the accounting system in the organization is the source of the
accounting information, financial statements that prepare by the
accounting system include the accounting information that needed by the
users.
Financial statements: are records that provide an indication of an
individual’s, organizations, or business's financial position. 1
Financial position: refers to a company’s economic resources, such as
cash, inventory, and buildings, and the equities and liabilities against
those resources at a particular time.2
There are four basic types of financial statements statement of financial
position, Income statements, statement of cash flow and statement of
change in equity.
1
2
Kieso, D. & et al. (2011), page 46.
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2.1.9 Types of financial statements:
1. Statement of financial position
It presents a summary statement of the firm‘s financial position at a
given point in time, the statements of financial position are used to
provide insight into a company’s assets and debts at a particular point
in time, and provide information about the company’s shareholder
equity, the company lists its assets on the left side of the balance sheet
and its debts and liabilities on the right.
2. Income statements:
The income statement provide a financial summary of the firm‘s
operating results during specific period, and present information
concerning the revenue earned by a company in a specified time period.
Income statements also show the company’s expenses in attaining the
income and shareholder earnings per share.
3. Statement of cash flow:
The statement of cash flow provides a look at the movement of cash in
and out of a company; these financial statements include information
from operating, investing, and financing activities. The cash-flow
statement can be important in determining whether or not a company
has enough cash to pay its bills, handle expenses, and acquire assets .
4. Statements of change in equity:
The statement of retained earning presents the changes in a company's
or organization’s retained earnings over a specific period of time.
These statements show the beginning and final balance of retained
earnings, as well as any adjustments to the balance that occur during
the reporting period. This information is sometimes included as part of
the balance sheet or it may be combined with an income statement.
However, it is frequently provided as a completely separate statement.
2.1.10 Accounting information and user needs:
In order to the accounting information to be useful, the accountant
must be clear about for whom the information is being prepared and
for what purpose the information will be used. There are likely to be
various groups of people with an interest in a particular organization,
in the sense of needing to make decisions about that organization.
There are several user groups with an interest in the accounting
information relating to a business. The majority of these are outside the
business but, nevertheless, they have a stake in the business. This is not
21
meant to be an exhaustive list of potential users; however, the groups
identified are normally the most important.1
Accounting system prepares its financial report which includes
accounting information in both internal and external report.
Management accounting deal with the information that is needed for the
internal users and financial accounting focus on the information that is
needed for the external users.
-Managerial accounting:
Provides internal decision makers who are charged with achieving the
goals of profitability and liquidity with information about financing,
investing, and operating activities.2
-Financial accounting:
Generates reports and communicates them to external decision makers so
they can evaluate how well the business has achieved its goals. 3
2.1.11 Users of accounting information:4
A. Internal users:
Parties inside the reporting entity or company who are interested in
accounting information.5
Types of internal users include:
1. Management:
Management in every level of the business from director level to
supervisor level relies on accounting information to do their job
properly. They all use the same information for different purposes. For
example, directors use it for strategic purposes and middle
management can use it to see if they are meeting their financial
targets.
2. Investors:
Investors generally provide money to individual or organization to
start a business. Before investing money investors generally want to
know whether they should invest or not or if they would invest to start
a business now then how much return they will get from their
investment. The investors will decide based on the financial
accounting information of that business .
1
Mclaney, E. & Artill, P. (2009).
http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch01.pdf
3
http://college.hmco.com/instructors/catalog/walkthroughs/pdf/061862676x_ch01.pdf
4
http://www.accounting-tutorial.com/users-accounting-information
5
http://simplestudies.com/introduction-to-accounting.html
2
22
3. Employers:
Employers use accounting information for their own benefit, accounting
information help the employee to ensure their future benefit from the
company like pension, health provision, retirement benefit etc.
4. Owners:
Business owners want to know whether their funds are being properly
used or not. Accounting information helps them to know the profitability
and the financial position of the concern in which they have invested their
funds.
B. External users:
Parties outside the reporting entity or company who are interested in the
accounting information.1
Types of external users include:
1. Shareholders:
Shareholders use the balance sheet and profit and loss account produced
by limited companies to decide if they are going to increase or decrease
their holding.
2. Creditors:
Creditors (lenders) are generally focused on the information which is
related to the borrower before making a large loan such as the Bank
(creditors) will want information about the borrower regarding some
criteria: the ability of the borrower to repay the loan, the amount of assets
and liabilities of the borrower, evidence of income, tax policies and so on.
The creditors will make the loan after having this detail information
through financial accounting statement of the borrower.
3. Government Regulatory Agencies:
Government regulatory agencies like Federal and State Government
Agencies and Security and exchange commission want financial
accounting information which is related to the investors, business
organization or any individuals, these regulatory agencies want the
information to know that whether the business organization are following
1
http://simplestudies.com/introduction-to-accounting.html
23
the business rules and regulation or not or whether the investors are able
to invest or make decision or not, Security and exchange commission
want accounting information to evaluate the financial accounting
disclosures of companies who sell their share or borrow money.
4. Taxing authority:
Taxing authority wants financial accounting information related to tax
policies, tax laws, amount of payable tax etc. from the individual or
organization., taxing authority wants financial accounting to know that
the business organization are following tax rules or not and their ability to
pay income tax because income tax is based on the financial accounting
reports.
5. Labor unions:
Labor unions want accounting information to know their future salary.
6. Suppliers:
Suppliers want to know about company‘s future goals so that they can
serve best material in coming days.
7. Customers:
Sometimes customer also want to know about company on issues like
warranty, product development etc.
2.1.12 Purpose of using accounting information:1
1. Measurement:
Accounting information is a measure of the performance of the company
and its success because it reflects the events and the financial accounting
of the company and shows the financial situation of the company at a
certain period.
2. Evaluation:
Performance evaluation for an individual can be based on accounting
information for transactions that were under that person's control. For
1
http://www.ehow.com/about_6319335_purpose-producing-accounting-information.html
24
example, a purchasing agent might be responsible for negotiating prices
on raw materials. The actual cost of purchases made by that agent would
form the basis for his evaluation. The local manager of a division might
be evaluated based on the profits earned by that division. An income
statement for that division would form the basis for her evaluation.
3. Communication:
Accounting information is used to communicate. It is used to
communicate financial results to external users, such as creditors or
investors. Creditors use the information to determine how much credit to
extend to the company. Investors determine whether they want to invest
in the business. Accounting information is also communicated to
managers and employees, who consider it in making decisions
for future transactions.
4. Decision-Making:
Accounting information can be used for decision-making. One type of
decision is whether a company should make a component itself, or
purchase the part from an outside supplier. Another type of decision
would be whether the company should accept a special order at a lower
price.
25
Section -2Administrative
decision &
Decision making
process
26
2.2 Decision-making 1
2.2.1 Introduction:
A
critical managerial function is decision making, decisions
which
management must make may be classified as
marketing, production, and financial.
Decisions may also be classified as strategic and tactical and long-run
and short-run. A primary objective of decision-making is to achieve
optimum utilization of the business’s capital or resources.
Effective decision-making requires relevant information and special
analysis of data.
2.2.2 Accounting Department
The accounting department is a primary source of information necessary
in making-decisions. The accounting department is expected to provide
information to all levels of management, management will consider the
accounting department capable of providing data useful in making
marketing, production, and financial decisions.
2.2.3 Nature of Accounting Information :
In order for the accounting department to make meaningful analysis of
data, it is necessary to distinguish between fixed and variable costs
and other types of costs that are not important in the recording of business
transactions. Some but not all of the information needed by management
can be provided from financial statements and historical accounting
records, In addition to historical data, management will expect the
management accountant to provide other types of data, such as estimates,
forecasts, future data, and standards. Each specific managerial technique
requires an identifiable type of information. The accounting department
will be expected to provide the information required by a specific tool. In
order for the accounting department to make many types of analysis, a
separation of costs into fixed and variable will be required.
The management accountant need not provide information beyond the
relevant range of activity.
1
Harrison, E. F. (1999), The Managerial Decision-making Process, 5th edition, New york, Houghton
Mifflin Company
27
Following are some examples of decisions associated with specific
financial statement items(table 2.2.1)
Financial position Items
Cash
Accounts receivable
Inventory
Fixed asset
Bonds payable
Income Statement Items
Sales
Decision
Minimum level
Credit terms
Order size
Capacity size
Amount and interest rate
Decision
Price, number of products,
numberof sales people
Salesmen compensation
Advertising
Salaries and commission rate
advertising budget
2.2.4 Decision making process. 1
2.2.4.1 An overview
Is the Problem really the problem? Problems are often the symptom and
not the true problem.
Whenever more than one possible action is available, a decision must be
made. If you have to decide based only on one thing, making a decision is
easy (Effy, 2009).
A decision is a conscious choice from among two or more alternatives.
All of us make many such decisions daily. At work we choose from
alternative ways to accomplish an assigned task. Managers and
researchers have tried to improve the outcomes of decisions by using
more formal, systematic approaches to decision making, the act of
consciously choosing from alternatives (Berkowtiz et al, 1986).
A decision is easy to make when one option will clearly bring about a
better outcome than any other. Decisions become more difficult when
more than one alternative seems reasonable and when the number of
alternative is great (Effy, 2009).
1
Effy, O. (2009), Management Information Systems, 6th edition, Boston, Course Technology..
28
Decision-making is a conscious human process. A particular course of
action from among a set of possible alternatives. To decide means to
come to a conclusion or resolution (Ismail, 2011), decision-making
defined as the ―conscious and human process, involving both individual
and social phenomenon based upon factual and value premises, which
concludes with a choice of one behavioral activity from among one or
more alternatives with the intention of moving toward some desired state
of affairs".
To make a decision means that:
1. The person has started a series of behavioral reaction in favor of
something.
2. The person made up his mind to do a certain thing or action.
3. To make a judgment regarding what a person must do for a certain
condition after evaluating several alternatives.
Decisions are a big part of everything managers do. Planning, organizing,
leading and controlling are the basic management functions. Each of
these calls for decisions, which plan to implement, what goals to choose,
which people to hire (Dessler, 2002).
A basic understanding of decision making is essential because most
information systems are designed to support decision making in one way
or another (Effy, 2009).
2.2.4.2 The significance of decision making 1
Decisions are the core transactions of all the firms. In addition, there are
at least three ways where successful organization out decide the
competitors (Harrison, 1999).
1. The firm makes better decisions
2. The firms makes faster decisions
3. The firm implements the decisions more than competitors.
"The facility to predict decision-making performance of individual
managers is of significance, not only for executives and scientists, but for
society itself" (Streufert and Swezey, 1986).
1
Effy, O. (2009), Management Information Systems, 6th edition, Boston, Course Technology..
29
2.2.4.3 Decision making and problem solving 1
The terms decision making and problem solving are used
interchangeably. However, problem solving involves of overcoming a
certain obstacle in the path toward the goal. At the mean time, decision
making is defined as choosing from different solutions to achieve the best
results (Harrison, 1999).
A decision is a choice from among the available alternatives. Decision
making is the process of developing and analyzing alternatives and
making a choice. Decisions don‘t always involve problems. On the other
hand, problem solving always involves making decisions. Managers
make decisions every day, and these often decide the success or failure of
their firms (Dessler, 2002).
According to Rue and Byares (2009), ―Decision making in its narrowest
sense, is the process of choosing from various alternatives. A problem is
any deviation from some standard or desired level of performance.
Problem solving, then, is the process of determining the appropriate
responses or actions necessary to alleviate a problem.
• Decision-making is represented as a problem-solving process preceded
by a separate problem-finding process.
• Problem-solving is the use of information, knowledge, and intuition to
solve a problem that has previously been defined.
• A Problem exists when there is a major difference
2.2.5 Types of Decisions. 2
2.2.5.1 Structured Decisions. 3
When an optimal solution can be reached following certain steps, the
problem is called a structured one (Effy, 2009). Effy (2009) added, since
the steps are known, and they must be followed the same way, this yields
to getting the same solution for the same problem all the time.
Operational management and team leader end to execute and handle the
structured decisions (Laudon and Laudon, 2006).
1
Harrison, E. F. (1999), The Managerial Decision-making Process, 5th edition, New york, Houghton
Mifflin Company
2
Effy, O. (2009), Management Information Systems, 6th edition, Boston, Course Technology..
2
Laudon, K. and Laudon, J. (2006), Management Information Systems: Managing the digital Firm, 9th
edition, New Jersey, Prentice Hall
30
2.2.5.2 Unstructured decisions 1
A problem can be classified as an unstructured problem when reaching an
optimal solution does not follow a certain set of steps or there is no
algorithm to follow (Effy, 2009). The senior management of the company
is responsible for making the decisions for the unstructured problems,
because the problem requires many sources of information, and the
evaluation procedure is not easy. In addition, this kind of decision
depends on the personal experience of the decision maker (Laudon and
Laudon, 2006).
2.2.5.3 Semi structured decisions. 2
According to Effy (2009), "a semi structured problem is one that is
neither fully structured nor totally unstructured. Middle management in
the firms is responsible for making the semi structured decisions.
However, they face more structured decisions, but their decisions include
unstructured components (Laudon and Laudon, 2006).
2.2.6 Classification of Decision. 3
2.2.6.1 Programmed decisions. 4
When the decision maker knows the situation, and the decisions are
repetitive, the decision can be called a programmed decision. Each
decision that can be reached by an established or systematic procedure is
a programmed decision(Rue and Byars, 2009). According to Dessler
(2002) intended, ―programmed decisions are repetitive and routine
and can be solved through mechanical procedures such as applying rules,
and through mathematical procedures. When classifying the decision, it
was found that 90% of managerial decisions are programmed decisions
(Dessler, 2002).
1
Effy, O. (2009), Management Information Systems, 6th edition, Boston, Course Technology..
2
Effy, O. (2009), Management Information Systems, 6th edition, Boston, Course Technology..
3
Rue, L. W. and Byars, L. L. (2009), Management: skills and applications, 13th edition, New York,
McGraw-Hill.
4
Dessler, G. (2002), ―A Framework for Management‖, New Jersey, Prentice Hall.
31
2.2.6.2 Nonprogrammed decisions. 1
Nonprogrammed decisions have no precedent, which means that the
decision maker is faced by a new situation. Those decisions are
unstructured and require a more creative approach by the decision maker.
Dessler (2002) intended, ― Nonprogrammed decisions are unique and
novel. Nonprogrammed decisions are the kind of decisions that the
managers are paid to address, and they rely heavily on judgment and on
the strategic development and survival of the firm (Dessler, 2002).
This leads to the fact that Nonprogrammed decisions are more difficult to
make (Rue and Byars, 2009).
Programmed Vs. Nonprogrammed decisions (2.2.2)
Source : Dessler, G., 2002, p. 70
1
Dessler, G. (2002), ―A Framework for Management‖, New Jersey, Prentice Hall.
32
Figure (2.2.1): Programmed Vs. Nonprogrammed decisions
Source : Dessler, G., 2002, p. 70
2.2.7 Conditions for making decisions.1
The available information for the decision maker play a major role in the
impact of the decision. The impact of the decision is the factor that
decides if the decision made was the best choice (Rue and Byars, 2009).
Certainty: This situation occurs when a decision maker knows exactly
what will happen, and knows the exact outcome of his decision(Rue and
Byars, 2009).
Risk: Rue and Byars, (2009) defined the situation of risk as "situation that
occurs when a decision maker is aware of the relative probabilities of
occurrence associated with each alternative.
Uncertainty: When the decision maker has little information about a
certain condition, or no reliable information to evaluate the outcomes, this
means that the manager is operating in a situation of uncertainty (Rue and
Byars, 2009).
1
Rue, L. W. and Byars, L. L. (2009), Management: skills and applications, 13th edition, New York,
McGraw-Hill.
33
2.2.8 The decision making process
The process of making a decision, of getting from the first signifying that
a choice is there to be made to making the choice, can be understood as a
response partly the problems raised by the subject of decision and partly
to the interest implicated by it (Hickson et al, 1986). 1
As defined by Baker et al in their 2001 study, ―efficient decisionmaking involves a series of steps that require the input of information at
different stages of the process, as well as a process for feedback.
In business, there can be dozens, hundreds, or even millions of different
courses of action available to achieve a desired result. The problem is
deciding on the best alternative.
Decision making is a three-phase process (Effy, 2009). 2
Phases of decision making table(2.2.3)
Source: Effy O., 2009, p. 343.
Herbert Simon, a Nobel Prize winner, also described the manager‘s
decision process in the same three stages. The intelligence stage involves
searching the surrounding environment for certain conditions those are in
need for making a decision. The design stage is where to inventing,
developing and analyzing possible actions. The final stage is to choose
from the different alternatives (Rue and Byars, 2009)3. Lauden and
Lauden (2006) added one more step to the process. They added the
implementation step that is responsible for testing the solution and try to
make it better.4
1
Hickson, D., Butler, R., Cray, D. and Mallory, G. (1986), Top Decisions: Strategic Decision Making
in Organizations, San Francisco, Jossey-Bass..
2
Effy, O. (2009), Management Information Systems, 6th edition, Boston, Course Technology..
3
Rue, L. W. and Byars, L. L. (2009), Management: skills and applications, 13th edition, New York,
McGraw-Hill.
4
Laudon, K. and Laudon, J. (2006), Management Information Systems: Managing the digital Firm, 9th
edition, New Jersey, Prentice Hall
34
According to Dessler (2002), the manager who approached decision
making rationally have to:
1. Have complete information about the situation.
2. Perfectly define the problem.
3. Identify all the criteria and weigh all of them.
4. Know all possible alternatives and assess each one.
5. Choose the best alternative.
Thus, the rational decision making process should include (Dessler, 2002)
1. Define the problem: Managerial decision making is sparked by
identifying the problem. In addition, identifying the problem correctly is
really hard.
2. Identify and weigh the criteria: Some criteria are more important than
others, which leads to the fact that the managers weigh some criteria more
than weighing another one.
3. Develop alternatives: To develop good and reliable alternatives is a
very complex situation. This is where managers differ from each other.
4. Analyze the alternatives: This step requires forecasting the future
which makes it the most difficult step in the process.
The key point—the decision process should collect and analyze useful
data that lead to effective actions.
2.2.9 Factors affecting the decision making process 1
There are many factors that affect the decision making process. They are
divided into three categories (Laudon and Laudon, 2006):
1. Factors related to the problem.
2. Environmental Factors.
3. Manager personal traits.
2
Laudon, K. and Laudon, J. (2006), Management Information Systems: Managing the digital Firm, 9th
edition, New Jersey, Prentice Hall
35
Section-3The
Palestinian
Banking
Sector
36
The Palestinian Banking Sector
3.1 Introduction1
he banking sector plays a vital role in the development of the
local economy in terms of increasing the effectiveness and
efficiency of the role of financial intermediation
The Palestinian banking sector evolution after the advent of the
National Authority in 1994 where they built the Palestinian
Monetary Authority, which serve as the nucleus of the Central Bank.
The monetary authority was assigned to rebuild the Palestinian banking
system (Kahlout, 2004).
Palestinian banking sector started to grow at a rapid pace and followed
the developments of banking management and technology in the
surrounding countries, and became efficient and highly qualified.
T
The banking sector consists of the Palestinian Monetary Authority,
eighteen banks offering their services in various Palestinian areas which
have reached 175 branches and offices at the end of 2010 divided by 143
branches and offices in the governorates of the West Bank and 32
branches and offices in the governorates of the Gaza Strip ( PMA, 2011).
3.2 The emergence of the Palestinian banking sector: 2
The Palestinian banking sector was the most affected sectors as a result of
the policy of the Israeli occupation and through the practices of
occupation.
After occupying the West Bank and Gaza Strip in 1967, the occupation
closed the banks operating in the West Bank (22 Bank and Branch ) and
the Gaza Strip (6 banks and branches ) recalled by the military order No.
7 dated 8/6/1967 until the beginning of the eighties.
It was not allowed to any of the banks to open branches until the
occupation government lost trial in the court in favor to the Bank of
Palestine in Gaza, which lead to reopening of the bank. Later in 1985
Cairo Amman bank in Nablus returned to work.
1
Kahlout, K. (2004), ―The external auditor's compliance with studying and evaluating the internal
control system on the commercial banks working in Palestine, Master thesis, Islamic University of
Gaza
2
PMA,http://www.pma.ps/index.php?option=com_content&view=article&id=115&Itemid=136&lang=
ar, accessed October 2nd , 2011
37
The resumption of work within the framework of an agreement signed
between the Central Bank of Jordan and the Bank of Israel, and
Department of Cairo Amman Bank.
The banking space prevails throughout the occupied territories from 1967
and until the signing of the Declaration of Principles between the PLO
and the Israeli government in September 1993. In 1994 after the arrival of
the Palestinian National Authority, the Palestinian Monetary Authority
was created under the presidential decree and to oversee monetary policy
within the territory of the Palestinian National Authority and supervise
the licensing of banks and control.
The Palestinian Monetary Authority started to build the money and
banking system and ensure stability and promote economic growth in the
Palestinian territories, until the Palestinian banking system became one of
the of the best systems in the region (PMA, 2011).
3.3 Classification of banks operating in Palestine: 1
There are 18 banks working in Palestine (See Appendix 2), and they are
divided into two parts (Journal of banks in Palestine, 2010):
1 - local banks: The banks that have the Palestinian nationality and
numbering 8 banks, where only 5 banks are working in the governorates
of the Gaza Strip ( Bank of Palestine, Arab Islamic Bank, Islamic Bank of
the Palestine, Al Quds Bank for Development and Investment, Palestinian
investment bank ).
2 – Foreign banks: There are 10 banks that have a different nationality
other than Palestinian, and are divided into Egyptian, Jordanian, and
foreign banks.
3.4 Distribution of the Palestinian banking sector employees: 2
The number of employees by the end of the Palestinian banking sector at
the end of the year 2010 was 4687 employees.
The bulk of the staff with a percentage of 78.5 % of the total employees
are working in the West Bank, due to the wide area of the West Bank and
the high number of banks and branches compared with the provinces of
Gaza. In addition, the bulk of public administrations and regional banks
are in the cities of Ramallah and Al Bireh in the West Bank (Journal of
banks in Palestine, 2010).
1
Journal of banks in Palestine Issue 47 September 2011, p. 50.
2
Journal of banks in Palestine Issue 47 September 2011, p. 50.
38
Bank of Palestine: 1
We introduce bank of Palestine as large bank in Gaza strip.
Bank of Palestine is the first and largest national bank, was founded in
1960 and commenced its operations on February 21, 1961 to give small
loans to projects, business and limited short-term personal loans, Bank of
Palestine is the most prevalent in Palestine through the banking network
consists of 47 branches and sub- branches, extended from Jenin in the
north to Rafah in the south, Bank of Palestine offers many distinguished
banking services that meet customer needs and expectations, including
services for personnel and companies, Bank of Palestine, has outstanding
management team and highly qualified professional working in the bank
currently has over 1100 employees.
Bank of Palestine celebrated this year's golden jubilee on the occasion of
the passage of fifty years of its foundation under the slogan "Fifty years
of Building."
The Bank was listed in the Palestine Exchange in 2005 as a public
shareholding, at the end of 2006, Bank of Palestine, founded the
brokerage firm for securities investment “Al-Wasata”, which has three
branches, in Gaza City, Ramallah and Khan Younis.
2
http://www.bankofpalestine.com/index.php?lang=en
39
Chapter -3Methodology
40
4.1 Introduction:
T
his chapter explains in details the procedures adapted by
the two researchers in implementing the study, research
methodology identification, defining the study population, the
sample of the study, preparing the interview, and summarize
the interview.
The two researchers will define these procedures as follows:
4.2
Research approach:
The researcher used the descriptive analytical approach to complete the
study which depends on describing and demonstrate the importance of
using accounting information in decision-making process.
4.3 Research phases:
The first phase:
Research proposal, which include generating research topic, identifying
the research problem, establishing research objectives, defining the
importance of the study, determine the scope and limitations of the
research, and developing research plan.
The second phase:
Summary of literature review about accounting and accounting
information, decision making, and the importance of using accounting
information in decision making.
The third phase:
Write the interview questions and make the interview with the employees
from Bank of Palestine.
The fourth phase:
Summarize the questions and its answer after it has been answered by
company employees.
41
The fifth phase:
Write the conclusions and recommendations.
The following figure 4.1 illustrates the phases of research that lead to
achieve the research objectives. ( Figure :4.1 research phases)
Topic
Research proposal
Literature review
Interview
Summarize the interview
Results & recommendations
4.4 Data collection:
1. Primary data sources:
The primary source concentrated in interview, which has been designed
and prepared specially to meet the research purposes
42
2. secondary data sources:
This research would base on some sources of secondary data, represented
mainly in the books, Arabic and English references, researches, studies ,
specialized magazines and some related sites on the World Wide Web
(Internet), which dealt with such research as well as brochures and
periodicals that are related to the topic of the study.
4.5
Society and sample of the study:
Research community:
It means all individuals that constitute the subject of study, or all the
people the researcher want to know about.
The society of this study consists of companies in the banking sector, in
Gaza strip.
Research sample:
It is impossible to make the interview with all individuals the two
researchers want to know about. Instead of this, the two researchers select
a sample that represent the original society and can generalize its results
on the research.
Sample means a set of individuals or items selected from a population for
analysis to yield estimates of, or to test hypotheses about, parameters of
the whole population, and representative of all community.
The selected sample consists of Bank of Palestine, it was selected as one
of the largest bank in Gaza Strip, Where the interview was made with one
of its employees.
43
Interview:1
An interview is a purposeful discussion between two or more people.
To complete this research structured interview was made with "Salman
Qemailah" The chief financial officer of Bank of Palestine Company in
Gaza strip.
Content of the interview:
The interview includes a series of questions relating to the research
hypotheses that have been developed, which aims to achieve the
objectives of the research.
Advantages and disadvantages of the interview:
Advantages of using an Interview:
 It is a good way to find out the attitudes, thoughts, and behaviors of a
large group of people.
 Always offer positive information.
 Get directly the information that you need.
 the respondent lacks reading skills to answer a question.
 Are useful for untangling complex topics.
Disadvantages of using an Interview: 2
 In some situations it can take a long time.
 Unwillingness of respondent to provide Information.
 The interviewer can affect the data if he/she is not consistent.
 It is very time consuming.
 It is not used for a large number of people.
 The Interviewer may be biased and ask closed questions.
Summarized the interview:
Coordinate the interview and summarized the answers of the questions
that were obtain in the interview in a scientific and clear way and use
clear and understandable terms so that everyone can understand it.
1
2
Saunders, M & et al, (2003), page 245.
Saunders, M & et al, (2003), page 245.
44
Chapter -4-
Applied
study
45
5.1 Introduction:
M
anagement finds itself in many situations need to make
decisions with significant impact on the organization‘s
profits and its financial position as a result of rapid
development and the competition that companies faced at
all times.
Decision-making process is the essence of the administrative process, so
the decision maker can not relies only on the expectation, experience and
conventional methods of decision-making process, but must rely on the
information and data that concerning with the situation or problem that
need to be solved.
Many recent studies proved that accounting information is the best for the
management to rely on it in making decision, where the management
relies on the outputs of the accounting system as inputs for decision
making process.
In this chapter, researchers introduce the implementation of the study
where it was applied by interview and discussion with department of
finance staff in the Bank of Palestine.
Bank of Palestine increasing their interest in financial report which
include accounting information because it is include all the information
concerning with the company and its financial position because Bank of
Palestine has become one of the largest Palestinian companies in the Gaza
Strip.
The importance of the company increased to the accounting information
as an effective tool in order to use it in the administrative decisions which
requiring access to accounting information that having the characteristics
required for decision-making process.
To find out how important of using accounting information in
decision-making and their contribution to the success of these decisions
the two researchers make a personal interview and asked several
questions related to the subject and the answers are summarized
as follows:1
1
A personal Interview with ""Salman Qemailah" The chief financial officer of Bank of Palestine
Company in Gaza strip.
46
5.2
Summarized the interview:
Accounting information included in financial reports has all necessary
information for the company and Accounting information explains all the
financial transactions undertaken by the company where the company
published its financial statements on the it's website and everyone can
access to them.
As for depending completely on the information found in the financial
reports, Mr. Salman has pointed that we do not rely only on the
accounting information in decision making process, For example, there
are decisions related to marketing in this case the company need to some
marketing research related to customer and their tastes. But in the case of
financial decisions that related to the financial position in the company,
the company relies in this case on the accounting information that
available in financial reports.
As for the Accounting information found in the Annually, Semiannually
or quarterly financial statements sufficient for a decision maker, it is
sufficient if the decision related to the accounting information found in
financial statements and the company makes and publish its financial
statements at the end of each year, but there are a lot of decisions taken
by the company during the year and therefore decision maker does not
wait to the end of the year to make the decision because of this the
company use instant or mechanism report to make necessary reports
during the year.
In terms of that decision is based on the comparison that made between
the previous accounting information and the current accounting
information, he stressed that the company make a comparisons between
previous financial statements and current financial statements to know the
difference between the current and previous years, and to know whether
this difference desirable for the company or not and take the necessary
decisions concerning with each of these cases.
As for the decision maker use the accounting information in rationalizing
decisions, he stressed that the accounting information using in
rationalizing decisions if the accounting information received in a timely
and appropriate quantity and required characteristics it will help to make
correct decisions.
About the existence of other information affecting the decision making
process, he explained that there are a lot of information that affect the
decision-making process and explained that the company as all works as
an information system integrated and interdependent where each
department of the company has an information system and provide
47
information about itself to the management and this information
integrated with the accounting information to form an integrated and
interdependent information system and the resulting information used by
management in making decisions.
As for the obstacles that may face the usage of accounting information in
making decision, are represented in several things including:
 High costs of collecting accounting information that related to
decision making.
 Lack of access to accounting information in a timely manner.
 Deficit of providing reports that related to the daily decisions that
occur during the year.
 Failure to provide information with required characteristics.
 Incorrect information leads to the incorrect decision.
As for decision makers be considered highly qualified and
knowledgeable with accounting information and taking decisions
depending on them, he said that the decision makers must be qualified
and knowledgeable with accounting information in order to make correct
decision in line with the interest of the company and its objectives and he
stressed that the decision makers of the company have the ability to
understand the accounting information and have the experience and
competence to make decisions.
About the Stages of decision-making process, it start with studying the
problem, collect the necessary information around it, found alternatives,
develop appropriate alternatives, choose the best alternative then apply
the best solution and finally evaluate the decision and know the
implications of making the decision.
As for the presented accounting information comprehensive and
sufficient as required, the accounting department in Bank of Palestine is
working to provide adequate and comprehensive information for
decision-making process.
As for accounting information depend on prediction in future depending
on the current state, he explained that the accounting information that
related to the future year prepared depending on the financial statements
that related to the previous years and this used in preparation of estimated
budgets.
48
About the internal and external circumstances affect on the information
and the accounting status in the company, he confirmed that the absence
of any circumstances affect on the information and the accounting status,
but there may be an impact on the company's activities and services but
as an information system the company does not have any effect, because
the company has a high capacity and its systems work efficiently and the
accounting system is strong and highly efficient and provides reports and
information for decision-making to the fullest.
As for the company reveals all the accounting information related to it or
there is a kind of secrecy, he said that the company reveals all related
information in annual financial reports and published it on the website,
where the financial reports including all information about the company
and matched to the needs of users.
In case errors are discovered after taking a decision, the right behavior the
company does, Mr. Salman explained that the Appropriate action
undertaken by the company, first determine the size of the damage caused
by the wrong decision and try to find out the reasons that led to the error
in the decision-making may be the reason for the information system or
decision-maker or in the accounting information and then work to avoid
the error in another time.
About the participation of the accounting department in the decision
making, he explained that the accounting department participates in
decision-making where the accounting department works to prepare the
financial statements that include accounting information for decisionmaking.
As for the completely depend on the decision makers or there is a room
for the administration to interfere in this regard, said that the
administration of the company who make decision for the company and
departments in the company participate in to provide the reports and
information needed for decision-making process.
About the preparers of the financial reports highly knowledgeable with
the required information, he stressed that the preparers of the financial
statements should be have a high degree of expertise and knowledgeable
of the information required by management to facilitate decision-making
process.
49
Decisions taken according to the accounting information, he said that
decisions-making process is based on information available to
management.
About the accounting information role in the goodness and competence of
the taken decision, he stressed that if the accounting information is
correct the decision taken is correct, where there is a positive relationship
between accounting information and taken decisions.
50
Chapter -5-
Results and
Recommendations
51
6.1
Results:
After the study was conducted the research reach to the following:
1. Management knows the role of accounting information in the
rationalization of the decision making.
2. The decision is up to the management always.
3. The inability of the decision maker to identify the information
needed for decision-making process in some cases not always.
4. The inability of the preparers of financial statements to provide the
accounting information as required in some cases not always.
5. The inability to see periodic financial reports of the company.
6. Sometimes the accounting information doesn't has the required
characteristics.
7. Some of the daily decisions made during the year are based on
periodic reports and thus increase the efforts of the preparers of
financial statements in the company.
8. May the collection of information necessary for decision-making
process require more time that the decision maker can not wait by
the nature of the problem that sometimes need a quick solution.
9. Errors found in the information leads to errors in the decision to the
detriment the interests of the company.
10.There is a positive relationship between the extent of using
accounting information in decision-making and taken decision, if
the accounting information is correct the decision taken is correct.
6.2 Recommendations:
By the results that have been reached and to highlight the importance of
using accounting information in decision making, the two Researchers
proposed a set of recommendations.
1. Administration must participate all the departments in the decisionmaking process.
2. Give an opportunity for staff and accountants to make their views
in the resolution and suitability and then analyze the data and
access to the decision in the application of the decision or change,
in line with the objectives.
3. Must choose the best alternative in the decision-making process in
line with the objectives and interests of the company.
52
4. Joint employees who specialize in preparing financial reporting and
accounting information in training courses to acquire skills and
practical experience and knowledge of accounting information.
5. Importance of publish the accounting information about the
company for all users.
6. Importance of analyzing financial statements in order to compare
between previous years and the current financial reports.
7. Work to provide information quickly and with desired properties.
8. Learning from mistakes that occur in decision-making process,
both in financial reporting or accounting information collection
methods and avoided in the coming times.
53
References
54
References :
Arabic references:
Books:
1. Kanaan, Nawaf. (1998)," management decision-making between
theory and practice", 5th edition, Amman, Jordan. P 75.
Articles :
1. El- Amri, Mohammed, (2011). "The definition and importance of the
decision making in our lives," Encyclopedia of learning the skills of
success, Foundation for Human Development, Kingdom of Saudi
Arabia.
Theses:
1. Alhubaity, K. & Alsaqah, Z. (2003),"Accounting Information system",
Unpublished Master Thesis, Ellhaddbaa College in Iraq.
2. Shubair, Ahmed, (2006)."The role of accounting information in
managerial decision making", Unpublished Master Thesis, The
Islamic University of Gaza.
Foreign References:
Books:
1. Artill, P. & Mclaney, E. (2005), "Financial Accounting for decision
making", 4th edition, prentice hall, p.2.
2. Atrill, P & Mclancy, E, (2009), "Management accounting for
Decision Makers", 4th edition, prentice hall, P 14.
3. Kieso, D. & et al. (2011), "Intermediate Accounting", volume 1,
IFRS edition, PP.43.44.
4. Mclaney, E. & Artill, P. (2009),"Management Accounting for
Decision Makers", 4th edition, prentice hall, PP 2 & 14.
5. Nutt, P. C. (1994). Types of organizational decision processes.
Administrative Science Quarterly, PP, 29.
6. Romney. M & Steinbart. P, (2008)"Accounting Information
System", prentice hall, 10th, P 5.
55
7. Romeny, M & Steinbart. P, (2008)."Accounting Information
System", prentice hall, 10th edition. P, 5 & 13.
8. Saunders, M & et al, (2003), "Research Method for Business
Student", 3rd edition, P 245.
9. Saunders, M & et al, (2003), "Research Method for Business
Student", 3rd edition, P 245.
10.Williams, J. & et al, (2007),"Financial and Managerial
Accounting", the basis for business decision, 12th edition, P 5 &
28.
11.Zimmerman. J, (1995), "Accounting for Decision Making &
control", IRWIN, P.2.
Thesis:
1. Dumitrana.M, Radu. G & et al, (2008), "The Use of The Accounting
Information in Decision Making in the Hospitality Business",
Bucharest Academy of Economic Studies.
2. El- Amri, Mohammed, (2011), "Definition and importance of the
decision taken in our lives", (On-line), Encyclopedia of learning the
skills of success, www.sst5.com.
3. Fülöp, János, (Unknown), "Introduction to Decision Making
Methods", Laboratory of Operations Research and Decision Systems,
P.11.
4. Ireland, R. D., & Miller, C. C. (2004). Decision making and firm
success. Academy of Management Executive, pp, 8 –12.
5. Sharayri. M & Momani. G, (2011), "The Impact of Reliability and
Relevance of Financial Position Information on Decision Making", the
Review of Financial and Accounting Studies.
6. Harris, Robert. (2009)," Introduction to Decision Making",
VirtualSalt, (On-line), http://www.virtualsalt.com/crebook5.htm.
7. Harris, Robert. (1998)," Planning for Decision Making", VirtualSalt,
(On-line), http://virtualsalt.com/crebook6.htm.
8. Harris, R. (1998),"Introduction to Decision Making", VirtualSalt, (Online), http://www.virtualsalt.com/crebook5.htm.
56
Websites:
1.
2.
3.
4.
5.
http://www.accounting-tutorial.com/users-accounting-information
http://accountlearning.blogspot.com/2009/10/internal-users-of-accounting.html
http://www.brainyquote.com/words/de/decision151695.html
http://www.businessdictionary.com/definition/decision.html
http://www.buzzle.com/articles/advantages-and-disadvantages-of-groupdecisions.html
6. http://www.ehow.com/about_6319335_purpose-producing-accountinginformation.html
7. http://hrmadvice.com/hrmadvice/useful-hr-tools/hr-swot-examples.html
8. http://EzineArticles.com/3441560
9. www.jawwal.ps
10. http://www.rapid-business-intelligence-success.com/intuitive-decisionmaking.html
11. http://www.rapid-business-intelligence-success.com/rational-decision-makingmodel.html
12. http://simplestudies.com/introduction-to-accounting.html
13. http://www.the-happy-manager.com/definition-of-decision-making.html
14. http://www.wisegeek.com/what-are-financial-statements.htm
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Appendix
58
‫بسم هللا الرحمن الرحيم‬
Islamic University – Gaza
‫الجامعة اإلسالمية – غزة‬
‫كلية التجارة‬
Faculty of Commerce
Department of Accounting
Dear Gentlemen:
‫قسم المحاسبة‬
Bank of Palestine
A study is The Impact of accounting disclosure
on administrative decisions
I'd highly appreciate it if you answered the following
questions for the sake of the scientific research only.
The researchers:
Yehia F. Al- Hirsh
Hatem A-Badawi
59
The Questions of the Personal Interview
1. Do you depend completely on the information found in the financial
reports?
2. Do you think that accounting information included in financial reports
has all necessary information for the company, or there is secret
information which no one has the right to know?
3. From your point of view, are the accounting information found in the
Annually, Semiannually or quarterly financial statements sufficient for
a decision maker?
4. Is there a comparison between the current accounting information and
the previous one upon which a decision can be taken?
5. Does the decision maker use the accounting information in taking
rational decisions?
6. Are there any other pieces of information which affect in decisions
making?
7. What are the main obstacles for using the accounting information in
taking a decision?
8. Can decision makers be considered highly qualified and
knowledgeable with accounting information and taking decisions
depending on them?
9. Is the accounting information presented in the due time and with the
needed amount?
10. Is the presented accounting information comprehensive and
sufficient as required?
11. Does the accounting information depend on prediction in future
depending on the current state?
12. Do the internal and external circumstances affect on the information
and the accounting status in the company?
13. Does the company reveal all the accounting information related to it
or there is a kind of secrecy? If any, on what?
14. In case errors are discovered after taking a decision, what is the right
behavior the company does?
15. Does the accounting department participate in taking the decision?
16. Do you completely depend on the decision makers or there is a room
for the administration to interfere in this regard?
17. Are the financial reports preparers highly experienced and accurate?
18. Are the preparers of the financial reports highly knowledgeable with
the required information, and do they help the high administration in
taking the decision?
19. None can deny that the taken decisions depend on the accounting
information, if it is correct and true, it gives credibility and
seriousness. What do you think about this?
60
20. Does the accounting information play a role in the goodness and
competence of the taken decision?
61