The Role And Importance Of Economic Information Accounting Essay

In today ‘s extremely competitory economic environment, concern are challenged to research advanced and dynamic commercial opportunites. It has become imperative that concern administration adopt and implement stringent concern patterns in an attempt to get by with an about volatile environment that presently, one that is posed to go even more unsure in the foreseeable hereafter. The recent downward force per unit area on micro and macro economic systems has caused important ripplings in domestic and internal market.

Changes in the economic environment can hold an consequence on concern administrations. These can impact both the demand and supply side. Is is imperative that directors monitor the external environment. Harmonizing to ( Gillespie, 2010 ) alterations in the income of a state, the value of the currency, the monetary values of resources, the grade of competition in the market, the degree of employment and the cost of borrowing can find whether a concern succeeds or fails. Directors must be able to construe and analyze the econmonic informations and measure its impact on the concern operation.

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The Gross Domestic Product ( GDP ) is the sum of the production of goods and services, An addition GDP means the economic system Is turning and there is a high degree of concern activity whilst a death shows contraction. This information is critical to concern directors in developing their strategic administration. supply administrations index used to mensurate the state economic public presentation provides information on the province of the economic system, whether Government policy – ordinances and revenue enhancements

Price snap of demand is a step of the reactivity of the measure demanded of a good to a alteration in its monetary value, when all other influences on purchasers ‘ programs remain the same ( Parkin et al, 2005 ) . thatA when monetary value increases the measure demanded lessenings, and when monetary value decreases the measure demanded additions. Harmonizing to ( Green, 2012 ) Analysis of snap of demand helps direction to take determinations on pricing of merchandises. Price snap of demand affects a concern ‘s ability to increase the monetary value of a merchandise. Elastic goods are more sensitive to additions in monetary value, while inelastic goods are less sensitive. Assuming that there are no costs in bring forthing the merchandise, concerns would merely increase the monetary value of a merchandise until demand falls.


In today ‘s extremely competitory economic environment, concerns are challenged to research advanced and dynamic commercial opportunites. It has, hence, go imperative that entities adopt and implement new engineerings cope with an about volatile environment.

While Information Technology ( IT ) has impacted every facet of administrations concern maps and procedures, it is the direction procedure that exploit it that creates the competitory advantage. Directors can deploy IT to alter concern procedures, merchandises and services. IT has made it necessary for administrations to increase its Return on Investment ( ROI ) , maintain or increase their market portion and maximize their competitory advantage. Laudon and Laudon ( 2006 ) argued that director and organisations invest in information engineering and information systems because they provides existent economic value to the concern and function different degrees in the organisation. However, Carr ( 2003 ) argues that Information Technology impact on corporate scheme has diminished. He suggested that the footing for competitory advantage is scarceness and since IT has become a cosmopolitan resource and it is no longer of strategic value.

A authoritative illustration where organisation utilize IT to back up the concern scheme to go low-priced manufacturers, achieve increase new efficiencies Porter ( 1985 ) argued that purchase information engineering on the administration value concatenation most efficaciously enhances it competitory place. He identified the value concatenation as a system of independent activities that add value to its merchandise and services. Therefore administrations can use information engineering to these specific concern processes that add value to its merchandises and services. made of primary and services. For illustration, Petrotrin usage of cyberspace engineerings across its concern procedure to increase efficiency and cut down cost.

Porter ( 1985 ) suggested that information systems engineering plays a critical function in scheduling, commanding, optimising, mensurating and organizing concern activities. He suggested that technological alteration is a really import influence on competitory advantage because new chances are created for competition. Porter identified three generic competitory schemes that organisations can prosecute.

Cost decrease in goods and services can be positively impacted by the deployment of information engineering efficaciously they it can better efficiency and cut downing overall cost. Harmonizing Porter and Millar ( 1996 ) the usage of information engineering and the cyberspace can hold important impact on cut downing cost of obtaining, processing and conveying information. It can besides cut down the cost of market, advertisement and concern operations. For illustration, Petrotrin directors acknowledging the demand to put in modern engineering in order to do the organisation more efficient by automatizing several concern procedures to cut down runing cost. Petrotrin had a figure of standalone applications such as Payroll, Invoicing Processing and Materials Management which were independent of each other which resulted in informations duplicate, information incompatibility, extortionate preparation cost and high care cost.

Petrotrin implemented SAP ERP ( Enterprise Resource Planning ) package, and developed in-house a Well Information System. ERP systems are commercial package applications packages that facilitate the integrating of minutess informations and concern procedures throughout an organisation ( Marcus el al, 2000, p245-265 ) . At the operational degree, the SAP application faculties are used for support Financial Accounting, Order Processing, Inventory Control, and procurance concern maps. The Well information System ( WIS ) is an incorporate database used for hive awaying oil and gas production informations. The WIS information is used at the operational and direction degree, whereas, the SAP package is used at all three degrees i.e. operational, direction and strategic degree. Middle directors utilize the SAP package to execute several undertakings such as supervising monthly budgets, stock list degree and use forms. They can bore down informations and execute simulation and what-if analysis. At strategic degree, senior directors use the Reporting Portfolios for company broad information such as corporate gross revenues, fiscal information and tendency prediction.

The execution and care of ERP applications poses a figure of challenges and hazards to organisations. ( Kuldeep and Hillegersberg 2000 ) identified proficient complexness, jobs migrating between versions, decelerate to react to environmental alterations, mismatch between organisational demands and ERP bundle. Petrotrin had to alter its concern procedures and processs to suit the SAP ERP package. Petrotrin has to trust to a great extent on the


In a extremely competitory globalize concern environment, many administrations are required to be agile in to rapidly react to altering environment. This requires concern director to hold speedy entree to hold seasonably, accurate information to do informed determinations. This highlights the importance of quality and utility of the fiscal information. McLaney and Atrill ( 2005 ) argued that relevancy, dependability, comparison and comprehensibility are cardinal features for fiscal information to be utile for for directors to do good determinations.

Accounting is the procedure of recording, summarizing, and analyzing fiscal minutess which satisfy the demands of diverse set of users. Organisation provides fiscal information in the signifier of balance sheets sheet which studies on a its fiscal place at a point in clip, the income statement studies on a company ‘s public presentation over a period of clip and lists sums for grosss and disbursals and the hard currency flows study on public presentation over a period of clip ( Easton et al, 2010 ) .

Some research workers has knock the utility of the fiscal information in the determination devising procedure. Boyle ( 2009 ) argued that the utility of fiscal information is impeded because the fiscal information produced are backward looking, that is the information is based on past events. He besides argued that fiscal statements are based on premises of an efficient market and the information represent a snapshot, which represents a point in time.the fiscal as dramas a important function in administrations for directors, investors and creditors. Collier ( 2002 ) besides suggested that fiscal information produced represent a given twelvemonth which may non co-occur with the concern rhythm which has greater weight when doing concern determinations. Despite the these positions, the handiness fiscal information such as hard currency flows, budgets and net income and loss is critical to the determination doing procedure in concern administrations.

Cash flows reveals the motion of hard currency, that is the hard currency influx and outflow on a monthly footing, over a period and the consequence of these motions on the hard currency place of the administration. This is peculiarly of import since hard currency is the lifeblood of any administration and concern directors can measure the ability of the administration to last or do determination on concern chances as they arise ( McLaney and Atrill,2005 ) . For illustration, in the Petroleum Company of Trinidad and Tobago the hard currency flow statement ( provides an penetration into incomes generated by each geographic expedition field based on oil production. The directors can see with field is bring forthing the maximal gross and can make up one’s mind on which field to concentrate on to bring forth the highest return ( Petrotrin, 2011 ) .

Similarly budgeting gives a guideline on disbursals and grosss, it is a policy statement on how the administration operates and what programs are of import. It besides provides information on the sum of debt and what strain the debt is puting on the administration wellness. Directors can determine whether the administration is paying more in debt than they are doing in gross. In add-on, the information can besides assist pinpoint where the administration might hold jobs making its aims. Furthermore, budgetary information besides highlights the administration strengths and the country of operations in which the administration has a competitory advantage ( MTD Training, 2010 ) .


The success on any concern administration depend partially on director holding entree to strategic information systems to supply accurate, seasonably and relevant, existent clip information to do critical concern determinations. Harmonizing to ( London and London, 2006 ) the usage of information systems has reduced the information uncertainness and has improved the quality of determination devising At the strategic degree in administration, Petrotrin ‘s directors are focus on developing strategic programs to cut down runing disbursal, better operational efficiency and addition market portion ( LN & A ; E, 2011 ) .

For illustration, at Petrotrin ‘s geographic expedition and production of rough oil and natural gas is a nucleus facet of its operation. Directors are responsible for be aftering geographic expedition undertakings, budgeting for equipment, forces and buying services. Pull offing these procedures requires directors to hold entree to economic, fiscal information and a encouraging information systems for brand informed determinations. Before doing investing determinations Petrotrin directors need to Government financial policy. They to determine wether the corporation revenue enhancement would increase.

Economic informations such as the rate of rising prices, foreign exchange rate, the monetary value of labor and stuff, universe supply, demand and comsumption for oil and gas in United States and China is utile in Petrotrin ‘s directors determination doing procedure. Harmonizing to the US Energy Information Association ( EIA ) “ EIA presently undertakings one-year additions in ingestion in China of around 0.4 million bbl/d in both 2012 and 2013. On the supply side, oil monetary values could be higher than projected in this Outlook if recoveries from supply breaks are slower than prognosis, extra breaks occur, or supply growing is lower than expected ” . This is of import information for input in Petrotrin ‘s Exploration and Production concern scheme is to increase oil and gas production through Joint ventures and to cut down operation cost.

Second, at the tactical degree directors are more focal point on average term planning and supervising the administration public presentation through mechanism such as budget and control systems through SAP Enterprise Wide Information Systems supplying direction studies on capital expendure, repeating and operating disbursals, budgeting, bing and hard currency flow studies, Monthly oil production study and Allocation studies.

This allow director to descry jobs really early and do the needed determinations. Oil and gas geographic expedition is really dearly-won venture which requires a high capital spending. Therefore director demand entree to fiscal informations such as budgets and hard currency flow. For illustration, budget informations shows directors the existent outgo, budgeted outgo, discrepancy for the Land, East Coast and North Coast geographic expedition Fieldss for capital outgo, wages and rewards, contract, public-service corporations.

Petrotrin directors and determination shapers would be able to entree concern information such as oil and gas productions informations in existent clip. This would be of important concern advantage as that these integrated applications will ease sharp determinations doing and by extension increased operational efficiency. Directors will hold entree to a to the full incorporate corporate database. They can utilize concern intelligence tools, perform questions for illustration what-if analyses on good production informations and generate production graphs and studies Holsapple and Sena ( 2005 ) . The handiness of this determination support capableness provides directors with the tools to do more informed concern determinations.

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