CHAPTER ONE
1.1 BACKGROUND
OF THE STUDY
All the information necessary in the
business are being summarized in the Accounting Records to ascertain the
efficing and effectiveness of all the business enterprises though the process
of accounting.
Accounting
may be defined as a set of Rules and Methods by which financial and economic
data an collected processed and summarized into report for decision making.
In
using data presented to them by customer for the purpose of leveling the bank
is interested in financial Accounting Information which enable it reach an
initial lean decision and also helps it to monitor progress after the advice
has been made.
These
information are those that deal with solvency, liquidity and profitability
these means obtaining information that will described the client’s financial
stand and long term liability. Banks
need three basic types of Accounting Information namely:
The score keeping information
involves liability and investigation of variance for corrective actions. This is done by campaign expert results with
elections implement ex-ante and useful in evolution state of planning.
It
also concerned the control principles function of management by exception.
Moreover
it bring out problems look into for collective actions.
The problem solving information is
useful in the implementation shape of planning since it focuses on analyzing
and recommending the best course of action among may courses. It is closely associated with management decision
making process and consist of non-routine and ad-loc and special decision.
The
objective of the most banking activity is to ensure effective.
Lending and as such lending has
become the most important of banking operation.
However lending forms the major segment to banking operation. As all known the important of lending in
banks activity the needs for a judicious lending cannot be over
emphasized. Loan request has to be properly
appraised by considering the necessary financial accounting information
required.
It
is easy to issue out loan but not often so easy to recovers to loan. Banks usually take some risk when lending
money. To ensure the safety of funds
committed banks should create a framework.
For dealing to have relevance information to the internal constraints of
each bank e.g sectoral performance deposit basis existing exposure risk
exposure and so on.
There
are thus three basic principles that serves as guide to commercial bank lending
Math. (1972) recommended the use of safety.
Suitability and profitability, these consist of some other sub element
known as the CANONS OF LENDING which involves purpose of loan amount, duration,
repayment borrower and collateral security to ensure or good lending decision,
these principles and canons of lending has to be followed vary strictly by the
bank when lending.
The
project will examine the extent to which the Union Bank. Have applied these accounting information in
their lending operation. By nature of
Banking business customers need to be critically scrutinized accessed before
granting to them any loan proposals one of the criteria for assessing customer
is by looking at the accounting information of the customers. In utilizing the data presented by the
customers for the purposes of lending union banks are interested in accounting
information which enables them to reach on initial loan decision and also help
than to monitor progress. After the
liquidity and profitability that is obtaining information that will described a
firm financial stand and longterm viability.
Union
Banks as users of accounting information would want to satisfy that the company
will be able to meet the interest payment accruing during the period of the
loan and repayment of capital sun of at the end of loan period other factors
like short term loan are also considered by the bank before approving loan
proposal to their customers. Union Bank
will be interested in their estimate of their net cash flow over the next for
months.
But
for a long term loan or advance the bank will need to be convinced that the
client is financially stable and that adequate profit will be earned through
out the foreseeable future. The ability
of the borrowers to repay both the capital and interest sum should be the bank
is prime consideration.
1.2 STATEMENT
OF PROBLEM
Lack of proper accounting information
from loan applicant had made it difficult for the union bank to ascertain the
instability of the applicant for the loan.
2.
Reduction
in incidence of bad debt many bank loan benefactors had not been able to repay
their loans on schedule.
3.
Improper
accounting records by borrowers. This
had posed problems to the bank and had been used as an index for evaluating
bank loan applications.
4.
The
borrowers had no financial and economic base which the bank would have accepted
as collateral for purpose of lending money.
1.3 OBJECTIVE
OF THE STUDY
1.
To
determine the extent to which the accounting information presented by loan
applicants influence bank lending decision.
2.
To
ascertain the extent to which adequate use of accounting information has
contributed to reduction in incidence of bad debts.
3.
To
ascertain the extent to which improper accounting records by borrowers have
contributed to non-repayment of loan.
4.
To
ascertain the extent to which no financial and economic base which the bank
will accept as collateral has effected the borrowers.
1.4 SIGNIFICANCE
OF THE STUDY
Commercial
Bank are every where in Nigeria
but this research work therefore is mainly on Union Bank PLC garden Avenue
Enugu.
The problem is mainly lack of proper
accounting information form loan applicant and reduction in incidence of bad
debt.
1.5 THE SCOPE OF STUDY
Commercial
Bank are every where in Nigeria
but the research work therefore is mainly on Union Bank PLC Garden Avenue Enugu.
The problem is mainly lack of proper
accounting information from loan applicant and reduction in incidence of bad
debt.
1.6 DEFINITION OF TERMS
BANK:
This is a place that provide a financial services. It is a financial institution that grant loan
and accept deposit.
LOAN AND ADVANCES:
It is a stated amount given to the customer for the bank by the bank for
the purpose of carrying out a particular project.
CLIENT AND CUSTOMERS:
A person(s) company(s) or firm who borrows money from the bank or a
person uses the service of a professional person or organization.
REFERENCES
1. Orjih .J. (1996) Element of Banking
Nigeria Rock Communication (Nig)
2. Adekanye F.A. (1990) Bank Customer Relationship
Jan Aprot The Nigeria
Banker.
3. PERRY
F.C. (1986) Element of Banking in Nigeria
Specuttruon
Books LTD.s
4. Nwosu
Nduka (1990) Business Times March 12.
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