Assessing Book-Keeping Practices Of Small And Medium Scale Enterprises

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Assessing Book-Keeping Practices Of Small And Medium Scale Enterprises


The role of SMEs in the development of any nation cannot be over-emphasized. Yet their growth into bigger firms is often beset with many challenges. This study sought to assess book-keeping practices of small and medium scale enterprises. The study employed the quantitative research method and survey design. The simple random sampling method was used to draw a sample of 100 enterprises from a survey population of 135 registered SMEs from Enugu Metropolis. A structured survey questionnaire was used in gathering primary data for the study. A total of 100 questionnaires were returned and used for analysis. The study found that most SMEs surveyed did not keep complete written records even though majority (74%) of them perceived bookkeeping as an important tool for business growth. The challenges that confronted SMEs owners in bookkeeping were lack of personal knowledge in bookkeeping, lack of record keepers, time and resources constraints among others. The study also found that majority SME owners perceived bookkeeping to have an effect on the growth of SMEs and level of education of SME owners or managers also had a positive relationship with their bookkeeping practices. The study recommended that the National Board for Small Scale Industries (NBSSI) in Ghana should initiate policies that will intensify education of SMEs operators on bookkeeping since many of them lacked personal knowledge in bookkeeping. Business operators were also recommended to go for seminars and training that will improve their record keeping skills.

Table Of Content

Preliminary Page(s)

  • Title Page
  • Declaration
  • Approval
  • Dedication
  • Acknowledgement
  • Abstract
  • Table of Content

Chapter One

1.0 Introduction

  • 1.1 Background To The Study
  • 1.2 Statement Of The Problem
  • 1.3 Purpose Of The Study
  • 1.4 Objectives Of The Study
  • 1.5 Research Questions
  • 1.6 Research Hypotheses
  • 1.8 Definition Of Terms

Chapter Two

2.0 Literature Review

  • 2.1 Small And Medium Business
  • 2.2 Bookkeeping Practices And Financial Reporting Of Smes
  • 2.3 Bookkeeping And Growth Of Small And Medium-Scale Enterprises
  • 2.4 Challenges Of Smes Practicing Sound Bookkeeping
  • 2.5 Types Of Book Keeping
  • 2.6 Theoretical Review

Chapter Three

3.0 Research Methodology

  • 3.1 Research Design
  • 3.2 Research Approach
  • 3.3 Study Area
  • 3.4 Sampling Procedure
  • 3.5 Instrument For Data Collection
  • 3.6 Data Processing And Analysis

Chapter Four

4.0 Results and Discussion

  • 4.1 Result

Chapter Five

5.0 Conclusion and Recommendation

  • 5.1 Conclusion
  • 5.2 Recommendation
  • References
  • Questionnaire

Chapter One

1.0 Introduction

1.1 Background To The Study

There has been a growing concern for supporting the operations of Small and Medium-Scale Enterprises (SMEs) among governments (Amoako, 2012).Given their contribution to national growth and economic development, it is believed that small and medium-scale enterprises (SMEs) are the backbone of many economies across the globe (Alhassan & Muazu, 2014; Okoli, 2011). According to Amoako, Marfo, Gyabaah, and Gyamfi (2014), a major indicator of a booming economy is a vibrant Small and Medium Scale Enterprises and how efficiently they contribute to Gross Domestic Product (GDP).

Aside generating income for their owners, Alhassan andMuazu (2014) argued that SMEs promote innovative ideas and creativity in the business arena, as well as providing employment for many people. Even in the developed industrial economies, it is the SME sector rather than the multinationals that takes the largest proportion of employees(Adu, 2013; Quartey&Abor, 2010).For instance, it has been shown that in 2008, SMEs employed 90 million people in Europe (Bowen, 2009).

In Nigeria, the impact of SMEs on the economy cannot be overemphasized. Aryeetey (2001) and Amoako (2012) argued that in addition to contributing to Nigeria’s Gross Domestic Product (GDP), SMEs form a characteristic feature of the production landscape and thus provide about 85% of manufacturing employment. Thus, SMEs have been described as proficient and prolific job creators, the seeds of big businesses and the supporting pillars of development in many economies (Adu, 2013; Quartey&Abor, 2010).

While recognizing the potential roles of SMEs in national development, one key issue worth considering is their growth and sustainability. In spite of the concerted efforts by successive governments coupled with the financial support given to SMEs in Nigeria, they still face the threat of failure, with past statistics indicating that three out of five SMEs fail within the first few months of operation (Bowen, 2009). It is estimated that 25% to 40% of SMEs below 5 years in Nigeria collapse every year (Acheampong, 2015; Amidu&Abor, 2004).

Some authors argue that in Nigeria, most businesses that were started in the early 2000s are no longer in existence (Amidu&Abor, 2005). For enterprises to grow, however, they must be able to survive and then inch up gradually. It is, thus, imperative to investigate the factors that militate against survival and hence constrain the growth of such ventures. Muchira (2012) opined that the problem that might require emphases in research may be the management of these SMEs. She, however, noted that the efficient management of these enterprises revolves around sound accounting practices, which is highly dependent on proper bookkeeping of records on the business transactions. A recent study by Mbro and Attom (2012) discovered that basic book-keeping practices were not in operation in many of the enterprises operating in Enugu with majority (52%) frequently seeking external assistance in their business accounting. Mbro and Attom (2012), however, did not relate book-keeping to any performance measures of SMEs which is the focus of this study.

1.2 Statement Of The Problem

In the past, the common factors that constrained SMEs growth included lack of government support, lack of access to finance, high operating costs and stiff competition among others (Esaete, 2005). However, with the current legal and regulatory framework in Nigeria coupled with the increased number of lending institutions, these problems have been substantially reduced (Alhassan & Muazu, 2014). Alhassan and Muazu (2014) further indicated that the banking sector has recently improved its financial services to the SMEs in Nigeria. Despite the several attempts to boost activities of SMEs the survival and growth of SMEs in Nigeria is still a problem (Alhassan & Muazu, 2014). It is against this background that the need arise for current studies to explore other equally important factors that can contribute to the problem.

Earlier studies have suggested that record keeping is at the heart of any external interaction with the SMEs be it access to finance or eligibility for assistance. That is, credit worthiness and growth potentials are all embedded in bookkeeping records of enterprises. It is theoretical plausible to expect some positive effects of proper record keeping and enterprise performances such as profitability and growth. According to Blank (1966), however, “Theory and introspection have their proper place in economic analysis but at some point they must be tested by the actual reactions of the market place”.

However, Amoako, Marfo, Gyabaahand Gyamfi (2014) investigated the accounting records keeping practices of SMEs in Nigeria and found that majority of SMEs did not keep complete accounting records. Alhassan and Muazu (2014) on the other hand also investigated the relationship between record keeping and performance of SMEs and discovered that there was a positive relationship between record keeping and business performance.

Again, Suraj(2011) conducted a study on bookkeeping practices and its relevance to SMEs and found out that many SMEs did not keep proper books and could not obtain financial assistance from banks. Amissah(2011) also conducted a study on proper bookkeeping and basic accounting procedures among SMEs in the Abuja and discovered that lack of knowledge in bookkeeping and lack of finance to engage the services of a bookkeeper contributed to most SMEs not keeping books.

As partitioned by the World Bank group in 2007 and 2013 (World Bank, 2013), none of the studies was done in Enugu. For a complete picture of the situation and role of bookkeeping in Nigeria, a study on SMEs in Enugu is a step in the right direction. Notwithstanding the fact that SMEs in the Enugu state are struggling with growth, a major motivation for the study was the observation that it will not be appropriate to approximate the findings of studies done on size from one setting to another because how size and age relates to firms’ performance cannot be analyzed outside the institutional framework that the firms operate within.

1.3 Purpose Of The Study

The purpose of the study is to assess bookkeeping practices of small and medium scale enterprises in Enugu state, Nigeria.

1.4 Objectives Of The Study

The main objective of this study is to assess bookkeeping practices of small and medium scale enterprises in Enugu State. The following specific objectives have been formulated to guide the study:

  1. Examine the types of records kept by SMEs operators
  2. Assess the relationship between levels of education of SMEs owners’ and willingness to keeping business records.
  3. Examine the perception of SMEs owners on the effects of bookkeeping on the growth of their enterprises.

1.5 Research Questions

The study seeks to answer the following questions:

  1. What types of records are kept by SMEs operators?
  2. To what extent does willingness to keep records depends on level of education of SMEs owners?
  3. What is the perception of SMEs owners on the effects of bookkeeping on the growth of their enterprises?

1.6 Research Hypotheses

The study seeks to test the following hypotheses

  • HO1: There is no significant relationship between perception of SMEs and practice of bookkeeping among SMEs in Enugu state, Nigeria
  • HO2: There is no significant effect of bookkeeping on the growth of small and medium scale enterprises in Enugu state, Nigeria

1.7 Significance Of The Study

The study sought to explore the state and relationship between bookkeeping and SMEs performance which shall provide lead information to Policy makers on the challenges that need redress as Nigeria adopts the International Financial Reporting Standards (IFRS for SMEs). That is, the state and perception of SMEs on bookkeeping is very key to readiness of SMEs to preparing financial reports since the information needed must first come from records kept.
Furthermore, a good knowledge of bookkeeping greatly facilitates the work of the Internal Revenue Service and the Value Added Tax officials in determining assessable and chargeable incomes of SMEs.

The study is equally helpful to the National Board for Small-Scale Industries (NBSSI) in evaluating the success of its activities with specific reference to proper bookkeeping and basic accounting procedures. It can also assist the Board in formulating its future plans.

Finally, the study has contributed to the existing wealth of knowledge in bookkeeping and SMEs growth and survival.

1.8 Definition Of Terms


Is the recording of business transactions in a systematic manner so that the financial position of an organization can be ascertained at any point in time.

Business growth

Refers to the process of a business expansion by increased output (products and services), customer base, new product development or expansion of the target market.


The National Board for Small Scale Industries (NBSSI) defines Small enterprises as those employing between 6 and 29 employees or firms with fixed assets not exceeding $100,000, excluding land and building (Amoako, Marfo, Gyabaah, &Gyamfi, 2014; NBSSI Report, 2009). The NBSSI further defined enterprises that employ between 30 and 100 employees as medium sized enterprises (Abor & Biekpe, 2006). This operational definition by the National Board for Small Scale Industries (NBSSI) is thus adopted by the study.

Chapter Five

5.0 Conclusion and Recommendation

5.1 Conclusion

This study has provided an overview and relevant discussion on some of the key areas in bookkeeping within academic literature. It has also brought to bear relevant information for policy consideration. From the findings, it can be concluded that there is a mixed perception about bookkeeping among small and medium-scale enterprise owners in the Cape Coast Metropolis. Though some people did not see any benefit in bookkeeping, the majority understood the importance of bookkeeping in the growth of their businesses. Since the majority had a positive perception about bookkeeping, this is a good starting point for the National Board for Small Scale Industries (NBSSI) to intensify efforts to educate and train SME operators in bookkeeping. The unusual observation from the study was that, despite the high positive perception of bookkeeping among SME operators, only few of them really practiced bookkeeping. The reasons given were lack of personal knowledge in bookkeeping, lack of bookkeeper or accountant, time constraint and financial or logistical constraints.

Another conclusion that can be drawn from the study is that bookkeeping can have a positive effect on the growth of businesses. From the study, those who kept records of their business activities were able to confirm that there was growth or reduction on sales, profitability and customer base but those who did not keep records were unable to observe any growth or reduction in their business sales, profitability and customer base.

The study can also conclude that preparation of financial statements was a problem among the SMEs surveyed. It was revealed that among those who kept some form of records, only a few prepared financial statements which were also limited only to income and expenditure accounts. Though it is worth acknowledging that the small enterprises cannot afford the services of a qualified accountant, at least someone with basic accounting background could be engaged and trained to serve as accounts clerk who will both keep records and prepare financial statements.
Finally, the study can conclude that majority of the SMEs did not have the basic books of accounts in place for the purpose of record keeping. Simple day books such as sales day book, purchases day book, receivables ledger, payables ledger, asset register, cash receipt book, cheque payments book and a petty cash voucher should at least be maintained in any business establishment. But this finding was not surprising because majority of the SME operators confirmed that they lacked personal knowledge in bookkeeping.

In general, it can be concluded that this study has effectively answered the research questions and can establish that there is still a mixed perception about bookkeeping among SME operators in the Cape Coast Metropolis and that bookkeeping is likely to have an impact on the growth of SMEs. There is also a positive relationship between bookkeeping and level of owner education. This study has also contributed to a better understanding of bookkeeping among the 100 enterprises surveyed and has also contributed significantly to academic discourse and literature on the subject.

5.2 Recommendation

Based on the research findings, the following recommendations are made:

  1. It is recommended that the regulatory authorities initiate policies that will intensify education of SME operators on bookkeeping since many of them lack personal knowledge in bookkeeping.
  2. Many small-scale business operators think that employing capable hands to keep record of business operations is the concern of the big enterprises only. Therefore, for them to achieve good financial management and growth, it is recommended that SME operators employ at least an accounts clerk to keep proper and adequate records for the growth and survival of their businesses. The bookkeeper should also be trained to prepare traditional profit and loss accounts as well as balance sheets.
  3. Business operators are also recommended to go for seminars and training programmes that will improve their record keeping skills since level of education has a direct relationship with proper bookkeeping practices.
  4. As a matter of policy, SME operators should be encourage by their respective associations to keep the following record books – sales day book, purchases day book, receivables ledger, payables ledger, asset register, cash receipt book, check payments book, petty cash

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