The Effect Of Accounting Techniques On Small Business Performances

Project and Seminar Material for Accountancy / Accounting

The Effect Of Accounting Techniques On Small Business Performances


Abstract


There have been the recent calls for additional research in order to enhance the understanding of the adoption of accounting techniques (ATs) in small and medium sized enterprises (SMEs). This, allied to an increasing importance of SMEs around the world especially in developing countries, is the motivation for this research. This research explores the uptake of a broad range of ATs in Nigerian SMEs; identifies the roles of ATs in the management of SMEs; determines factors that affect the extent of use of ATs in SMEs and lastly examines the relationship between the use of ATs and organizational performance of SMEs. A postal questionnaire was conducted to 1,000 Nigerian SMEs in manufacturing sector which elicited 160 useable responses.

The results show that the majority of respondents have used the five accounting areas identified. Use of the costing system, budgeting system and performance evaluation system are significantly higher than for the decision support system and strategic accounting, which indicates that the uptake of traditional ATs is greater than for sophisticated ATs. The results indicate that medium sized firms make greater use of all ATs as opposed to small sized enterprises. The most significant differences relate to the use of decision support system and strategic accounting. The increased uptake of sophisticated ATs by larger firms is in line with size being a contingent variable explaining the use of such practices.

This study enriches the existing body of knowledge of accounting by providing information as to the use of ATs in SMEs in Nigeria. The findings can be specifically informative for policy makers intent on developing accounting skills among Nigerian SMEs. This research will provide valuable insights into the nature of ATs in SMEs in a developing country and will promote interest among Nigerian researchers as well as researchers of other countries to make the SME sector a focus of interest in accounting research.


Chapter One


Introduction

1.1 Background of the Study

The business environment has become intensively dynamic and increasingly unpredictable in recent decades and, correspondingly, managing company has become more demanding. Cost Accounting is a task of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. The SMEs sector has been recognized worldwide for its role in economic advancement through ways various like; wealth generation, employment creation, and poverty reduction (Kithae, Gakure, & Munyao, 2012). Small and medium scale enterprises are a fundamental part of the economic fabric in most developing countries, and they play a very important role in furthering growth, innovation and prosperity (Dalberg, 2011).

Small and Medium Enterprises are critical to the development of any economy has they possess great potentials for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large scale industries.

Cost accounting is a task of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.

In Nigeria there has been gross under-development of SMEs sub-sector and this has undeNined its contribution to economic growth and development. The key issue affecting the SMEs can be group into four: unfriendly business environment, poor funding, low management skill and lack of access to technology (FSS 2020 SME Sector Report, 2007). Small and medium enterprises (SMEs) play an important role in the development of a nation’s economy. The reasons for this are the fact that SMEs provide benefits such as job creations, knowledge spillover, economic multipliers, innovations driver and cluster development in an economy (Chinaemerem & Anthony, 2012). Given the importance of SMEs in an economy, it becomes quite plausible to look at factors affecting their financial performance which is a major determinant of their survival and growth.

An accounting system is an orderly, efficient scheme for providing accurate financial information and controls. Regulatory requirements and internal administration policies are key considerations in the design of an effective accounting system. Thus accounting systems show the books, records, voucher, and files and related supporting data resulting from the application of the accounting process. It involves the design of documents and transactions flow through an organization. The uniqueness of small and medium scale businesses call for careful consideration in the design of accounting systems. Small and medium scale enterprises are a vast majority of businesses found in variety of primary and inteNediate production of the economy. These establishments have tremendous impact on the state and well being of the nation in employment generation, as sources of national outputs and revenues, providing feedstock for large corporations They may lack the sophistication to apply the detailed accounting processes, yet the value of accounting systems to these businesses is quite profound.


1.2 Statement of the Problem

Most of the existing research literature on accounting in Port Harcourt SMEs tends to be more biased toward the aN of cost accounting techniques in performance of SMEs, more so only remote exists in regard of the adoption of cost accounting techniques by SMEs in Port Harcourt [(Wairegi, 2011),(Makau, Wawire, & Ofafa, 2013), (Waweru, 2012), (Mugambi, 2010) (Aduda, Mogutu, & Githinji, 2012) , lack of technical skills are as much obstacles to developing a small business as is the inability to access credit (Mbogo, 2011). In Nigeria, SMEs cover the entire range of economic activity within all sectors and share a number of common problems that hinder them from effective performance in Port Harcourt, include low market access to credit, poor information flow, discriminatory legislation, poor access to land, weak linkages among different sectors, weak operating capabilities in terms of skills, lack of knowledge and attitudes, lack of infrastructural facilities among others.

Another problems of SMEs failure is poor management ability which includes accounting problem-solving. Small and medium enterprise experiences difficulties in raising equity capital from the finance houses or individuals. Even when the finance house agrees to provide equity capital, the conditions are always dreadful. All these result to inadequate capital available to the sector and thus lead to poor financing.

Another problems facing SMES is Lack of competent management which is the consequence of inability of owners to employ the services of experts; Use of obsolete equipment and methods of production because of owner’s inability to access new technology; Excessive competition which resulted from sales which is a consequence of poor finance to cope with increased competition in the industry; The high cost of available raw materials affects the prices of good food. This only has adverse effect on the turnover of the enterprise but also on the profitability; The availability of infrastructural facilities is grossly inadequate in the areas of access roads, electricity, water supply, etc. and Multiplicity of policies and regulatory measures such as removal of fuel subsidy, taxes, several charges on loans.

The place of sound accounting and internal control systems in any business, irrespective of its scale, cannot be overemphasized. A vast majority of small-scale businesses cannot afford the complexity of a detailed accounting system even if they would have. Hence, the existence of single entries in their books and in some cases incomplete records (Wood, 1979; Onaolapo, et al., 2011). Audits of small and medium scale enterprises have proven to be among the most worrisome for professional accountants because of the inadequacy of the internal controls. This study thus sought to assess the determining factors and the adoption levels of modern accounting techniques by SMEs in Port Harcourt.


1.3 Research Objectives

Based on the issues and problems discussed above, this study identifies four main objectives

  1. To investigate the extent to which ATs are employed by Nigerian SMEs.
  2. To identify the roles played by ATs in Nigerian SMEs ‘management.
  3. To determine the factors that affect the extent of use of ATs among Nigerian SMEs.
  4. To seek to demonstrate a positive relationship between AT use and the performance of SMEs.

1.4 Research questions

These objectives can be expressed in the following research questions:

  1. What is the extent of the use of ATs by Nigerian SMEs?
  2. What are the roles of accounting in Nigerian SMEs ‘management?
  3. What factors affect the extent of the use of ATs by Nigerian SMEs?
  4. Is there a positive relationship between the use of ATs and the performance of Nigerian SMEs?

1.5 Hypotheses

Research questions 3 and 4 can be expressed in terms of the following two general hypotheses for empirical testing:

H1: There are significant and positive relationships between selected contingent factors and the use of ATs.

H2: There is a significant and positive relationship between the use of ATs and organizational performance.


1.6 Significance of Study

The effect of Cost Accounting Techniques and performance Small and Medium Enterprise development has been an area of intermse research both in practice and academia. This work is to prove helpful to existing and potential entrepreneur of SMEs since this study lends assistance in strategic effect of sources of finance in the performance of a business in order to plan ahead. The research work could also serve as a source of future reference to future researchers who may find it helpful in carrying out a research work of similar nature or related topic.

This empirical investigation of SMEs is therefore a significant contribution to existing literature. FurtheNore, the study would provide evidence on the extent to which Rivers state Small and Medium Enterprise are accounting accommodating in readiness for gaining strategic competitive advantages in their businesses.

The study would also provide uniqueness of small and medium scale businesses call for careful consideration in the design of accounting systems. Small and medium scale enterprises are a vast majority of businesses found in variety of primary and inteNediate production of the economy.


1.7 Scope of the Study

The general scope of this study covers Cost Accounting Techniques and performance Small and Medium Enterprise. The geographical scope is Rivers State of Nigeria. The study will be limited to selected SMEs in Port Harcourt.


1.8 Definition of Terms

Accounting:

The bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business.

SME:

Small and medium enterprises) are businesses whose personnel numbers fall below certain limits.

Cost accounting:

Is ‘the process of accounting for cost from the point at which expenditure is incurred or committed to establishment of its ultimate relationship with cost centres and cost units.

Technique:

A way of doing something by using special knowledge or skill

Accounting Records:

Accounting records are all of the documentation and books involved in the preparation of financial statements or records relevant to audits and financial reviews.

Financial Performance:

Measuring the results of a firm’s policies and operations in monetary terms.


Chapter Five


Conclusions and Recommendations for Future Research

5.1 The Research Problems and Conclusions

The importance of small and medium-sized enterprises for the Nigerian economy is undeniable. As discussed in chapter 3, SMEs in Nigeria play a crucial role by providing employment opportunities and boosting the growth of the economy. The SME sector has also proved valuable in helping Nigeria to achieve sustainable economic growth as the sector has been resilient to the adverse impact of global economic challenges that impact on the Nigerian economy. Among the different sectors in which SMEs operate, the manufacturing sector is most significant in terms of the contribution to GDP and exports from Nigeria, whereas the service and agriculture sectors contribute most in terms of employment. On balance it is reasonable to claim that the manufacturing sector is the most important SME sector in Nigeria and to make it the focus of the research.

A major contributor to the success of SMEs has been support from the Nigerian government to this sector. Given the various potential advantages from a thriving SMEs sector, the Nigerian government/policy makers have enacted various policies and interventions to promote SME development and to ensure the sector‘s sustainability and survival. Financial assistance as well as training in technical aspects of business, marketing and management skills is among the support from the government for this sector. These policies and support have successfully stimulated the growth of this sector. Despite the increasing interest in the SME sector, there is a dearth of academic research into Nigerian SMEs including their use of ATs.

Research has shown that ATs have a role in ensuring that the management of a firm is efficient and effective and may also improve performance. ATs also peNit firms to compete in the market place and reduce the likelihood of business failure. Given these advantages from AT use, it is important to promote knowledge and awareness of ATs among small business in Nigeria so that firms may benefit from the advantages that have been highlighted above. FurtheNore, in a Nigerian context, this lack of research into ATs and SMEs may result in a failure by government to appreciate the importance of ATs for SMEs. For example, knowledge of ATs is not included in management skills training for entrepreneurs provided by the government. This research may ensure that policy makers are better infoNed.

Therefore the thesis addressed this literature gap by investigating four research questions:

  1. What is the extent of the use of ATs by Nigerian SMEs?
  2. What are the roles of accounting in SMEs‘ management?
  3. 2What factors affect the extent of the use of ATs by SMEs?
  4. Is there a positive relationship between the use of ATs and the performance of SMEs?

Research questions 3 and 4 were expressed in terms of the following two general hypotheses for empirical testing:

  • H1: There are significant and positive relationships between selected contingent factors and the use of ATs.
  • H2: There is a significant and positive relationship between the use of ATs and organizational performance.

The four research questions were answered through evidence obtained from a survey of 1,000 Nigerian SMEs, which elicited 160 useable responses. Three main type of analyses; descriptive; bivariate and multivariate were undertaken to help answering the above research questions. The main conclusions for each research question are as follows:


5.2 Implications and Recommendation

This research concerns the use of ATs by SMEs. Although there is a body of literature examining the use of ATs, the focus has been on larger firms and no previous research has exclusively addressed the use of ATs in SMEs particularly in a developing country. This research therefore makes its own specific contribution by providing knowledge of ATs in SMEs in a developing country. The research is distinct not only because it documents the uptake of ATs among SMEs; but also because it addresses the roles of ATs in the management of SMEs; investigates factors affecting the use of ATs, and examines the impact of ATs on the performance of firms in SME sector.

By filling this research gap, this study has sought to advance understanding of recent developments of ATs in SMEs particularly in a developing country context by adding new empirical evidence to the body of knowledge on the use of ATs as well as responding to calls for research into ATs in small business (see Mitchell et al., 1998;
Mitchell and Reid, 2000; and Nimtrakoon, 2009).

This research considers a broad range of ATs instead of focusing on a single AT or a limited set of ATs. The information will increase an understanding on how far small businesses have taken advantages of the available ATs and whether they have adopted newly developed techniques to some extent.

Using the notion of contingency theory as a foundation, this research has also advanced the current state of knowledge by shedding light on factors influencing the use of ATs in small businesses in a developing country. The findings indicate that ATs can be influenced by external environment as well as by factors within the organization. As such this research has responded to the recent calls for additional contingency based research in accounting in order to enhance understanding of potential contingency factors which explain the use of ATs (Chenhall and Langfield-Smith, 1998; and El-Ebaishi et al., 2003). It extends the body of knowledge that use contingency theory to explore the significance of contingency variables in small businesses.

Further this research has made at contribution by exploring the roles of ATs in the management of SMEs and examining for a possible association between the some use of ATs and improved firm performance. As such this research has highlighted the importance of accounting in the management as well as the relationship of their use to organisational performance. Consequently this research has extended the findings of Chenhall and Langfield-Smith (1998) and El-Ebaishi et al. (2003) among others.

This research has increased knowledge of ATs in a SMEs context. Nigeria as a developing country has strived to move to parity with more developed economies, and find the research useful to provide relevant knowledge that can support efforts to enhance the performance of Nigerian SMEs. The findings will be informative for policy makers intent on developing accounting skills among Nigerian SMEs. In specific it is hoped that the Nigerian government will enhance the existing training programmes to the Nigerian entrepreneurs or young graduates by subsidising the training in the use of ATs so that the SMEs. The training should bring more awareness to the use of ATs particularly to the use of more modern ATs. More broadly this research will promote interest among Nigerian researchers as well as researchers of other countries to take the SMEs sector as a focus of interest for their research. This study can be also a starting point for further investigations and analysis of ATs among SMEs in Nigeria.

The study suggests that there is ample room to increase both awareness of and understanding of the importance of ATs within smaller firms since these practices are vital ingredients in the success of any organizations. The results indicated that traditional and financially oriented ATs have high level of usage but the adoption of newly-developed ATs remains patchy. Perhaps Nigerian policy makers could provide training in these techniques for entrepreneurs or future graduates in Nigeria.

In conclusion, the work presents a comprehensive survey and explanations of the use of ATs in SMEs and therefore makes a contribution to the awareness of accounting in small firms particularly in a developing economy.


5.4 Recommendations for Future Research

The results of this research raise several issues that warrant future research.

First, the sample of small firms should be extended to achieve a valid set of responses. This would enable differences based upon size to be clearly identified and highlight the effect of contingent factors in different contexts. However, this may prove difficult as there must be the possibility that small firms without ATs will be much less likely to complete the questionnaire and thus bias the responses.

Second, in the context of contingency theory it might be advantageous to focus on a sample from one particular industry such as electric and electronics or food and beverages in the manufacturing sector. This would mean that the sample would be more homogeneous and might be expected to use certain types of ATs or certain techniques. This might make the contingent factors explaining differences more distinct. Alternatively a case study approach might be employed to highlight differences and reasons for them in a more detailed context so that how and why practices and techniques are applied or not applied would be identifiable.

Third the nature of the dependence between traditional and recently-developed ATs needs further investigation. The lower use of sophisticated ATs raises the question of the conditions necessary to effectively implement these techniques within smaller firms. Again a qualitative case study approach would be likely to provide additional insights beyond those that can be gleaned from a questionnaire survey approach.

Fourth, the next few years are likely to see increased global competitiveness in the Nigerian industrial markets; therefore it would be interesting to expand the survey to provide a longitudinal study of accounting change by documenting changes over time in the adoption of specific accounting techniques in a more detailed way.
Lastly, research in this area can be developed by conducting a comparative study of the Nigerian situation on adoption of ATs against that in other developing countries in order to explore differences in terms of cultural and other contingent factors.


Complete Material For The Effect Of Accounting Techniques On Small Business Performances


Project Material Download

3,000 Naira


The Complete Material will be Sent to You in Just 2 Steps

Quick & Simple…


Step One Purchase

Make a Mobile Transfer or POS Payment of ₦3,000 to any of the Account Below

Access Bank PlcAccount No.: 0811003731
Name: Samphina Academy
Account Type: Current
Zenith BankAccount No.: 1225513212
Name: Samphina Academy
Account Type: Current

Or CLICK HERE To Pay With Debit Card

FOR CLIENTS OUTSIDE NIGERIA
CLICK HERE To Pay With Debit Card ($15)
GHANA – Make Payment of 60 GHS to MTN MoMo, 0553978005, Douglas Osabutey 

Step Two Purchase

Send the Following Details on WhatsApp ( 08143831497) After Payment

  • Payment Details
  • Email Address 
  • The Effect Of Accounting Techniques On Small Business Performances

The Complete Material Will Be Sent To Your Email Address After Receiving Your Details
T & C Apply


  Contact Our Help Desk


⚠️ Need a different topic? Perform a quick search



Get A Complete Business Plan For Any Business In Nigeria

Business Plan for Businesses in Nigeria

  Business Plans in Nigeria


Disclaimer


This research material “The Effect Of Accounting Techniques On Small Business Performances” is for research purposes and should be used as a guide in developing your research project / seminar work. For no reason should you copy word for word (verbatim) as samphina.com.ng will not be liable for any who copied the material.

The aim of providing this material is to reduce the stress of moving from one school library to another all in the name of searching for research materials. This service is legal because, all institutions permit their students to read previous projects, books, articles or papers while developing their own works. According to Austin Kleon “All creative work builds on what came before”.

samphina.com.ng is only providing this material “The Effect Of Accounting Techniques On Small Business Performances” as a reference for your research. The paper should be used as a guide or framework for your own paper. The contents of this paper should be able to help you in generating new ideas and thoughts for your own research. Use it as a guidance purpose only.

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.