The Impact Of Accounting System In Microfinance Bank

Project and Seminar Material for Accountancy / Accounting

Project and Seminar Material for Accountancy / Accounting


Within the frame work of this project topic “The Impact of Accounting system in Microfinance Bank” the researcher has attempted to explain the importance of accounting system as a ways of helping management to improve operations in the microfinance Bank sector. However, recent researchers have shown that one of the main causes of indigenous business failure in this country is due to failure in this country is due to the failure to maintain proper Accounting records. Therefore, at the end of this project research work, an attempt was made to give solutions to this problem so as to increase the status of microfinance banks. In achieving the objectives of this study, various investigation instruments such as questionnaires, personal interview and chi-square statistical test were implemented in the collection of data for the study and the result from them were used for the summary of findings. Furthermore, in the research objectives, recommendation were made which when implemented, the researcher hopes that it will be of great help to the regulatory authorities. The recommendations were based on research findings and should not be noted to be exhaustive.

Chapter One


1.1 Background Of The Study

Accountancy embraces the installation of book-keeping and accounting systems. The writing up of account and the preparations of every kind of financial statement from the simplest receipts and payments of small club to the published accounts of large public companies. It is one of the main works of the accountant in practice to provide client both large and small with necessary advice as to the most appropriate accounting system to entail what will provide management with up to date information. Accounting is always said to be the language of business. Every organization including bank registered under the Nigerian Company Law, having statutory responsibility of profit of the assets and liabilities at the end of its accounting period, to its members’ shareholders, the public and other users including the government. Accounting system means the system of recording financial transactions in an organization. It could also be referred to as an internal control system in an organization depending on the nature of business undertaken by the organization. This is because financial transactions are qualified in monetary terms and thus requires proper recording of receipts and payment of funds. It is worthy to note that any default in the accounting system of an organization could lead to business failure. In addition, banks by virtue of nature of its services dealing with money are expected to maintain up-to-date records of its transactions with or on behalf of its customers.

However, in microfinance banks, this responsibility can be effectively discharged if put in place for recording day to day transactions of the bank. Beside, accounting is not only concerned with recording of transactions but also with the use to which the records are put, their analysis and interpretations for use in making decisions not only for the management usefulness but also to the members and would be investors, government agencies e.t.c.

Recent researchers have shown that one of the main causes of indigenous business failure in the country is due to the failure to maintain proper accounting records. Therefore, these purposes can only be achieved in the light of good design and application of sound accounting system. Thus, the scope of this research work is to make appraisal of relevance and adequacy of accounting system in microfinance Bank using “Ohha Microfinance bank Nigeria Ltd as a case study.

1.2 Statement Of The Problem

Accounting being a profession referred to as service activity and accounting as often termed to be language of business, therefore the importance of accounting system in any organization cannot be overemphasized. The organization cannot be achieved if there is no adequate accounting system in place. In the course of this research work, the following problems will be considered.

  1. The effects of inadequate accounting system in banking operation.
  2. Unavailability of timely accounting data.
  3. The falsification of account in the banking sectors.
  4. Nonchalant attitude of the management towards the information provided by the accounting system.
  5. Poor decision making.
  6. Poor accounting record.
  7. Poor audit problem.

1.3 Objective Of The Study

The study will aim to accomplish the following objectives:

  1. To determine the impact of accounting system in microfinance bank
  2. To evaluate the factors that will limit the efficacy of community banks in their efficient application of accounting system in their banking operations or activities.
  3. To determine whether the strategies used by community bank in their accounting system in their banking operations or activities.
  4. To assess the release of accounting system in proving the activities of Ohha Microfinance bank.
  5. To assess whether accounting system will provide timely accounting data for management decision making.
  6. To find out whether it will facilitate banking activities.
  7. To make recommendations on how to enhance the efficacy and effectiveness of accounting system in comment banking.

1.4 Hypothesis

The following hypothesis forms the basis or the framework for carrying out this research study

  1. HO: Accounting systems have no impact in microfinance bank.
    H1: Accounting systems have impact in microfinance bank.
  2. HO: The strategies used by microfinance banks in her accounting system have not been very efficient and effective.
    H2: The strategies used by microfinance bank in her accounting system have been very efficient and effective.

1.5 Research Questions

i. Deferred Tax:

This include tax due on income which is not taxable within 12months of the current year as a result of differences of the current year as a result of differences between the tax profits and the reported profit.

ii. Deposits:

This mean all deposit liabilities of banks including other accounts and placements by other banks, current and time deposited.

iii. Dividend:

This is refereed to the total dividend paid to either the ordinary shareholders or the preference shareholders.

iv. Earnigs Per Share:

This computed as profit after taxation less preference dividend by the number or ordinary and founder’s shares outstanding. To enhance comparability, all shares are assumed to have a per value of one naira.

v. General Reserves:

This includes all over reserves and other reserves.

vi. Interest Margins:

This is the next of interest income received and paid.

vii. Investment:

This includes investments in all calls, money, fixed deposits, negotiable certificates of deposits with other banks, bankers acceptances, quoted and unquoted investment

viii. Loan And Advances:

All loan and advances given to customers, the advances net of provision is used.

ix. Lateral Acquisition:

This is the investigation in other type of business apart from banking.

x. Bills Of Exchange:

This simply means an unconditional order writing address by one person to another signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time, a sum certain in money to or tot the order of a specified person or to the bearer.

xi. Cheque:

A cheque may be defined as a bill of exchange drawn on a banker payable on demands.

xii. Drawee:

This is the bank or whom the cheque is drawn.

xiii. Payee:

This is the beneficiary of an order cheque or the bearer of a cheque.

xiv. Open Cheque:

An open cheque is one that can be cashed over the counter.

xv. Cross Cheque:

A crossed cheque is one that cannot be cashed over the counter; it has to be paid into an account.

The Impact Of Accounting System In Microfinance Bank

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