Relevance Of Accounting Records In Small And Medium Scale Industry

Project and Seminar Material for Accountancy / Accounting

Abstract

The research was carried out to examine the importance of accounting records in small scale industry(a case study of Oliver Twist, Uyo) Akwa Ibom State. Data generated were analyzed using simple percentage method and questionnaires were administered to the respondents. The study found the training of accountants by these organization and the various professional institutes should focus more on practical means of solving accounts reporting needs of small and medium scale enterprises; and that government should provide adequate financial assistance, this is because if there is adequate financial support, more unemployed Nigerians will engage in small scale enterprises thereby gain their means of living easily than looking for unavailable while collar job. The researchers recommend that the training of accountants by these organization and the various professional institutes should focus more on practical means of solving accounts reporting needs of small and medium scale enterprises; and that government should provide adequate financial assistance, this is because if there is adequate financial support, more unemployed Nigerians will engage in small scale enterprises thereby gain their means of living easily than looking for unavailable while collar job.

Chapter One

Introduction

1.1 Background of the Study

An accounting system records, retains and reproduces financial information relating to financial transaction flows and financial position, a basic reality of modern economic life is the inter dependence of the business. There is no doubt whatever that the small scale and medium companies constitute the real fabric of a of nation’s economy. And to say that the present and future economic advancement of this our great country Nigeria lies in the growth of Small to Medium Scale enterprises (SME) is not an overstatement. This opinion was uphold during the economic conference in Lagos in 1989 at the instance of three bodies namely the Nigeria Institute of Social and Economic Research (NISER), the National Association of Small-Scale Industries (NASSI) and the Friedrich Albert Foundation. In other words, SMEs constitute a vital engine to economic growth and development.

However, the environment in which this sector operates in Nigeria is both challenging and rewarding. It is challenging because it is fraught with the changes of risk arising from having, in the first place to invest money in a business and the problems of managing it in the country’s recessed economy.

Nevertheless, there is smiling countenance of success, should the SMEs be given dynamic leadership and properly managed in the present economically recessive climate in the country and with the aid of the various package of incentives given by government (Federal State and Local) to this group of business. Past record of different countries that are regarded to be developed revealed that industrial revaluation had been the main cause for their economic survival. The financial capacity, the said developed countries has come mainly from bad rock for any meaningful industrial development and for the acquisition of this trial and technological power. There are slow growth in industrial development and lag in rural development. It is often suggested that small scale and medium enterprises (SME) would help promote rural development, as well as general urban employment.

There is no doubt that the survival of entrepreneur in the present Nigeria economy depend solely on his initiation drive including quick adaptation to the environment. The question of age of buy, buy, buy, sell, sell is now a thing of history in the country (Nigeria). Therefore, sole proprietor must appreciate the fact and advance to study the economy and develop interest in and any manufacturing or agricultural sector no matter how small or medium for the present and future survival of Nigeria

In order to sustain the growth and survival of the small scale industrial deemed it necessary to establish institutions that would provide the back-up extension.

Hence the establishment of industrial development centers (IDCS). They were established to give direct grass root support service including counseling on project identification and selection machinery, serving, conducting market studies and preparation of feasibility studies.

Hence this project titled “Relevance of Accounting Records in Small and Medium Industry in AkwaIbomState. A case of study of Oliver Twist, Uyois to demonstrate the importance of financial record keeping and good management of SMEs to ensure that every bit of Naira and kobo of the industry is used judiciously so that the aim and objectives of the business is achieved (i.e. maximizing profit and minimizing loss).

1.2 Statement of the Problem

It is now a common knowledge that the Nigeria economy presently and past years experienced drastic failure or setback as regard small and medium scale enterprises. There is no authentic or systematic information concerning the organization whereas the business owners or managers could embark on meaningful decisions. On the regard opinions or decision could not be taken based on the present facts and figures on the business financial stand. This position could result to non-growth of business and fall in the capital structure of the organization. This problems and others not mentioned here confronting the small and medium scale enterprises has attracted numerous sympathy. It is also on record that the number of survivors from this problem seen not to have gloomy days ahead. Very many people have apportioned the blame on improper or insufficient accounting record keeping or maintenance in conjunction with managerial problems. The aforementioned facts are not only known factors which may hinds the progress of any business. Accounting to management other variables include finance, state of economy, effective communication between managers and other employees experience and devotion to duty and of course satisfactory accounting system. For the purpose of this study, it is assumed that all the variables above listed exist in consonance with business.

1.3 Objective of the Study

The study oblige that we search deeply into accounting record keeping system of small and medium scale enterprise (SMEs) in Akwa Ibom State Oliver Twist, Uyo to find out the method of keeping records problems associated in doing so, and whether the system is enough for the business. Furthermore, the study will determine the study the scope of which poor management has brought a set back to the progress and expansion of the organization. The study will also emphasis reason why SMEs should keep sufficient records and want to be involved greatly in the country’s industrial change. The study also will intend to marshal out a simple be effective system of accounting for both small and medium scale industries. Based on the result gotten from the study appropriate recommendations will be made regarding proper books of accounts necessary to be kept by SMEs for the purpose of profit maximization, management adequacy including high growth.

1.4 Research Questions

The following research questions was formulated by the researcher to guide the study;

Do small scale industries keep proper and accurate accounting record of their transactions?
Does accounting record keeping contribute to efficient performance of small scale business?
Does Manual account record keeping more useful and popular to small scale industries than electronic methods?
What are the problems confronting small and medium scale industries in keeping proper accounting records?
What are the major roles of Accounting Records in the development of medium and small scale industries?

1.5 Significance of the Study

This study would benefit both businessmen and farmer because it will enable them to know that possible causes of industrial development and reasons for mortality of small and medium enterprises. This study will further did aid business owners and managers of SMEs by way of training good accounting records.

People who intends to invest their wealth in small scale or medium scale business should know the like hood of harm that will befall them for not keeping a proper and sufficient books and therefore should on their utmost interest guard against them.

Finally, it is considered that this study would be of importance to the planning authorities as it will avail them all the relevant information required in the formation of economic policies.

1.6 Scope and Limitation of the Study

This study capital the impact of accounting record in small and medium scale enterprises in Akwa Ibom State “a case study of Oliver Twist, Uyo” could have been extended to cover Enugu State as a whole and beyond and of problems of business establishment but considering the huge financial involvement, the project writer is compelled to limit the scope of study to only the relevance of accounting records in small and medium size industries Oliver Twist, Uyo.

The researcher encounters some constrain which limited the scope of the study;

Time:

The time at the disposal of the researcher which was allocated for the study was a major limitation as the researcher had to combine other academic activities with the study.

Finance:

The finance at the disposal of the researcher in the course of the study could not permit wider coverage as resources are very limited as the researcher has other academic bills to cover.

Availability of research material:

The research materials available to the researcher at the time of this study were insufficient, thereby limiting the study.

1.7 Definition of Terms

The following terms has been used in the study accounting: Accounting may be defined as a process by which data relating to the economic activities of an organization are recorded, measured and communicated to interest parties for analysis and interpretation.

Financial Accounting:

This can be said to be the process of classifying and recording the actual transactions of an entity in monetary terms in accordance with established concept, principles, accounting standard and legal possible of the effect transactions over the period and at the year end.

Cost Accounting:

This is said to be that part of management accounting which establishment budgets and standard costs and actual cost of operation department or product and the analysis of various, profitability or social use of funds. Testimonial

Cost:

Nweze (2000) writing on “Quantitative approach to management accounting defined cost as a measurement in monetary terms of the amount of resources useful for some purpose”

1.8 Organization Of The Study

This research work is organized in five chapters, for easy understanding, as follows

Chapter one is concern with the introduction, which consist of the (overview, of the study), statement of problem, objectives of the study, research question, significance or the study, research methodology, definition of terms and historical background of the study.
Chapter two highlight the theoretical framework on which the study is based, thus the review of related literature.
Chapter three deals on the research design and methodology adopted in the study.
Chapter four concentrate on the data collection and analysis and presentation of finding.
Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

It is pertinent to ascertain that the main objective of this study was to examine the relevance of accounting records in small and medium scale industry.

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges small and medium scale industry in Nigeria.

5.2 Summary

Findings revealed that majority of the respondents did kept business accounting records. Records are kept on cash basis. Sales purchases, creditors and debtors. Receipts, invoices, payment vouchers are used as record keeping documents which help to reduce operating costs, improves efficiency and productivity. Accounting records are very essential for decision making and majority of the respondents do not prepare yearly financial statements. Findings also revealed that majority of the small scale business operator’s measure performance of their businesses. Profitability is widely used as a measure of financial performance; workers provide a strongest linkage to successful business performance. Majority of the small scale business operators do not set yearly objectives for each performance indicator and majority do not prepare budgets for performance appraisal. Findings showed that there is a strong positive relationship between accounting record keeping and performance of small scale enterprises. This implies that accounting record keeping affects performance of small scale business. Accounting record keeping is essential for decision making. Business adjustment and records also help to improve business efficiency and productivity for effective business performance. It was also found that Accounting records keeping increase the chances of the business operating and achieving success, and provide information to enable the control of cash in the business.

5.3 Conclusion

The researcher concludes that bookkeeping impacts on the growth of small and medium scale industry in terms of level of sales, size of the business and level of profitability and there is need for cooperation therefore from all the stakeholders in ensuring small businesses are operated in a more professional manner to attain the economic growth as a whole. The government, small business owners, accountancy firms, universities and the media have a role to play in facilitating better bookkeeping practices and growth of small medium enterprises.

From the findings of this study, it was concluded that lack of education and high cost of hiring qualified staff made it very difficult for the owners to keep proper books of accounts. Some also failed to keep proper books of accounts in order to avoid or evade tax. This evidence confirms the position of previous authors acknowledged in this paper.

In addition, it is posited in this paper that, SSBs owners are ignorant of the value of keeping proper financial records and have perception that it is waste of time and resources to create finance and accounting department with qualified staff considering the scale of their operations. This may be true for businesses which are not generating much revenue. It could be argued from this evidence that, the volume and value of transactions can influence records keeping behavior of SSBs owners. This paper also uncovered that, most SSBs do not have a well-designed and effective set of internal control procedures and their failure to keep proper financial records could also be attributed to it. Any well-designed and effective set of internal control procedures guarantees good financial control and records. Cash control method is the best method for businesses who do not keep proper books of accounts.

5.4 Recommendations

In view of the findings of this study, the following recommendations are provided to help enhance an accelerated and sustainable growth in small scale businesses sector and the economy as a whole.

There is need for the owners and managers of the small scale enterprises to embrace proper accounting records keeping practices in order to be successful in their financial performance.
More bookkeeping consultancy firms that provide bookkeeping advice should be opened up throughout the country to facilitate better bookkeeping amongst SMEs.
Small scale business operator units should ensure that complete and accurate business records are kept because they are essential for decision making. This can be ensured by undertaking course training about records keeping, and hiring knowledgeable and skilled workers.
There is need by the government to enhance better management practices in these small businesses because they participate a lot in the county’s GDP and employment opportunities to the citizens.
More efforts need to be channeled on accounting record keeping for effective performance of small scale business units because accounting record keeping strongly affects performance of small scale business units.