Abstract
Small
and medium scale enterprises have long believed to be catalysts for economic
growths and national development both in developed and developing countries. In
Nigeria where private sector is not well developed SME is assumed to play the
role of employment generation, facilitator of economic recovery and national
development. The broad objective of the study is to determine if there is any
significant relationship between SME’s performance and accounting records being
maintained and also to examine if SME’s businesses fail as a result of poor
accounting records and information. The primary source of data collection was
adopted and a sample size of 40 was used. The findings revealed that many SME’S
lack skilled accounting personnel and infrastructure to implement existing
accounting rules and regulations. It was concluded that accounting information
is as relevant to small and medium businesses as it is to large-scale
businesses which makes internal control paramount. It was recommended amongst
others that providers of funds such as banks and other financial institution
should include proper accounting knowledge
as a requirement for granting loans to the operators of SME’S.
TABLE OF
CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgements iv
Abstract v
Table of Contents
vi
Chapter One:
Introduction 1
1.1 Background to the Study 1
1.2
Statement of Problem 2
1.3
Research Questions 3
1.4 Objective of the Study 4
1.5
Statement of Hypotheses 4
1.6
Significance of The Study 5
1.7 Scope of the Study 6
1.8 Limitations of the Study 7
1.9 Definition of Terms 8
Chapter Two: Review of Related
Literature
2.1
Introduction 10
2.2
Definition of Small and Medium Scale Enterprises 11
2.3 Characteristics
of Small and Medium Scale Enterprise 12
2.4 The
Roles of Small and Medium Scale Enterprise in Economic Growth and Development 14
2.5
The
Need FPR Accounting Information
for SME’S 17
2.6
Definition
of Accounting 18
2.7
Accounting
Challenges of SME’S 19
2.8 Importance
of Accounting Information SME’S 20
2.9 Uses of Accounting Information to SME’S 22
2.10 Financial
Statement 23
2.11 Setting up
Accounting Records 25
2.12 Necessary Books to be kept by SME’s 26
2.13 Internal Challenges of SME’s 28
Chapter Three: Research Method and
Design
3.1 Introduction 30
3.2 Research Design 30
3.3 Description of Population of the Study 30
3.4 Sample Size 31
3.5 Sampling Technique 31
3.6 Sources of Data Collection 32
3.7 Method of Data Presentation 32
3.8 Method of Data Analysis 33
Chapter Four: Data Presentation, Analysis and Interpretation
4.1 Introduction
34
4.2 Presentation of Data 34
4.3 Data
Analysis 35
4.4 Hypotheses
Testing 46
Chapter
Five: Summary of Findings, Conclusion and Recommendations
5.1 Introduction
52
5.2 Summary
of Findings 52
5.3 Conclusion
53
5.4
Recommendations 55
References 57
CHAPTER ONE
INTRODUCTION
1.1
Background to the study
The importance of small and medium scale business
cannot be over emphasized. In Nigeria today SME’s faces serious management
challenge because most of the operators and owners (entrepreneur) are not well
educated and the literacy level is still very low.
This study will focus
on the challenges of effective accounting system in Nigeria; challenge is
something new and difficult which requires great effort and determination.
Experiences have shown
that most programmes set up by both the federal and state government to
encourage entrepreneurial development do not bother to prescribe the type of
challenge to be maintained by SME’s. This approach has left most SME’s
(entrepreneur) operating without adequate facilities to comber ineffective
accounting records and information. The bankers on their part do not also
prescribed the type of accounting books to be kept by their clients, they rely
on traditional method of appraising business based on set of accounts prepared
by SME’s in the previous 3-5 years and projected income for the following
3-5years without caring about the nature of the accounting system that produced
such accounting information.
1.2 Statement of Problem
Developing countries
(Nigeria included) have more small and medium scale enterprises operating
within their economics than the developed nations and if these developing
countries are to match towards industrialization, they have to ensure that
their SME’s manufacturing business are assisted to grow effectively. Hence, it
is working at the different accounting challenges facing them and how these
challenges could be minimized entirely.
Good accounting
information for SME’s business and indeed any business at all is inevitable for
their survival. Accounting information show monetary terms which make it
pertinent for all business (small or big) to maintain adequate record that will
make it possible for their performance to be assessed with relatives ease.
Some of this small and
medium scale business does not enjoy the benefit of capital allowance and
pioneering status because of lack of adequate records. Some suffer serious
fraud as a result of lack of good records and accounting control. What they
should have paid as taxes to remain good corporate citizen is usually lost to fraudulent
and unscrupulous employees.
1.3 Research Questions
In order to achieve the
objective of this study the following questions will be asked
i. To what extent is there any significant
relationship between SME’s performance and accounting records being maintained?
ii. Is there any significant relationship
between poor accounting information and SME’s ability to raise funds?
iii. Does SME’s business fail as a result of poor
accounting records and information?
1.4 Objectives
of the Study
In this research work
attempts will be made to examine the following;
i. To determine if there is any significant
relationship between SME’s performance and accounting records being maintained.
ii. To ascertain if there is any significant
relationship between poor accounting information and SME’s ability to raise
funds?
iii. To examine if SME’s business fail as a
result of poor accounting records and information.
1.5
Statement of Hypothesis
Hypothesis
One
HO: There is no significant relationship between SME’s
performance and accounting records being maintained.
HI: There is significant relationship between SME’s
performance and accounting records being maintained.
Hypothesis
Two
HO: There is no significant relationship between poor
accounting information and SME’s ability to raise funds.
HI: There is significant relationship between poor
accounting information and SME’s ability to raise funds.
Hypothesis
Three
HO: SME’s business does not fail as a result of poor
accounting records and information.
HI: SME’s business fails as a result of poor accounting
records and information.
1.6
Significance of the Study
A business whether big
or small or medium comprises of people who work with materials and other
resources for the attainments of some set objectives including profit
maximization. The following bodies will benefit immensely from this study;
Accounting is the only
means of recording transaction such as labour cost or wages cost of materials,
daily expenses and salaries cash in-flow and outflows need to be recorded also
as well as asset bought for operating the business. Accounting is the only
language of communicating the performance of any business at any given time to
third parties such as government trade, creditors, shareholders and investors.
This study is aimed at
determining the accounting information needs of small and medium scale
enterprises the need for entrepreneurs of SME’s to have some knowledge of
accounting as a means of improving the performance of such business. It will
also look at the importance of proper record keeping as a means of improving
and minimizing the frequent failure of SME’s in Nigeria.
The providers of short
term and long term funds such as banks, individual investors and bodies set up
by government to encourage entrepreneurial development.
1.7
Scope of the Study
This study is concerned
with the accounting challenges of small and medium scale enterprise. The study
used small and medium scale enterprise in Benin City as reference point. A
business concern is made up of people with different behavioural pattern due to
difference in their management cultures, perception and religion and the
effects of these on good management record keeping attitude have not been
considered in this study. A time frame of 5 years was used in this study (2011
to 2015 with both years inclusive). For effective result, a sample size of 40
was used.
1.8
Limitations of the Study
Although accounting is
the universal language of communicating business activities and important
limitation is the fact that the study is only based on small and medium scale
enterprise in Edo State. Another important limitation is the extent to which
respondents are willing to complete the questionnaires and the significance
they attach to this study after limitation includes:
a.
The
non-maintenance of adequate accounting records by SME’s.
b.
Fear of
espionage and unwillingness of CEO’s of SME’s to dissolve certain information
they regard as vital and confidential.
c.
The reliability
of information given based on (a) and (b) above
d.
Time constraint
1.9
Definition of Terms
a. Accounting:
Is the process of identifying, measuring, recording, classifying and summarized
financial transaction or event to generate economic information and
communicating and interpreting economic information so as to aid informed
judgment and decisions by the end-users of the economic information.
b. Book
Keeping: Book-keeping is an aspect of accounting; it is the
actual recording and summarizing of financial transaction.
c. Enterprise:
According
to Oxford Advance Learner’s dictionary of current English, enterprise means a
company or business.
d. Business:
It is the activity of making, buying selling or supplying goods or services for
money or profit.
e. Accounting
Records: Accounting record refers to the details of documentation
raised with respect to the economics transaction of an enterprise from the
point of initiation to the point of entry into the final accounts of the
enterprises.
f. Industry:
One
cannot possible define the term without defining a firm therefore, a firm is
simply an organization set up to produce a particular good
(or some goods) or services for sales to other organization, government or member
of the public.
g. Challenge:
A
challenge is difficulty or something that is difficult to understand.
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