AN ASSESSMENT OF ACCOUNTING INFORMATION SYSTEM AND THE GROWTH OF SMALL AND MEDIUM SCALE ENTERPRISES IN NIGERIA
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- 1-5 Chapters
- Quantitative
- Chi-Square
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 5000
Background of the study
Accounting is critical to the success or failure of modern commercial organizations. (Amidu, John, & Joshua. 2011). Systems are responsible for recording, analyzing, monitoring, and assessing the financial health of corporate institutions, creating tax records, and providing information assistance to many other organizational responsibilities. Accounting information is significant in the setting of small and medium-sized organizations (SMEs) because it may assist firms in managing short-term difficulties in crucial areas such as costing, expenditure, and cash flow by giving information that can be utilized to enhance monitoring and management (Mitchell, Reid & Smith, 2000; Son, Marriot, & Marriot, 2006).
Small and medium-sized businesses are the backbone of every expanding economy. Small and medium-sized businesses play a variety of roles, including job creation, rural development, youth empowerment, significant contributions to national income and growth, the spread and development of adaptable technology, and a regionally balanced growth channel (Amidu, John, & Joshua, 2011). Due to multiple internal and global economic concerns, as well as legislative inconsistencies, these businesses confront a variety of hurdles in Nigeria. As a result, the firm's mortality rate is significant (Dasanayaka, Kankanamge & Sardana, 2011). Inadequate working capital, high competition from larger companies, difficulties sourcing raw materials, low capacity utilization, poor management strategies, poor educational background of operators, huge financial problems, and a reluctance to embrace technology are some of the internal challenges (Tafamel & Idolor, 20010; Osamwonyi and Tafamel, 2010).
Small businesses are frequently founded by family businesses. The majority of family businesses are run by family members. Non-family members can, nevertheless, contribute to the workforce. As a result, the company environment varies depending on the management style and the culture that the family has passed down through the centuries (Peter and Buhalis 2004). Small and medium-sized businesses (SMEs) play a significant part in the growth of the Nigerian economy. The extent to which these business units can contribute to Nigeria's growth and development is determined by their operational performance. The fact that the establishment and application of controls by the owners or management, in addition to the systematic record keeping of business transactions, is underlying the success of a business enterprise, which keeps the owner well-informed about the performance of the business at the end of the period. 2011 (Mbroh, John, and Attom).
The financial management of businesses is the subject of Ismail's (2009) research. Accounting data is information given by accountants and accounting software. Financial statements, such as the income statement and the statement of financial status, are frequently used to show this information. Any financial ratios taken from these financial statements are also included. Accounting systems are in charge of evaluating and monitoring a company's financial position, preparing tax records, and supplying data to assist a variety of other organizational activities including production, marketing, human resource management, and strategic planning. It will be extremely difficult for SMEs to assess performance, identify customer and supplier account balances, and estimate future performance without such a system. The fundamental goal of an accounting information system (AIS) is to gather and record data and information about events that have a financial impact on businesses, as well as to maintain, process, and communicate that data to internal and external stakeholders for proper decision-making (Stefanou, 2006).
The rise of computer technology in the 1950s ushered in a new era of information storage and processing (Rashid, Hossain, & Patrick, 2001). Computer technology facilitates the utilization of information by allowing for the analysis of large amounts of data as well as the production of accurate and timely reports. Because of these distinct characteristics of computer capabilities, numerous information systems such as Accounting Information System (AIS), Manufacturing Resource Planning (MRP) system, and Human Resource (HR) System have been developed. The way organizations are run has unquestionably altered as a result of information system technology (Elliot, 1992). Because enterprises are better positioned to attain their goals, this system has contributed to an increase in business production and transactions. As a result, company operations are enhanced. With more firms and transactions, accounting data will need to be recorded and updated more often. The old accounting approach of manually entering and documenting daily transactions was inefficient and time-consuming. Errors such as incorrect data input, ineffective job execution, and extensive use of paper products wreaked havoc on company operations and the performance of the organization. As a result of these flaws, accounting information systems have emerged. A system capable of gathering, analyzing, and producing reports more quickly (Saira, Zariyawati & Annuar, 2010).
Aremu and Adeyemi (2011) noted that, aside from regulatory requirements, small and medium-sized businesses barely give sound accounting a second consideration, while also highlighting that the insufficiency and ineffectiveness of accounting procedures have resulted in the untimely collapse of the majority of them. The above-mentioned problems have continued as a result of Nigeria's inadequate accounting data creation and utilization. The lack of an accounting information system in most Nigerian small and medium businesses tends to exacerbate their problems.
1.2 Statement of the problem
Small and medium-sized businesses are believed to be the engine that propels the Nigerian economy forward, and every major company began as a small one (Ali, 2012). Despite the relevance and vital nature of SMEs in Nigeria, many SMEs have not given much attention to accounting information and bookkeeping in connection to their business transactions, despite the necessity of accounting information and bookkeeping in the success of SMEs. This might be due to the owners' or respective managers' lack of understanding in bookkeeping processes (Dandago, et al, 2014).
The extent of non-recognition of the importance of accounting information to the continuous survival and growth of SMEs is difficult to determine. The generation of incorrect accounting or financial statements has been influenced by the owners' low educational backgrounds and the hiring of incompetent accounting employees, which has influenced managerial decision making (Eniola, et al, 2014).
It was also shown that the majority of SMEs do not keep appropriate books of account or follow basic accounting practices. As a result, they are unable to accurately reflect the company's financial situation. This obstructs the company's capacity to get critical financing from financial institutions and other sources for development and diversification (Dandago, et al, 2014). Financial statements for SMEs, such as profit and loss accounts, statements of financial position, and cash flow statements, are difficult to produce. Annual earnings are difficult to predict in such conditions. SMEs in Nigeria, on the other hand, frequently face accounting and financial management issues (Dandago, et al, 2014). Poor record keeping, ineffective use of accounting information to assist managerial decision making, and low quality and dependability of financial data are all issues that SMEs in Nigeria face when it comes to financial management.
1.3 Objective of the study
The broad objectives of the study is to examine the role of accounting information system and the growth of small and medium scale enterprises. The specific objectives are to:
1. To determine the effect of AIS on sales growth.
2. To determine the effect of AIS on asset growth.
1.4 Research Questions
1. What are the effect of AIS on sales growth?
2. What are the effect of AIS on asset growth?
1.5 Research Hypothesis
The following hypothesis were formulated:
H01: AIS has significant effect on sales growth.
H02: AIS has significant on asset growth.
1.6 Significance of the study
A good accounting information system operated in a company is an indispensable aid to effective management. It assures management of the reliability of decision taken by them and that these decisions are in accordance with goals to be attained. The research work will create great awareness to the management of the firms or various businesses or other managers, the importance of appropriate, complete and reliable set of records using accounting information system for such purpose as quick, correct decision making and effective planning and control of activities of their business.
To the employees and consumers, it will help them to assess the ability of the business to produce goods and render services on continuous basis and pay salaries. The research will be of benefit to the government in terms of tax collection and the regulation of business activities.
Lastly, the study will contribute to the body of the existing literatures on the topic, hence it will be of used to the prospective researchers.
1.7 Scope of the study
This study focuses on the “accounting information system and the growth of small and medium scale enterprises”. The population of the study comprises of SMEs in Lagos metropolis, Lagos State registered with "Small and Medium Scale Enterprises Development Agency of Nigeria" (SMEDAN).
1.8 Definitions of terms
Accounting: It's the systematic process of recording, communicating, summarizing, analyzing and reporting of financial information.
Accounting information: This refers to the system of storing, processing of financial and accounting data that are used by decision makers.
Accounting information system: it's defined as a computer based system that increases the control and enhance the cooperation in the companies.
Small scale businesses: This refers to a generally privately own business that employs a small number of workers and does not have a high volume of sales.
Medium scale enterprises: This refers to the typically result from the slow and steady growth that results from a successful small business
Sales Growth: This is the amount by which the average sales volume of a company's products or services has grown, typically from year to year.
Assets Growth: This is a corporate events associated with asset expansion.
Ethical Values: The set of established principles governing virtuous behavior.
Effective Accounting Systems: An effective accounting system is a type of system that is accurate, useful and timely. Its purpose is to provide information for external entities, such as tax agencies and investors, and for internal purposes, such as evaluating efficiency and profitability.
Human Resources: It is used to describe both the people who work for a company or organization and the department responsible for managing resources related to employees.
Investment: It is an asset or item that is purchased with the hope that it will generate income or will appreciate in the future.
Financial statement is the formal record of the financial activities of a business, persons or other entity. It also provide information about the regarding the position and performance of the business such as its assets, liabilities, equity, income, expenses and cash flow.
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