AN EVALUATION OF ACCOUNTING AND ITS PROBLEMS IN SMALL AND MEDIUM SIZE INDUSTRIES
- Project Research
- 1-5 Chapters
- Quantitative
- Chi-Square
- Abstract : Available
- Table of Content: Available
- Reference Style: APA
- Recommended for : Student Researchers
- NGN 3000
BACKGROUND OF THE STUDY
The interdependence of businesses is a core element of modern economic life. No contemporary firm is self-contained. There is no question that small and medium-sized businesses are the true foundation of a country's economy. And it is not an exaggeration to suggest that the dynamism and expansion of small-to-medium size firms (SME) is critical to the present and future economic success of our beautiful country Nigeria (Abdipour, 2011).
This viewpoint was supported by three organizations at the 1989 economic conference in Lagos, namely the Nigerian Institute of Social and Economic Research, the Nigerian Institute of Social and Economic Research, and the Nigerian Institute of Social and Economic Research (NISER). The Friedrich Albert Foundation and the National Association of Small-Scale Industries (NASSI). To put it another way, SMEs are a critical engine for economic growth and development (Ansoff, 2008).
However, the Nigerian climate in which this industry works is both difficult and profitable. It's difficult because it's riddled with the shifting dangers that come with having to invest money in a firm in the first place, as well as the issues of managing it amid the country's slumping economy (Basil, 2005).
Furthermore, there is the issue of government regulatory operations that may have a negative impact on the performance of SMEs.
In the current economically depressed situation in the country, and with the assistance of the numerous packages of incentives offered by governments (Federal, State, and Local), there is a smiling visage of success if SMEs are given energetic leadership and well managed (Basil, 2005).
Historical records of several industrialized countries demonstrate that the industrial revolution was the primary reason for their economic existence. The industrialized countries' financial capability is mostly derived from the gain of industrial and technical strength. Small and medium-sized businesses are undeniably the bedrock of any serious industrial development and the accumulation of this technological and trial power (Beckman, 2009).
Development economists and policymakers have been more concerned in recent years about two issues that affect both developing and rich nations. Because industrial development is slow and rural development is behind, it is frequently argued that small- and medium-scale companies (SME) can assist increase both rural and urban employment. It's worth noting, though, that despite this high level of optimism, Nigeria has had little success. The Indian, Japanese, South Korean, Brazilian, and Mexican countries are all living instances of marginal socioeconomic growth accomplished by small-scale industrial activity. The Nigerian economy and small-scale industrial operations need not be mentioned (Drucker, 2012).
The focus on the small scale industrial sub-sector in Nigeria dates back to the second National Development Plan (1970-1975), when the small scale industries (SSI) credit program was established. This came as a result of the government's acknowledgement of the sector's financial assistance. With initial support from the federal ministry of industry and a grant from the state government in their yearly budgetary provisions, this credit plan was launched throughout the then 12 states of the federation (Goltz, 2011).
Regardless of whether they are international or domestic, all large industrial firms began small. Small and medium-scale commercial establishments abound in Enugu State, but the majority of them are focused on purchasing and selling things. Given the current economic scenario in Nigeria, company owners in the state must shift their focus away from buying and selling (Goltz, 2011).
Nigeria's economy has gone through various stages over the years, from the oil boom of the 1970s to the wasteful spending of the early 1980s to the current economic downturn caused by a reduction in the country's foreign exchange earnings due to the oil glut, which led to the implementation of the Structural Adjustment Programme (SAP) (Beckman, 2009).
There is no question that an entrepreneur's survival in the current Nigerian economy is totally dependent on his innovation, which includes rapid adaptability to the environment. In this country, the heyday of purchase, buy, buy, sell, sell, sell is now a thing of the past (Nigeria). For Nigeria's present and future existence, a lone owner must recognize this truth and progress to research the economy and create interest in any industry or agricultural area, no matter how little or medium. (According to Basil, 2005).
Nigerians, on the other hand, have a reputation for having a high rate of entrepreneurial tendencies. An typical Nigerian prefers to be self-employed, that is, he would rather start his own business than work for someone else. This argument is supported by the fact that Onitsha, Anambra State, Nigeria, is home to the largest market in the West African sub-region. Despite the country's geometrical development of small and medium-sized businesses, accessible statistics revealed a high rate of company failure. The problem of company failure affects people all around the world. According to a series of study results in Enugu State, practically every small and medium size firm never dreamed of storing or maintaining essential paperwork, which is one of the major causes contributing to the high incidence of business failures affecting SMEs. There is an early boom in the development of SMEs due to the owners' initial enthusiasm, but after the shoot period, there will be a layoff and subsequent wind-up (Abdipour, 2011). On the other hand, any SMES that survives may not produce a useful result for simple comparison with the larger ones. In industrialized countries, where small and medium-sized firms keep precise records, businesses can expand quickly and in a short period of time (Goltz, 2011).
To ensure the growth and survival of small-scale industries, it was decided to build organizations that would offer back-up extension services, which led to the creation of industrial development centres (IDCS). They were formed to provide direct grass-roots support services such as project identification and machinery selection, sourcing, market research, and feasibility study preparation (Abdipour, 2011).
The government's decision to use United Nations Development Programme (UNDP) technical assistance to supplement key components of the 4th century program 1992-1996 was influenced by the central role that small industrial activities played in the government's strategy for economic restructuring and growth. The UNDP provided assistance in five key areas that are deemed vital for a company's success. It aided in the establishment of a regulatory framework for policy, planning, and institutional development in order to guarantee that the new private sector-led growth strategy, which includes the active engagement of small scale/industrialists, is properly defined and executed (Abdipour, 2011).
Nonetheless, the government and banking institutions have implemented a number of initiatives and policies to assist SMEs.
The Nigerian stock exchange acknowledged the complementary function of small size businesses in 1985 by establishing a second-tier market where they could access loans of up to N5 million for project growth, modernisation, and development. The World Bank provides financial assistance to the federal government in the form of grants for the development and rehabilitation of SMEs. The European Investment Bank and the Nigerian government established an agreement in February 1990 to lease N445 million to fund medium and small businesses in Nigeria (Abdipour, 2011).
The Nigerian Industrial Development Bank, the Nigerian Association for Small Scale Industries, the Nigeria Bank for Commerce and Industry, the African Development Bank, the National Directorate of Employment, and the National Economic Reconstruction Fund are all influenced by the CBN's credit policy guidelines, which directed Commercial Bank and Merchant Bank to increase their total credit outstanding to small scale enterprises from 16 percent to 20 percent in 1990. (Drucker, 2012).
In a business, records are essential for the following reasons.
They serve as proof of the company's policies and actions.
They vividly depict managerial choices, actions taken in the course of business, and the outcomes of these activities. These policies can be presented as exhibits in court as legal backings and to regulatory authorities such as the Tax Board Inland Revenue to show that regulations are strictly followed by the entrepreneurs. These records assist them in assessing the stewardship and control practiced by their managers in the management of the property under their care.
Secondary, it gives information that is important for the day-to-day administration of the company's activities in general. Their commitment to the organization's day-to-day management results in cost management issues being resolved quickly (Drucker, 2012).
Even today, the current administration's economic policy blueprint (EPB) for economic re-invention and engineering for the period 1999-2003 gives a high importance to small and medium-sized businesses and the informal sector as crucial tools for attaining the program's stated objectives (Ansoff, 2008). There is no question that an invigorated and fully operating SMEs sub-sector has the capacity to change the country's industrial foundation as well as provide the propellant for much-needed economic revitalization (Goltz, 2011).
As a result, the project "Accounting difficulties of small and medium firms in Enugu State" was born. A case study of Uncle Joe's Bakery and Mr. Bigg's is used to highlight the need of financial record keeping and effective management in SMEs in order to guarantee that every Naira and kobo in the industry is utilized wisely in order to fulfill the business's goals and objectives of maximizing profits and minimizing loss.
1.2 STATEMENT OF PROBLEM
It is now common knowledge that Nigeria's economy is in bad shape. Small and medium-sized businesses have recently, and in previous years, encountered significant failure or setbacks (Drucker, 2012). There is no reliable or structured information about the company that would allow business owners or managers to make informed decisions (Goltz, 2011). On this, comments or conclusions could not be made based on current facts and statistics on the financial state of the firm. This situation might lead to a lack of business growth and a drop in the company's capital structure.
This issue, as well as others not addressed here, has elicited widespread sympathy among small and medium-sized businesses (Ansoff, 2008). It is also documented that the amount of people who survived this crisis did not have dark days ahead of them. Many people have attributed the blame on poor or insufficient accounting record keeping or upkeep, as well as managerial issues (Abdipour, 2011). The aforementioned facts are not the only recognized variables that might stymie a company's growth. Finance, the status of the economy, good communication between managers and other staff, experience and dedication to duty, and, of course, a competent accounting system are all elements that accounting to management must consider (Drucker, 2012).
All of the factors indicated above are considered to exist in accordance with business for the sake of this study.
1.3 OBJECTIVES OF THE STUDY
The study oblige that we search deeply into accounting record keeping system of small and medium scale enterprises (SME’s) in Enugu State Mr. Bigg’s and Uncle Joe’s Bakery, 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 will determine the scope of which poor management has brought a set back to the progress and expansion of the organization. The study will also emphasize 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 but 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 HYPOTHESIS
Ho1. Failure of small and medium scale industries is not due to improper and inadequate accounting kept by the business.
Ha1. Failure of small and medium scale industries is due to improper and inadequate accounting kept by the business.
H02: Lack of managerial planning, forecasting and control does not contribute immensely to SMEs failure or downfall.
Ha2: Lack of managerial planning, forecasting and control contributes immensely to SMEs failure or downfall.
1.5 SIGNIFICANCE OF THE STUDY
This research will aid both businesspeople and farmers by allowing them to understand the probable causes of poor industrial growth and the reasons for small and medium firm mortality (SMEs)
This research will also assist small business owners and managers by instilling in them the value of maintaining accurate accounting records.
People who want to invest their money in a small or medium-sized firm should be aware of the potential for harm as a result of failing to keep adequate and sufficient books, and should take precautions to avoid it.
Students of business studies, on the other hand, would benefit greatly from this study because it aims to cover all areas of business setup.
Finally, it is thought that this study will be useful to planning authorities since it will provide them with all of the necessary information for developing economic strategies.
1.6 SCOPE OF THE STUDY
This study covers accounting problems in the small and medium size industries. The study will therefore be carried out in Mr. Bigg’s & Uncle Joe’s Bread Industries, Enugu State.
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.
From the definition are discovered that accounting is made up of three major branches financial accounting. Cost accounting and management accounting.
FINANCIAL ACCOUNTING: This can 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 requirements and represent as accurate a view as possible of the effect transactions over the period and at the year end.
MANAGEMENT ACCOUNTING: Accounting to size (1976) writing on. An insight into management. Accounting; defined management accounting as the application of accounting knowledge to the purpose of producing and interpreting accounting and statistical information to assist management in its function of promoting maximum efficiency, formulating and guaranteeing future plans and subsequent measurement of their execution. It is therefore concerned with the internal management and operation of an entity.
COST ACCOUNTING: This is said to be that part of management accounting which establishment budgets and standard costs and actual cost of operation, process department or product and the analysis of variances, profitability or social use of funds”.
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 purposes”.
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