AN EXAMINATION OF ACCOUNTING SYSTEM OF SMALL SCALE BUSINESS ORGANISATION
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- NGN 3000
BACKGROUND OF THE STUDY
In comparison, the majority of Small Scale Businesses (SSBs) are registered as sole proprietorships, which makes the registration process much simpler and easier than other types of company registration. Small businesses now outnumber all other types of businesses and may be found practically anywhere in the country, thanks in part to this tendency. Despite their importance and numbers, current research reveal that 60% of SSBs fail during their first five years of operation. - Boachie (2005).
According to studies, SMEs have a difficult time obtaining financing from financial institutions because they lack the necessary financial documents (William, 2008). The failure of SMEs to survive beyond their initial few months has been linked in part to a lack of capital. SMEs must be able to seek and acquire financing on their own in order to be successful and contribute significantly to the Nigerian economy. Amoako (Amoako, 2013).
In most sectors, size has an impact on comparability. Larger companies will be able to use cost-effective and advanced quantitative management strategies that small businesses may not be able to use. Smaller businesses may be able to keep deeper client relationships and provide better customer service than bigger businesses. This change in operation methodology may have an impact on the accounting system used to generate financial data (Abdulrasheed, Khadijat and Oyebola, 2012). Many inventory techniques, depreciation methods, income tax accounting methods, and revenue recognition processes are some of the different concepts that a company may use. Pacioli (1494) defined the fundamental accounting model that is being used today as a method devised by Italian merchants to account for their operations as owners and administrators of businesses. As the economy went from fundable to agricultural, it continued to adapt to society's needs. Accounting evolved in response to management's growing planning and control duties as business units became more sophisticated and larger in scope. Accounting was established to address the greater responsibility as government grew in size and centralization. It is frequently argued that strong and quality financial information, which must be relevant, user-friendly, and available in a timely way, is required to support business choices (Abdulrasheed, Khadijat and Oyebola, 2012). Accounting should be used as an active steering tool to operate and manage a firm rather than just another administrative responsibility for a lone owner to deal with. Accounting systems for one-person enterprises should perform activities such as delivering crucial financial information to owners and managers so that they can run the business in a competitive environment and make educated decisions to avoid business failure and develop the business. However, because one-man firms may have unique demands and circumstances, accounting systems must be adaptable in order to avoid imposing undue operational constraints. (2012) (Abdulrasheed, Khadijat, and Oyebola).
Many new company owners, on the other hand, are intimidated by the mere thought of bookkeeping and accounting. But, in truth, both are rather straightforward. Keep in mind that bookkeeping and accounting have the same two primary goals: keeping track of revenue and spending to increase the possibilities of generating a profit, and collecting financial data for completing various tax returns. There is no necessity to keep records in a certain format. However, certain firms must adopt a specific way of crediting their accounts, either the cash method or the accrual approach, as long as the records correctly reflect the business's income and spending. Depending on the size of the company and the number of sales, you may either generate your own ledgers and reports or hire an accountant (Williams, Haka, Bettner, and Carcello, 2008). Financial information linked to financial transaction flows and financial status is recorded, retained, and reproduced by an accounting system. Inflows on account of income and outflows on account of costs make up the majority of financial transaction flows. Assets, liabilities, and equity are the three major areas in which financial position elements, such as property, money received, and money spent, are classified. Each different asset, obligation, income, and cost is represented by its own "account" within these basic groupings.
A record of financial inflows and outflows in connection to a certain asset, obligation, income, or cost is called an account. Because they only represent the inflows and outflows absorbed in the financial-position elements at the end of the time period, income and expense accounts are termed transient accounts (Williams, Haka, Bettner, and Carcello, 2008). Accounting's influence is a consequence of the benefits gained by members of society who have committed themselves to the social structure of their existence and seek fulfillment (Anyigbo 1999). The availability of accounting information benefits businesses, but it is equally crucial that accounting information aids the solution or resolution of business planning, organization, and control functions of enterprises as social organizations. Most small business owners prefer to hire unskilled workers, particularly administrative and accounting people. The result of these inexperienced accounting (clerical personnel) has only served to keep small businesses stagnant, with some even closing down. This was due to the fact that inexperienced accounting personnel could not maintain solid accounting records that would stand the test of time required; such workers could not accurately assess the profit or loss of the business when creating profit and loss accounts. In 2014, Onaolapo and Adegbite published Onaolapo and Adegbite (Onaolapo and Adegbit
It is impossible to overstate the importance of strong accounting and internal control systems in every firm, regardless of its size. Even if they could, the great majority of small firms cannot afford the complexity of a thorough accounting system. As a result, single entries in their books and, in some cases, partial records persist (Wood, 1979; Onaolapo, et al., 2011). Because of the absence of internal controls, audits of small businesses have proved to be among the most concerning for professional accountants. Small and medium-sized businesses, with the exception of statutory requirements, seldom consider the process of good accounting; yet, the insufficiency and ineffectiveness of accounting procedures have resulted in the premature collapse of a number of them (Mukaila and Adeyemi, 2011). The complexity of bookkeeping and accounting in one-person enterprises has generated several obstacles to a sole proprietorship's successful operation and accountability. The regulatory load falls disproportionately on one-man businesses compared to huge corporations, because smaller businesses frequently lack the financial and personnel resources to effectively handle their commitments(Abdulrasheed, Khadijat, and Oyebola, 2012).
Meanwhile, despite its importance in the performance of enterprises, a lot of Small Scale Enterprises have not paid much attention to bookkeeping in connection to their company transactions. This might be due to the owners' or managers' lack of understanding of accounting processes. It was also difficult to determine if there was a complete accounting record that met the requirements of the legislation under which it was incorporated. In 2014, Onaolapo and Adegbite published Onaolapo and Adegbite Onaolapo and Adegbit)
It was difficult to ascertain how much non-compliance with established accounting procedures contributed to the failure of a suitable accounting system to be implemented. It's difficult to say how much non-recognition of the importance of accounting to a company's continuing survival and growth, the owners' lack of educational background, and the hiring of incompetent accounting personnel influenced the generation of incorrect accounting or financial statements. Because adequate accounting information is critical for owners and managers of one-man enterprises, as well as their many stakeholders, it is critical for this study to evaluate the effect of accounting systems used in small scale firms in Nigeria.
It is frequently stated that the world has evolved into a global village. The way people, businesses, and countries are reacting to this declaration of globalization right now says it all. In order to adequately examine the notion of globalization, this period demands much more inputs of some form, particularly for commercial companies, in order to develop, survive, and flourish. However, simply surviving as a company entity necessitates the right application of accounting to every occurrence. This is owing to the fact that commercial companies' resources are frequently constrained, and appropriate management over resource allocation and performance monitoring has become the norm.
Small and medium-sized businesses (SMEs) play a significant part in Nigeria's socioeconomic growth. The extent to which these business units can contribute to Nigeria's growth and development is determined by the amount of success that their activities achieve. The fact is that the establishment and application of controls by the owners or management, as well as the systematic record keeping of business transactions, are underlying the success of a business enterprise and keep the owner well-informed about the performance of the business at the end of the period.
1.2STATEMENT OF THE PROBLEM
Accounting systems in small businesses are plagued by several control issues and inefficiency, which have, in most cases, resulted in dysfunctional corporate operations (Mukaila and Adeyemi, 2011). Similarly, the enormities of computerization's operational, countervailing, and strategic concerns have exacerbated the problem of a poor accounting system in small businesses.
1.3 OBJECTIVES OF THE STUDY
The objectives of this study are:
1) To evaluate the accounting system of model company so as to determine their appropriateness, adequacy and effectiveness.
2) To examine its operation and the cost and benefit of computerization so as to determine the plausibility or otherwise of adopting computer technology in its accounting system.
3) To examine the operational, contextual and strategic problems inherent in the computerization of accounting systems so as to determine how the company has effectively tackled these problems.
4) Finally, to make such recommendation as in considered necessary to raise the level of operating environment of the company.
1.4 RESEARCH QUESTION
The study will be guided by the following questions;
- What is the extent of the organization’s accounting system appropriateness, adequacy, and effectiveness?
- Is the adoption of computer technology for accounting system beneficial for effective computerization?
- Is the operation of the computer technology for accounting system cost efficient for the organization?
- What are the operational, contextual and strategic problems inherent in the computerization of accounting systems?
1.5 SIGNIFICANCE OF THE STUDY
The financial department and senior management bodies of the selected firms will benefit the most from the outcomes of this study. It will educate them on the different dynamic issues that arise when using an accounting system, as well as viable remedies.
It will also be used as a literature review by future scholars. This implies that other students interested in conducting research in this field will be able to access this work as available material that may be critically reviewed. Invariably, the study's findings contribute significantly to the corpus of scholarly knowledge in the field of small-scale business accounting.
1.6 SCOPE OF THE STUDY
The study is focused on examining the accounting system of small scale business organisation the study will also delve into evaluating the accounting system of model company so as to determine their appropriateness, adequacy and effectiveness, determining the plausibility or otherwise of adopting computer technology in its accounting system, and examining the operational, contextual and strategic problems inherent in the computerization of accounting systems.
The respondents for this study will be obtained from aqua rapha investment and majesty bakery Enugu State.
1.7. LIMITATIONS OF THE STUDY
In the course of carrying out this study, the researcher experienced some constraints, which included time constraints, financial constraints, language barriers, and the attitude of the respondents.
In addition, there was the element of researcher bias. Here, the researcher possessed some biases that may have been reflected in the way the data was collected, the type of people interviewed or sampled, and how the data gathered was interpreted thereafter. The potential for all this to influence the findings and conclusions could not be downplayed.
More so, the findings of this study are limited to the sample population in the study area, hence they may not be suitable for use in comparison to other organizations.
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