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The research provides a theoretical and case study appraisal on the effect of accounting records on the performance of SME in Nigeria. It elucidates the nature and significance of accounting records and determines the levels of performance of SMEs. The research projects the nature, growing importance and contributions of SME’s to the development of the economy. It provides a case study appraisal of selected SME’s in Lagos metropolis as a measure to provide a practical perspective to the study.
1.1. BACKGROUND OF THE STUDY
Small and medium –scale enterprise (SMEs) play very important roles in the process of industrialization and sustainable economic growth (Ogujiuba, Ohuche and Adenugs, 2004) since the 1960s to date SMEs are being given due recognitions especially in the developed nations for playing very important roles towards fostering accelerated economic growth development and stability within several economies (Gunu;2004) (Orugu, 2005; Aremu, 2010) they make up the largest proportion of business all over the world and play tremendous roles in employment generation provision of goods and services, creating a better standard of living as well as immensely contributing to the Gross Domestic Products (GDP) of many countries (Ihua, 2009, Paul, 2010) SME’s sub-sector came into the mainframe of policy formation in Nigeria owing to its contributions (Obamuyi, 2007). Like in the developed countries, SME’s have enabled entrepreneurship activities through which employments have been generated and poverty reduction and sustainable livelihood achieved (Ogujiuba et al 2004). It makes up about 97% of businesses in Nigeria and provide an average 50% of Nigeria employment and its industrial output (Anyo, 2005). Government and development epacts have therefore realized the fact that SME’s possess the needed catalyst to turn the economy around for good. (Uchechukwu, 2003; Anyanwu, 2003).
SME’s in Nigeria need the necessary financial back up to improve operations build capacity and grow. But these laudable objectives are besieged with the poor nature with which SME’s are operated and managed. Many SME’s lack accurate financial record of their business operations, the inability to make proper accounting, results to waste and loss of profit. Lack of basic accounting practices in most SME’s in Nigeria tends to compound their financial challenges. Most SME’s can’t access funds because banks and other financiers cannot readily verify their vibrancy and their access to quality projects (Strinwas, 2005) Stigliz and Wass (1981) expressed the view that small and medium scale firms with opportunities to invest in positive net present value project may block from doing so because of adverse selection and moral hazard problems. Such discriminations arise because the SME’s don’t have comprehensive accounting records to be utilized in proper project evaluation and budgeting. In relation to the above are improper investments in both current and fixed assets. The research therefore focuses on appraising the effect of accounting records on the performance of SME’s in Nigeria.
1.2. STATEMENT OF THE PROBLEM
SME’s constitute a large proportion of business segment in Nigeria. Providing employment and playing important roles in the process of industrialization and sustainable economic growth. However the persistent inability of most SME’s to grow and expand business is critically affecting the laudable vision and plan of government to accelerate the rapid development of SME in Nigeria. Government has severally drawn policy measures through financial institutions like banks to provide the needed funding for SME’s. However, lack of basic accounting practice and information in most SME’s tends to compound to their financial challenges. Most SME’s can’t access funds because banks and other financiers cannot readily verify their vibrancy and their access to quality projects as a result of poor and lack of accounting information and records.
Therefore the problem confronting this research is to evaluate the effect of accounting information or records on the performance of SME in Nigeria.
1.3. RESEARCH QUESTIONS
- What is accounting records?
- What is the nature and significance of SME’s in Nigeria?
- What is the effect of accounting records in the performance of SME’s in Nigeria?
- What is the effect of accounting records on the performance of selected SME’s in Lagos metropolis?
1.4. RESEARCH OBJECTIVES
- To determine the nature and significance of accounting record.
- To determine the nature and significance of SME’s in Nigeria.
- To determine the effect of accounting records on the performance of SME’s in Nigeria.
- To determine the effect of accounting records on the performance of selected SME’s in Lagos metropolis.
1.5. SIGNIFICANCE OF THE STUDY
- The research shall provide a detail appraisal on the nature and significance of accounting information.
- It shall appraise the effect of accounting records on the performance of SME’s in Nigeria.
- The research shall elucidate the effects of accounting records on the performance of selected SME’s Lagos metropolis.
1.6. STATEMENT OF HYPOTHESIS
Ho the volume of SME’s in Lagos metropolis is low
Hi the volume of SME’s in Lagos metropolis is high
Ho the performance of SME’s in Lagos metropolis is low.
Hi the performance of SME’s in Lagos Metropolis is high
Ho the effect of accounting records on the performance of SME’s in Lagos metropolis is low.
Hi the effect of accounting records on the performance of SME’s in Lagos metropolis is high.
1.7. SCOPE OF THE STUDY
The research shall evaluate the effect of accounting records on the performance of SME’s in Nigeria.
1.8. DEFINITION OF TERMS
SME: small and medium-scale enterprise
SME DEFINED: by definition in Nigeria small and medium industries equity investment scheme (SMIEIS) define SME’s as those enterprise with a total capital employed not less than N1.5 million, but not exceeding N200 million including working capital, but exceeding cost of land and or with a stall strength of not less than 10 and not more than 300.
ACCOUNTING INFORMATION: accounting information is the result of business understandings stated in financial terms. Improved accounting information enhances the quality of financial reporting in SME’s. It is the satisfactory aggregation of business activities achieved in forms of records.
OBJECTIVES: objectives specifies what the firm intends to achieve for given period of time objectives are the ends of the business Ansoll (1985) identifies proximate objectives which is concerned with the short term performance of the business, proxy objectives which is concerned with the long term performance of the business and flexibility objective which is concerned with safe guarding against risk and uncertainty.
Aremu M.A (2010) Small and Medium Scale Enterprises Capacity Building in
Nigeria Pg 20-30
Ariyo .D (2005) Small Firms are the Back Bone of the Nigeria Economy pg 1-20
Atkinson .J, Hurstified .J (2003) Small Business Service pg 45
Black Burn R. (2006) SME’s Regulation and the Role of the Accountants ACCA
Research Report No 96.
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