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The study evaluated the accounting system in use by small scale enterprises operating in Uyo Metropolis of Akwa Ibom State. The study was neccessited due to high rate of small scale enterprises failure, the population of the study consists of 173 accounting officers and managers of small scale enterprises operating in Uyo Metropolis. 121 respondents were selected through a simple random sampling techniques. The instrument employed for the study was a structured questionnaire. Five research questions and two Null hypothesis tested at 0.05 level of significance guided the study. Data were analysed using mean and standard deviation and + - test. Summary of the result revealed that six accounting system were available for use to small scale enterprises operating in Uyo metropolis, significant number of small scale enterprises use the single entry system of accounting and that keeping of proper accounting records enhance profitability. It was concluded that significant number of small scale enterprises in Uyo use the single entry accounting system because of its simplicity and that there was correlation between proper record keeping and profitability of small scale enterprises. It was recommended that the small business owners to avail themselves the opportunity to use the accounting system that are relevant for the day-to-day reporting of their business transactions.4
1.1 Background of the Study
Accounting system is an orderly, efficient scheme for providing accurate financial information and controls. Regulatory requirements and internal administration policies are key considerations in the design of accounting system. Thus accounting system show the books, records, vouchers, files and related supporting data resulting from the application of the accounting process. It involves the design of documents and transaction flow through organization. The uniqueness of small and medium scale business call for careful consideration in the design of accounting systems. Small and medium scale enterprises are vast majority of business found in variety of primary and intermediate production of the economy these establishment have tremendous impact on the state and well being of the nation in employment generation, as sources of national outputs and revenues providing stock for large corporations. They may lack the sophistication to apply the detailed accounting processes, yet the value of accounting systems to those business is quite profound.
Small scale enterprises are catalyst for industrialization, this is because they provide raw materials for medium and large scale enterprises. They also provide employment opportunities for large segments of the population. For small business enterprises to efficiently play the mentioned roles, there should be an orderly method for gathering and organizing information about the various business transactions. This can only be done by the use of adequate accounting system.
Basically, there are two types of accounting system commonly in use namely; single entry and double entry system. These could be operated manually or computerized (Baumback, 2003). The single entry accounting system accounting to Osuala (2003) is the easiest accounting system to operate. The system records the flow of income and expenses through business on daily summary of each receipts, a monthly summary of cash disbursements.
Osuala (2003) reported that generally many of these enterprises recorded their transaction randomly without adherence to any established system of accounting hence, there is difficulty in keeping track of the cash flows in the enterprises. Mitchell et al (2000) argued that accounting information could help the small scale enterprises manage short term problems in such areas as costing, expenditure and cash flow by providing information to support monitoring and control.
Furthermore, the International Federation of Accountant (2006) reported that there is evidence to suggest that small firms are aware of the importance of accounting information. In spite of this awareness, most proprietors of small enterprises in Nigeria most time are not too keen to use standard accounting system to run the day to day activities of their enterprises. The high rate of failure of small scale enterprises in developing countries like Nigeria has generally been traced to poor management and accounting system employed by these enterprises (Ofonagoro, 2003). The purpose of this study therefore is to identify the accounting systems use in small scale enterprises in Uyo, Akwa Ibom State with a view to determine adequacy of such system(s) and recommend remedies needed for entrancement of accounting information system in optimization of the operation to these enterprises.
1.2 Statement of the Problem
An accounting system is one of the most effective decision making tools for management. It provides an orderly method of gathering and organizing information about the various business transactions so that it may be used as an aid to management in operating the business (Copeland and Dascher, 2003).
The high incidence failure among the small enterprises in Nigeria necessitated the study. The failures are attributed to the poor accounting system used by these enterprises (Ofonagoro, 1983). Since accounting system used by enterprises is one of the key things that determine business growth and profitability, there is need to evaluate the accounting system used by small scale enterprises in Uyo metropolis in Akwa Ibom State.
This is important because for optimum business growth small scale enterprises must make use of a system of accounting which will enable them determine the volume of sales, profits/losses, assets and liabilities at any given time.
Noror and Malcolm (2007) studies the factors of influencing the alignment of small scale enterprises to information technology in Malaysia and found that the usage of information technology depend on the level of owners/managers accounting knowledge. Although software for small scale enterprises embodying information communication technology (ICT) accounting solutions now exist in business (Wilson 2010, the application of information technology in small scale enterprises has not been documented). This forms the need to critically evaluate the accounting system used by small scale enterprises in Uyo with a view to identifying the appropriateness of the accounting system currently in use and suggesting the necessary innovations needed for optimum performance of these scale enterprises.
1.3 Objectives of the Study
The main objective of this study is to evaluate the accounting system used by small scale enterprises in Uyo metropolis. Specific objectives include:
i. To evaluate the accounting system in use by small scale enterprises operating in Uyo metropolis specifically for the study.
ii. Determined the extent the accounting system enhance small scale enterprises profitability.
iii. Ascertained the types of accounting system available to small scale enterprises in Uyo metropolis.
iv. Ascertained the types of accounting system used by small scale enterprises operating in Uyo.
v. Ascertained the problems that hinder the utilization of accounting system used by small scale enterprises operating in Uyo metropolis.
1.4 Research Questions
The following research questions guided the study.
i. What are the types of accounting system used by small scale enterprises in Uyp metropolis?
ii. To what extent does the use of accounting system enhance the profitability of the small scale enterprises?
iii. What are the problems that hinder the utilization of accounting system used by small scale enterprises in Uyo metropolis.
iv. What are the types of accounting system available for small scale enterprises Uyo metropolis?
v. To what extent does the cost of operation limits the use of accounting system in small scale enterprises?
1.5 Research Hypotheses
The following hypotheses is proposed by the study:
i. H0: The utilization of the accounting system does not significantly influence the profitability of the small scale enterprises.
H1: The Utilization of the accounting system significantly influence the profitability of the small scale enterprises?
ii. H0: There is no significant relationship between the structure of accounting system and the cost of operation used by small scale enterprises in Uyo metropolis.
H1: There is a significant relationship between the structure of accounting system and the cost operation used by small scale enterprises in Uyo.
1.6 Significance of the Study
In the first instance, this work sought to establish a link between accounting system and the performance of small and medium scale enterprises in Uyo metropolis. Hence, it has the potentials for providing on insight into how accounting system could be used in improving the performance of small scale enterprises. Such as orientation is needed by small scale business operators and managers in their quest for effective and efficient decision. Effective and efficient decision improve corporate performance.
Secondly, the research provides additional stock of secondary data needed for other researches above all, this study lays the foundation for further studies and the results for further researches. It could be used to further improve the performance of small scale enterprises in the State and Nigeria as a whole.
1.7 Scope of the Study
The study concerns about the evaluation of accounting system used by small scale enterprises in Uyo metropolis with particular reference selected from small scale enterprises in Uyo.
Specifically, the study were drawn from manufacturing, processing, trading, and services. The various system of recording and methods of recording transaction by these companies were incorporated in the study.
1.8 Limitation of the Study
In the course of the study, the researcher encountered problems which in one way or the other challenged the easy flow of this work. These include difficulty in data collection which include hoarding of information by organizations, unavailability of related materials, the publication of which might be detrimental to their operations proved to be limitations to the study.
Distance and its attendant cost of moving from one company to another in order to obtain information with which to write this study was also a major limitation. Despite these problems, a considerable effect was make to process the data for the successful completion of the research work.
1.9 Definition of Terms and Acronyms
Accounting: cab de define as the process of recoding, classifying, selecting, measuring, interpreting and communicating financial data of an organization to the users of these information to enable them make proper decision.
Accounting System: Accounting system is for identifying measuring, accumulating, analyzing, preparing, interpreting and communicating accounting information about an entity to a given group or persons.
The main focus of an accounting system is to provide relevant financial information on the resources of a business and the effects of the use of these resources such information is needed by management in making decision which affects performance of the business.
Small Scale Business: Small scale business is defined as a business which is owned and controlled by one or few persons with direct owners influencing decision making process and having a relatively small scale of market, how capital requirement few employers being independents.
Enterprises: An enterprise is considered to be an entity engaged in an economic activity, irrespectively its legal form. There include in particular self employed persons and family businesses engaged in craft or other activities and partnerships or associations regularly engaged in an economic activity.
Financial Statements: Financial statements are concerned with classifying, measuring and recording the transactions of a business at the end of an accounting period. It is useful to prepare the following financial statements to show the performance and position of the business: statement of profit or loss, statement of financial position, notes to the accounts and cash flow statements.
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