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Small and medium scale enterprises (SMEs) are very important to the development of the economy. This is because their roles promote the economy of the state, local government and the country at large. In view of this, cost accounting techniques have a vital role in the operation of SMEs. The main objective of this research is to examine the effect of cost accounting techniques on the performance of SMEs. The researcher used survey design which is more appropriate for the study and the questionnaire that serves as the, primary source was equally adopted for the study. Tables and percentages were used to analyze the research questions while the Chi-square statistic was adopted as the statistical tool to test the hypothesis. The findings of the study revealed that there is a significant relationship between accounting information and cost minimization and that the level of understanding and keeping of accounting records by SMEs operators is low due to lack of knowledge by some of the operators. In view of this, the researcher concluded that improper keeping of both financial records and inventory constitutes greater percentage of failure of the SMEs. It was recommended that operators of SMEs should update their knowledge on record keeping among other things.
1.1 Background to the Study
The business environment has become intensively dynamic and increasingly unpredictable in decades and, correspondingly, managing company has become more demanding in the scheme of their affairs, hence the introduction of cost accounting techniques to the Small and Medium Scale Enterprises (SMEs). Therefore, cost accounting being a task of collecting, analyzing, summarizing and evaluating various alternative courses of action, which its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. In this case, the SMEs contribution which has been recognized worldwide for its roles in economic advancement through wealth creation, employment generation, and poverty reduction which is the fundamental part of the economic fabric in most developing countries, and they play a very important role in furthering growth, innovation and prosperity (Dalberg, 2011). Small and Medium Enterprises are critical to the development of any economy because they possess great potentials to the nations in improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large scale industries.
Moreover, cost accounting provides the detailed cost information that management needs to control current operations and plan for the future. In Nigeria, there has been great underdevelopment of SMEs sub sector and this has undermined its contribution to economic growth and development in the nation because of lack of cost accounting technique. (Edward J. 2013).
The key issue affecting the SMEs can be group into four; unfriendly business environment, poor findings, low management skill and lack of access to technology (FSS 2020 SME Sector Report 2007). Small and Medium Enterprises (SMEs) play an important role in the development of a nations’ economy. The reasons for these are the fact that SME’s provide benefits apart from job creations, knowledge spillover, economic multipliers, innovations drives and cluster development in an economy (Chinaemerem and Anthony 2012). Given the importance of SME’s in an economy, it becomes quite possible to look at factors affecting their financial performance which is a major determinant of their survival and growth. An accounting system is an orderly, efficient scheme for providing accurate financial information and controls in SMEs.
The uniqueness of small and medium scale business calls for careful consideration in the design of accounting systems because of their role in the economy.
1.2 Statement of the problem
Globally, SMEs add value to the economy because of the provision of employment to the masses. The operators of these small businesses lack skills to manage the business. Potential and existing operators have no access to credit facilities in banks which has created obstacle for the operation. In Nigeria and particularly in Akwa Ibom State, Small and Medium Scale Enterprises (SMEs) covers the entire range of economy activities but there is no sound accounting and internal control system put in place in the business. Proper accounting records are not kept and there is no financial capability to employ qualified accountants. The use of obsolete equipment and modern method of the production further hinder the progress of the SMEs.
The cost accounting techniques which are relevant in terms of the ascertainment of the total of cost production is not applied by the operators.
All these problems motivated the researcher to carry out this study.
1.3 Objectives of the Study
The main objective of this study is to examine the effect of cost accounting techniques on the performance of selected SMEs or firms in Akwa Ibom State. Therefore, specifically the study aimed at:
1. To examine the extent to which accounting information is being used in measuring financial performance by SMEs.
2. To assess the types of cost accounting techniques adopted by SMEs in Akwa Ibom State.
3. To investigate the types of accounting records kept and maintain by SMEs.
4. Ascertaining the extent of which accounting information has fulfils the basic role of cost minimization, allocation of scare resources and improvement in the production.
1.4 Research Questions
The research questions raised are as follows:
1. To what extent is accounting information used in measuring financial performance of SMEs in Akwa Ibom State?
2. What are the cost accounting techniques used by SME’s in Akwa Ibom State?
3. What are the types of accounting records maintained by SMEs?
4. To what extent has accounting information fulfils the basic role of cost minimization, allocation of scare resources and improvement in the production?
1.5 Research Hypotheses
The hypotheses of this study are formulated below:
Ho: There is no significant relationship between the factors hindering cost accounting techniques and SMEs in Akwa Ibom State.
Ho: There is no significant relationship between the factors hindering cost accounting techniques and SMEs in Akwa Ibom State.
Ho: There is no significant relationship between types of accounting records being kept and maintained by SMEs.
1.6 Significance of the Study
The study is of great importance to the following group:
The effect of cost accounting techniques and performance in small and medium enterprise development has been an area of intense research both in practice and academia. This work is to prove helpful to existing and potential entrepreneur of SMEs since this study lends assistance in strategic effect of sources of finance in the performance of a business in order to plan ahead. The research work could also serve as reference material to future researchers who may find it helpful in carrying out a research work of similar nature or related topics.
This empirical investigation of SMEs is therefore a significant contribution to existing literature. Furthermore, the study would provide evidence on the extent to which Akwa Ibom State small and Medium Enterprises are accounting accommodating in readiness for gaining strategic competitive advantages in their businesses.
The study would also provide uniqueness of small and medium scale businesses call for careful consideration in the design of accounting systems. Small and medium scale enterprises are vast majority of businesses found in variety of primary and intermediate production of the economy.
1.7 Scope and Limitations of the Study
The study centres on the effect of cost accounting techniques on performance of small and medium enterprises. It studied selected SMEs in Akwa Ibom State. This study is limited by the following factors.
1. Time: This project was written during the school session and the researcher has to share her time between writing the project and other academic activities (course work).
2. Finance: Lack of finance really disturbed the researcher from visiting all the SMEs in Akwa Ibom State.
1.8 Organization of the Study
This study is organized in five (5) chapters.
Chapter one (1) deals with introduction which is discussed in the following sections: background of the study, statement of the problem, objectives of the study, research questions, research hypothesis, significance of the study, scope and limitation of the study, organization of the study, brief history of SMEs in Akwa Ibom State and definition of terms.
1.9 Historical Background of the Area under Study. (UBOTEX NIGERIA LIMITED, BMS/H61), Ifa Ikot Okpon Timber Market, Uyo, Akwa Ibom State.
Ubotex Nigeria Limited is located in Uyo, Akwa Ibom. The company is mainly into building materials and plumbing materials, ceiling, cement, offering ceiling boards and iron rod.
The company which is owned by Elder Ubong Bassey Obot from Akwa Ibom State started very small in some years back before it later metamorphose to the level it is today by the special grace of God. The company has since establishment spread across the state with different branches in Nigeria with about staff strength of twenty (20) to fifty (50).
1.10 Definition of Terms
SME’s: Small and Medium Scale Enterprises
COST ACCOUNTING: This is the management information system that concern itself with the analysis of past present and future economic data that are primarily financial in nature to provide sufficient, accurate, timely, relevant and appropriate information needed for managerial action such as planning, control and decision making.
Techniques: A particular way of doing something, especially one in which you have to learn special skills.
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