Appraisal Of The Impact Of The Bookkeeping And Business Records Of Small Scale Businesses

Introduction

1.1 Background of the Study

Since the prospects of getting white collar jobs has become harder and harder, many people, educated and non-educated, are reverting to being self-employed. One way of being self- employed is to start a small scale business. A small scale business is any business that is independently owned and operated (Kuehl, 2006). A small scale business is privately owned and managed by the owner, characterized by a small number of employees and low turnover (kuehl, 2006). Small scale businesses play a pivotal role in the development of the economy of developing countries in terms of generation of employment opportunities, utilization of locally endowed resources, generation of revenue for the government through tax, re-distribution of income thereby contributing to poverty reduction (Prasad et al., 2001).

Although small scale business play a big role in the development of the economy, most researchers point out that they have not been performing well. Recent studies indicate that the most probable cause is lack of or limited book keeping (Chepkemoi, 2013). Bookkeeping is the recording off all financial transaction in a systematic and logical manner. Transactions include sales, purchase income, and payments by an individual or organization. Book keeping is usually performed by a book keeper using common methods of bookkeeping such as single entry and double entry systems. While these systems may be seen as “real” book keeping, any process that involves recording of financial transactions is a bookkeeping process (Haber, 2004). Primary bookkeeping records all business transactions and allocates the income and expenses to various income and expenses account in separate account records (McCarthy, 2000). The single book keeping can be done with book keeping software to speed up manual calculation (Haber, 2004). Double entry book keeping system involves recording of financial information in a financial accounting system where a financial transaction impacts at least two different accounts. In modem accounting, this is done using debits and credits and serves a kind of error system. If at any point the system of debits doesn’t equal to the sum of credits then an error has occurred. In small scale business, bookkeeping vary in size, frequency, sensitivity, maturity and the level of growth of the small scale business including the relative importance of fixed working capital. The system of book keeping depends on the operator of the small scale business are required to keep proper records of financial data concerning all receipts and payments, all sales and purchases of goods and services and all assets and liabilities from which financial statements are prepared. The financial transaction recorded must be objective, sufficient, relevant and reliable to make informed decisions and judgments by interest groups. Despite the importance of book keeping a number of small scale business in Maiduguri have not given much attention.

1.2 Statement of the Problem

The necessity of recording all the transactions clearly and systematically cannot be over-emphasized. Accounting records, prepared on the basis of uniform practices enable business to compare results of one period with another period. Taxation authority (both income tax and VAT) are also likely to believe the facts contained in the set of accounting records/books if they are maintained according to generally accepted accounting principles. Accounting records backed up by proper authenticated vouchers are good evidence in court of law in the event of fraud by the customers, suppliers and employees. Studies on small scale business have disclosed that about 60% of small businesses fail within the first three years due to management inefficiencies brought about by poor record keeping. Further studies indicate that a significant element in the failure of many businesses is due to inefficient or absence of book keeping. An adequate financial record-keeping-system will provide the required information to assist small scale business to make sound decisions for future plans. However, many small scale business do not maintain accounting records yet they perceive the positive role of accounting records in the business performance. Although accounting records have been cited as one of the possible factors contributing to success of business, there is no research done to establish how accounting influences performance. Little information if any is available on the role of book keeping on performance of small scale business. Hence, it’s against this background that the study investigated the impact of the bookkeeping and business records of small scale businesses in Maiduguri

1.3 Objective of the Study

The main purpose of this study is to examine the impact of the bookkeeping and business records of small scale businesses in Maiduguri.

Specifically, this study will;

To ascertain the extent at which small scale business owners are acquainted with bookkeeping practices.

To determine the types of book-keeping and business record practice among the small scale business.

To determine the relationship between business record practices and the performance of small scale businesses

To ascertain whether bookkeeping and business records contributes to efficient performance of small scale business

 

1.4 Research Questions

The study was guided by the following research questions:

What is the extent at which small scale business owners are acquainted with bookkeeping practices?

What are the types of book-keeping and business record practice among the small scale business?

Is there any significant between the relationship between business record practices and the performance of small scale businesses?

Does bookkeeping and business records contributes to efficient performance of small scale business?

 

1.5 Research Hypotheses

Ho: There is no significant relationship between business record practices and the performance of small scale businesses.

Ha: There is a significant relationship between business record practices and the performance of small scale businesses.

 

1.6 Significance of the Study

The outcome of this study is sought out to provide information to researchers in accounting and business towards understanding what motivates Book-Keeping and potential good performance in small scale businesses. It should also be useful to regulatory agencies and other partners ( for instance Central Bank of Nigeria, Securities and Exchange Commission, Federal Inland Revenue Service and so on) for effective monitoring and policy formulation. It would also enable owners and managers of small businesses to appreciate the value of quality BookKeeping as a pillar for sound decision-making, better planning, high level of profitability and access to finance. Other value adding outcomes are easy tax assessment and good performance in business enterprises. Furthermore, this research will be of benefit especially to the policy makers by reducing the rigid laws attached to small scale businesses such as high cost of compliance and levies, revenue collectors by providing easy way to assess tax from the small scale businesses through formalized records. Thus, seeking the response of small scale businesses to financial accounting should be of interest not only to the owners and managers of the businesses, but to the regulatory authorities as well as the general stakeholders.

1.7 Scope of the Study

This study will focus generally on the impact of the bookkeeping and business records of small scale businesses in Maiduguri. However, this study will be delimited to Neital Shoe & Tannery Limited Maiduguri,Borno State.

1.8 Limitation of the Study

As every human endeavor is once faced with a constraint, the same was tenable during the period of this 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 tertiary institutions in other , states, and other countries in the world.

1.9 Operational Definitions of Terms

Business:

Business is an enterprise that engages in the production of goods and services that provides satisfaction to consumers.

Small Scale Business:

A small scale business is a business that have not less than ten (10) employees but not more than forty nine (49) and have not less than five (5) million naira but not only more than fifty million naira assets.

Book-Keeping:

Refers to the process of recording your company’s financial transactions into organized accounts on a daily basis.

1.10 Organization of the Studies

The study is categorized into five chapters. The first chapter presents the background of the study, statement of the problem, objective of the study, research questions and hypothesis, the significance of the study, scope/limitations of the study, and definition of terms. The chapter two covers the review of literature with emphasis on conceptual framework, theoretical framework, and empirical review. Likewise, the chapter three which is the research methodology, specifically covers the research design, population of the study, sample size determination, sample size, and selection technique and procedure, research instrument and administration, method of data collection, method of data analysis, validity and reliability of the study, and ethical consideration. The second to last chapter being the chapter four presents the data presentation and analysis, while the last chapter(chapter five) contains the summary, conclusion and recommendation.