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Accounting Project Topics

Proper Bookkeeping and Basic Accounting Procedures in Small Scale Enterprises

Proper Bookkeeping and Basic Accounting Procedures in Small Scale Enterprises

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Proper Bookkeeping and Basic Accounting Procedures in Small Scale Enterprises

Chapter One

ย Theย Objectivesย ofย the Study

Theย objectivesย ofย thisย researchย wereย toย considerย theย following:

  1. To examine the importance of proper bookkeeping and basic accounting procedures in small-scale
  2. To determine the extent to which bookkeeping and basic accounting procedures have been implemented and applied in SSEs

CHAPTERย TWO

LITERATUREREVIEW

ย ย Introduction

Irwin;ย (1993)ย describedย properย bookkeepingย procedureย asย oneย ofย theย waysย throughย whichย anย organization can keep track of its financial activities in order to ensure proper financial discipline.ย Thereย isย noย properย definitionย ofย small-scaleย enterprise;ย however,ย itย mayย beย definedย asย oneย thatย isย independently owned and operated and it is non-dominant in its field of operation ((Meggenso et al;ย 1994).ย Thereย areย alsoย certainย peculiaritiesย that differentiateย theย small-scaleย enterprisesย fromย otherย enterprises. It is independently owned and operated and does not therefore form part of any largerย enterprise. It is usually managed by its owner(s) in a personalized way without the need for a formalizedย managementย structureย (Broomย etย al;ย 1993).

There are a few things one needs to understand in order to make setting up your accounting systemย easier. They are basic and they will probably clear up any confusion you may have had in the past whenย talkingย withย yourย Certifiedย Publicย Accountant (CPA)ย orย otherย technical accountingย type.

ย Historyย ofย Bookkeeping

Bookkeeping has certainly been practiced many years ago: for we read of it amongst the Ancient Romans in J. Caesarโ€™ time; but should not be supposed, that it ever arrived to the perfection, as now it is. The Italians were the first merchants, we read of in Europe, and first invented this exact way of keeping accounts, now in use amongst all. Amsterdam has been a great nursery of this science, since it was brought there (Yamey et al; 1963). Appeals to the long history and early origins of accounting, whether as a generic activity or a specific practice such as double-entry bookkeeping, have served a number of purposes. First, they were seen by several writers of early treatises on accounting as ways of convincingย their potentialย audience of the value and relevance of the methods that the writers wishedย toย reveal andย promote.

This study is grounded on the compliance theory of Rautiala; (2000). This theory is relevant in the context of adherence of SSEs to accounting. Raustiala grouped compliance theories into rationalist and normative models. Rationalist models focus on cooperation to prevent non-compliance. Under the rationalist model called the deterrence theory, costs open up a range of enforcement options and address the corporate non-compliance with domestic rules. Cost to the firm is relevant to the SSEs. Another rationalist model described by Raustiala; (2000) is the behavioural decision theory, which acknowledges that people act according to their rational calculation of how a particular choice is framed. The awareness of the accrual and cash bases of accounting sets the frame of choice between the two methods to be applied. On the other hand, one of the normative models called the complexity critique focuses on the capacity of the regulated firm. Complexity charges regulations as too numerous, too difficult to understand, and too fluid or ever changing. This would particularly be the case for SSEs, which generally lack the resources to stay apprised of complicated, changing regulatory requirements.

 

CHAPTERย THREE

RESEARCHMETHODOLOGY

ย ย INTRODUCTION

Each research problem is in some form unique and thus requires a custom-made research procedure. Inย thisย chapter,ย theย researchย methodย thatย wasย usedย toย collect,ย manageย andย analyzeย theย dataย isย presented.ย In other words, the chapter discusses the methodology of the study including the source of data, sampleย and sampling technique, data instrument, pilot testing of instrument, data distribution and collection asย well asย dataย managementย andย analysisย toolย areย describedย inย thisย section.

To beย ableย to accomplish theย task at hand, thereย is theย need to gather adequateย and comprehensiveย data on Small-Scale Enterprises and National Board for Small-Scale Industries (NBSSI). This chapter seeksย to explain the research instruments used in collecting data, the population of the research, samplingย procedure,ย theย typeย ofย dataย collectedย andย theย difficultiesย encounteredย duringย theย survey.

RESEARCHย DESIGN

The research was designed to cover the activities of two hundred (200) Small-Scale Enterprises (SSEโ€™s) and key personnel from National Board for Small-Scale Industries were interviewed. They were; the director of research, public relation officer, the director of education, two field officers at the head office, district coordinators of Kanashie, Accra central, Madina, North Industrial Area and Tema. The survey method was used in gathering information from respondents. This included direct visits, observations, interviews and administration of questionnaires. The field data were edited, coded and punched. Frequencies, percentages and tabulations were used to score the data.

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Questionnairesย andย personalย interviewsย wereย theย methodsย employedย inย gatheringย theย fieldย data.

A personal administration of the questionnaires was employed because of the time constraints on theย part of these businessmen. As a prelude to the questionnaires personal interviews and discussions wereย conducted to prepare the minds of respondents and also to serve as a check on inconsistent and/orย conflicting response. Personnel of NBSSI were interviewed to determine the extent to which they assistย SSEs.

ย POPULATIONย ANDย SAMPLEย SIZE

For the purpose of this study, the author was able to identify a population of three fifty (350) small-scaleย enterprises (SSEโ€™s) from which two hundred (200) was selected for the research. Key personnels fromย NBSSI were also interviewed to determine the extent to which they help SSEs in recording their financialย transaction.

CHAPTERย FOUR

ย DATAย PRESENTATIONย ANDย ANALYSIS

ย INTRODUCTIONS

This chapter seeks to analyse data collected from small-scale enterprises and National Board of Small- Scale Industries on their activities. As stated in the preceding chapter, a sample of 200 small-scale enterprises and personnel of NBSSI were interviewed. The information were analysed both qualitatively and quantitatively in this chapter. Inย orderย toย getย aย comprehensiveย andย orderlyย analysisย ofย theย dataย collectedย fromย theย Small-Scaleย Enterprisesย (SSEโ€™s).ย Theย followingย parametersย wereย use:

 

CHAPTERย FIVEย (5)

SUMMARYย OFย FINDING,ย CONCLUSIONย ANDย RECOMMENDATIONS

ย SUMMARYย OFย FINDINGS

The contribution of the small-scale enterprises have been recognized by both governmental and non-ย government agencies. The research, aimed at finding out the need for proper bookkeeping and basicย accounting procedures in SSEs. The research covered 200 SSEs and an interview conducted at NBSSIย headquarters.

The study found out that there was lack of managerial skills especially in basic accounting principles andย bookkeepingย procedureย amongย SSEsย inย theย country.

The study shows the illiteracy rate in financial recording is generally high and NBSSI is doing every thingย possibleย toย correct thisย anomaly.

The study further found out that SMEs do not attach any importance to proper bookkeeping and basic accounting principles.

Theย studyย alsoย revealedย that thereย isย anย apparent non-existenceย ofย properย bookkeeping andย basicย accountingย proceduresย inย SMEs.

Principal among these functions were the training of business owners on various topics. But it seems their effort of educating these business owners on the need of proper bookkeeping is not enough.

Finally, SSEs do not employ account clerks not to talk of qualified accountant to prepare their financial books for the enterprise.

CONCLUSION

Conclusion drawn from the research indicated that the major problem of management of business was how to attract and maintain middle level accounting personnels to manage their accounting records and this affects the growth of enterprises and in most cases a major cause of business failure.

Theย researchย furtherย revealedย theย illiteracyย onย theย useย ofย basicย accountingย andย bookkeepingย proceduresย is generally high and it therefore suggested that NBSSI and other agencies responsible for the growth ofย SSEs should step up their training activities especially in basic bookkeeping procedures and accountingย principles.

Though,ย itย wasย identifiedย thatย thereย existย managerialย problemsย amongย ownersย ofย businessesย onย bookkeeping in the country, the study cannot be said to be conclusive. For instance, the study could notย identify the extent to which each managerial problem identified; affected the growth of the small-scaleย enterprisesย inย theย country.

It is hope therefore that, further research will be conduction on the topic to determine the level of accounting principles and bookkeeping needs of businesses in the country and to determine he extent of damaging effects of poor financial records in the growth of businesses.

RECOMMENDATION

Due to the enormous contribution of small-scale enterprises to the socio-economic up-liftment of the towns and village where they are located, and the country as a whole, much attention ought to be given to proper bookkeeping and basic accounting procedures in small-scale enterprises.

SOURCEย OFย EMPLOYMENT

It is an undeniable fact that SSEโ€™s are great sourceย of employment, and the development of localย industrial entrepreneurship and should be encouraged to separate their personal finances from that ofย theirย businessย finances.

In appreciation of the contribution of SSEs the researcher put forward the following recommendations for the enhancement of SSEโ€™s in the study area.

ROLEย OFย NBSSI

First and foremost, NBSSI, which is the major agency, established to see to the need of small scale industries must be the body around which other agencies can work to promote small-scale business.

Other institutions workingย in this direction may not even known each others existence in the countryย but the NBSSI can work to bring all such agencies together to ensure collaboration among them. This willย eliminateย duplicationย ofย activitiesย orย dutiesย ofย theseย establishedย organisationsย especiallyย theย NGOโ€™s.

ROLEย OFย NGOs

A major finding in the research was that other institutions like NGOโ€™s who assist SSEs rather dominate on the provision of financial and technical services ignoring the managerial needs of the SSEโ€™s. These institutions should add to their activities the provision of managerial skills especially proper bookkeeping and accounting procedures and vigorously pursue them to enable them make productive use of resources and other forms of assistance offered.

EDUCATION

Educational programmes, especially on the FM radio station through the Non-Formal Education Division (NFED) publication must be intensified to make business owners aware of the existence and activities of NBSSI and other assisting institutions in the country. Airtime could also be assigned to educate businessย ownersย onย topicsย inย bookkeepingย andย principlesย ofย accountingย inย managingย aย business.

MANAGEMENTย OFย SMEs

To solve the problem of management, it is been suggested that, businesses in the country should embark on serious planning on how to manage their affairs. The idea of managing businesses solely by individuals is not a good practice for effective performance. Businesses should therefore form partnership-pulling together resources and expertise. They should also employ qualified persons to help them in the management of their businesses.

FINANCIALย RECORDย KEEPPING

Properย recordsย andย booksย ofย accountsย areย prerequisitesย forย goodย performanceย andย this shouldย beย encouraged. Thus, not only must they start keeping records of business transactions, but also theyย should separate the activities of their businesses from their personal activities. Indeed the culture ofย goodย businessย practicesย such asย theย aboveย isย crucial forย effectiveย businessย performance.

Before any assistance is given either by NBSSI or other organisations the SSEs should be contacted and studied properly to determine their needs.

Follow ups should also be made to beneficiary SSEs to determine the impact of such assistance and to also determine whether there is the need for further assistance.

Anotherย wayย assistanceย toย SSEsย canย beย madeย beneficialย toย themย isย throughย theย formationย ofย co-ย operatives. SSEs should therefore be encouraged, especially those in the same area of business, to formย co-operativesย soย that theyย canย easilyย beย accessed,ย assessedย andย assisted.

The NBSSI; the government and other assisting organisations should organize district and regional tradeย fairs to create a forum for local entrepreneurs to exhibit their wares. Furthermore, the NBSSI shouldย make efforts to create awareness of the rich cultural and tourist potentials of the country throughย symposia and television broadcast for other equally interested persons can join the bandwagon SSEs toย createย theย neededย jobsย forย theย youth.

The entrepreneurs themselves should embark on serious quality control exercise to help them outwitย competitorsย andย alsoย toย improveย theirย salesย asย well.ย Theย governmentย onย hisย partย shouldย improveย theย poor infrastructural state especially the road network in the country to further ease the problems ofย distributionsย andย marketing.

FOLLOW-UPSย 

NBSSI should follow up on enterprises trained in basic bookkeeping and accounting to ensure that the SSEs follow what they were taught.

Further,ย NBSSIย asย aย matterย ofย urgencyย sourceย financeย fromย NGOsย andย otherย agenciesย toย helpย SMEsย prepareย theirย financial recordsย soย that theyย can meetย theย demandsย ofย theirย financial institutions.

NSSBIย shouldย ensureย strictย adherenceย toย theseย proceduresย inย orderย toย qualifyย theseย SSEsย forย furtherย trainingย programmes/assistanceย beingย offered.

POLICIES

ย Finally, since most policies are intended to boost large-scale firms, they invariable affect the growth and development of SSEโ€™s negatively. Policy-makers must be conscious of such consequences on SSEโ€™s when formulating such policies.

REFERENCES

  • Awiah,ย M.ย (1996);ย Problemsย and Prospectsย of Small-Scale Industriesย inย Ghana.ย Universityย ofย Ghana,ย Legon,ย Accra.
  • Baako, C. A. (1991); Financing Small-Scale Enterprises in Nzema East and Jomoro District of Western Region, University of Ghana Legon, Accra.
  • Bosworth,ย D.ย Jacobs,ย C.ย (1989);ย Managementย Attitudesย asย Barriersย toย Growth.ย Barriersย toย Growthย ofย Small Firms.ย Newย York.
  • Central Bureau ofย Statistics.ย (1984);ย 1984ย Population Censusย of Ghana:ย Preliminaryย Report,ย Accra.ย p.ย 59.
  • Frimpong, G. K. (1997); Change Agents in Small-Scale Industries Development in Ghana: A Review. National Development Planning Bulletin. Vol. 1, p. 33.
  • Gatewood, D. Wallace C. M. and Ringo, W. M. (1989); Entrepreneurshipย and Business Incubator: the Role of Control Data Business and Technologyย Centreโ€.ย Theย Entrepreneurย andย theย Challengesย ofย theย 1990โ€™s.

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