ACCOUNTING PROBLEM IN SMALL AND MEDIUM SIZE INDUSTRIES (A CASE STUDY OF GOLDEN TOAST INDUSTRIES)

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

A basic reality of modern economic life is the inter dependent of the business. No modern business is an entity outlay in itself.  This is no doubt whatsoever that the small scale and medium companies constitutes the real fabric of a nation’s economy. And to say that the present and future economic advantages of this our great country Nigeria lies in the dynamic and growth of small –to-medium scale enterprises (SME) is not an overstatement. This opinion was uphold during the economic conference in Lagos in 1989 at the instance of three bodies research (NISER). The National Association of small –scale industries (NASSI) and the fredrich Albot Foundation. In other words, SMEs constitute a vita engine to economic growth and development. However, the environment in which this sector operates in Nigeria is both challenging and rewarding. It is challenging because it is fraught with the changes of risks arising from having. In the first place to have money in a business and the problem of managing it in the country’s recessed economy. In recent years, it is often suggested that small scale and medium enterprise (SME) would help promote rural development as well as general urban employment. It is however remarkable to note that inspite of this high hope, little success has been achieved in Nigeria. In Nigeria, the focus on the development of small scale Industrial; sub-sector dates bank to the second  National Development Plan (1970-1975) during which the small scale Industries (S S I’s) credit scheme was initiated. This was a result of the recognition of government support for the sector in terms of findings. This credit scheme was initiated in the 12 state of the federal with initial input from the federal ministry of industry matched with a grant from the state government in their annual budgetary provisions. Without exception all big industries organization be the multinational or indigenous started in a small way. In Enugu State, small and medium scale business setup bound, but most of them are buying and selling products, considering the economic situation in Nigeria. The owner of business in the state, presently need to make change other than buying and selling. There is not doubt that the survival of entrepreneur in the present Nigeria economy depend solely on his initiative drive including quick adaption to the environment. The question of age of buy, buy, buy, sell, sell, sell is now a thing of past in the country (Nigeria). Therefore a sole proprietor must appreciate this fact and advance to study the economy and develop interest in any manufacturing or agricultural sector no matter how small or medium for the present and future survival of Nigeria. In order to sustain the growth and survival of the small scale industrial deemed it necessary to establish institutions that would provide the back-up extension service hence the establishment of industrial development caries (IDCS). They were establish to give direct good root support service including counseling on project identification and selected machinery, souring, conducting market studies and preparation of feasibility studies. In 1985, the Nigeria stock exchange recognized the complementary role of small scale business though, the establishment of second teir market where this category of business could obtain loans up to N5million for expansion, modernization and development of projects. The world bank gives some support by way of greater to the federal government for the development and rehabilitation of SMES. In 1990 the Europe investment bank and the Nigeria government reached and advance stage towards, the leasing of N445m to fiancé medium and small scale business in Nigeria. In 1990, the Credit policy guidelines of the CBN Director commercial Bank and Merchant Bank to increase their total credit outstanding to small scale from 16% to 20% other are the Nigeria Industrial development bank, Nigeria Association for small scale industries the Nigeria Bank for commerce and industry, all these influence the status of SMES in the country. Record are required in a business for the following reasons. They serves as evidence of policies and activities of the business. Secondary, it provides information useful for daily management of the affairs of the business in general. Their contribution towards the day-to-day management of the organization leads to quick settlement of cost management. Even today, the economics policy blue print (EPB) released by the present administration to guide economic re-invention and engineering for the year of 1999-2003 apportions high priority to small and medium scale enterprises and the in format sector as key instruments for achieving the target goals enumerated in the policy. Hence this project titled “Accounting problems of small and medium enterprises in Enugu state. A case study of Golden Toast is to demonstrate the important of financial record keeping and good management of SMEs to ensure that every bit if Naira and kobo of the industry is used judiciously do that the aim and objective of the business is a achieved.

       (The maximizing profit and minimizing loss)

1.2 STATEMENT OF PROBLEMS

    i.        It is now a common knowledge that the Nigeria economy, presently and in the past year experienced drastic failure or set back as regards small and medium scale enterprises.  

   ii.        There is not authentic or systematic information concerning the organization where as the business owners or manages could embark on meaningful decisions.

 iii.        The system of accounting for both small and medium scale industries are always complex which could result to non growth of business and fall in the capital structure of the organization.

1.3 OBJECTIVE OF THE STUDY

1. To determine the accounting record keeping of small and medium scale enterprises in Enugu state Golden Toast, To find out the method of keeping records problems associated in doing so, and whether the system is enough for the business.
2. To determine the causes of poor management which prevent the progress and expansion of the organization.
3. To examine the impact of accounting problems on profitability of small and medium industries
4. To investigate into the simple but effective systems of accounting for both small and medium scale industries.
5. To examine the relationship between accounting problem and profitability of small and medium size industries

1.4 RESEARCH QUESTION

The following were formulated by the research:

i.            What are the accounting problems associated small scale industries?

ii.           What are the problems faced by small scale industries in Nigeria?

iii.         What are the effects of the problems on the accounting system of small scale industries in Nigeria?

iv.         How can the accounting problems by solved.

1.5 RESEARCH HYPOTHESES

Hypothesis 1

H0: There is no significant impact of accounting problems on profitability of small and medium industries.

H1: There is a significant impact of accounting problems on profitability of small and medium industries.

Hypothesis 2

H0: There is no significant relationship between accounting problem and profitability of small and medium size industries.

H1: There is a significant relationship between accounting problem and profitability of small and medium size industries.

1.6 THE SCOPE OF THE STUDY

This study captured accounting problems of small and medium scale enterprises in Enugu state “a case of Golden Toast could have been extended to cover Enugu State as a whole beyond, as well as a whole and of problems of business establishment but considering the huge financial involvement, the project writer is compelled to limit the scope of study to only accounting problems of small and medium scale enterprises, Golden Toast.

1.7 THE SIGNIFICANCE OF THE STUDY

       This study could benefit business men and farmers because it will enable them to know the possible causes of poor industrial development and reasons for infant mort ability of small and medium Enterprises (SMEs).

       This study further did aid business owners and managers of SMES by way of training their mind on the importance of keeping good accounting records.

       However. Student of business studies in addition would find this study very helpful as it attempt to cover all aspect of business set-up.

       Finally, it is considered that this study would be of importance to the planning authorities as it will avail them all the relevant information required in the information of economic policies.

1.8 DEFINITION OF TERMS

       Accounting is made up of three major branches financial accounting, Cost accounting and management accounting.

i.            Financial accounting: This can  said to be the process of classifying and recording the actual transactions of an entity in monetary terms in accordance with established concept, principles, accounting standards and legal requirement & represents as accurate a view as possible of the effect transactions over the period of the year.

ii.           Cost accounting: This is the part of management accounting which establishment budgets and standard cost and actual cost of operation department or products and the analysis of various profit ability of social use of funds.

iii.         Management accounting: This is defined as the application of accounting knowledge to the purpose of production and interpreting accounting and statistical information assist management in its function of prolong maximum efficiency. It is therefore concerned with the internal management and operation of an entity of producing and interpreting accounting and statistical information to assist management in its function of promoting maximum efficiency. It is therefore concerned with the internal management and operation of an entity.