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ACCOUNTING RECORD KEEPING AND PERFORMANCE OF SMALL SCALE BUSINESS UNITS
ACCOUNTING RECORD KEEPING AND PERFORMANCE OF SMALL SCALE
BUSINESS UNITS
BY
CHINEDU JAMES
TABLE
OF CONTENTS
ABSTRACT
The study
was about the effect of accounting record keeping and performance of small
scale business units in the New taxi park basing on the following objectives;
to find out whether traders in new taxi park keep accounting records, to find
out performance level of small scale business units in new taxi park and to
establish the relationship between accounting record keeping and performance of
small scale business units in new taxi park.
The study
design comprised of a combination of both descriptive and cross sectional
research designs and both qualitative and quantitative data were employed.
Stratified sampling was used to determine the sample size. A sample size of 136
computed by a formula for krejcie and Morgan 1970 was considered primary data
was collected by the use of questionnaires which focused on the research
questions. Secondary data was got from journal reports and internet which are
in relation to the study objectives. Data entered into excel was presented by
the use of frequency tables. Data analyzed by statistical packages for social
scientists (SPSS) was presented in form of Pearson correlation coefficience
table which showed the strength of relationship between accounting record
keeping and performance of small scale business units.
Findings on
effectiveness of accounting record keeping in small scale business units showed
that accounting record keeping enhances business decision making and adjustment
accounting record play a role in reduction of operating costs, improves
efficiency and productively.
Recommendation
on the accounting record keeping in small scale business units, operators of
small scale business units need to ensure that complete and accurate business
records are kept to enhance business decision making and improve efficiency and
productivity.
CHAPTER ONE
1.0 Introduction
This chapter will cover the following areas,
the background to the study, statement of the
problem, purpose of the study, objectives of the study, research
questions and scope of the study and the significance of the study.
1.1 Background to the study
Record
keeping refers to day-today maintenance of business transactions and accurate
manipulating them to produce accurate and consistent financial statements
(Parker, 2000). Record keeping is the process of keeping full, accurate, up to
date business records (Reynolds Sarah, 2010). Proper record keeping can help
business to effectively manage cash flows and stay abreast of profits and
losses and develop plans for future based finance trends (N. Madison, 2002, Penn et al.,(1994), Jones (2003))
Record keeping cycle involves a process of
that is followed by Accountants and book keeping staff in processing raw
financial data into output information inform of financial statements (Mc Lean
(1999) The process ranges from creation of business transactions, analyze and
record the transactions in the journals by account name, post information from
journals to ledgers, prepare a trial balance, journalize adjusting entries,
post adjustments from the journal to the ledger, prepare an adjusted trial
balance, journalize closing entries, post closing entries from the journal to
the ledger, prepare a post closing trial balance, and prepare the financial
statements (Jay. Jacquest and William .C. Miller, 2004)
According to Hughes (2003), keeping records
is crucial for the successful performance of a business. A comprehensive record
keeping system makes it possible for entrepreneurs to develop accurate and
timely financial reports that show the progress and current condition of the
business. With the financial report you can generate from a good recordkeeping
system, you can compare performance during one period of time (month, quarter
or year) with another period, calculate trends and plan for the business's
future. An accurate record of the business' financial performance is vehicle to
monitor performance in specific areas, Complete and accurate income tax ,a
basis for sound planning for the future and basis for discussion with partners,
potential investors, and lenders, all these are important aspects which enhance
performance of the business.
Flolick (2006), Macey(2001) defined
Performance of business as the ability of business to meet the required
standards, increased market share, improve facilities, ensuring returns on
profitability, and total reduction and once this is achieved, a business is
believed to be performing effectively.
Laitinen (2002), Barutcugil (2002) and Akal
(1992), defined business performance as a capability to produce the targeted
output satisfying the needs of the interest groups.
Performance
dimensions include; business competitiveness in terms of market share, sales
growth, customer base, financial performance in terms of profitability,
liquidity and capital structure, quality of services in terms of reliability
and competence, flexibility in terms of speed of delivery and resource
utilization in terms of productivity and efficiency (Atkinson, AA. (1998), Fitzgerald et
al.,(1991), Neely et al.,(2002), keegan et al (1989), lynch and cross (1991)
Small
scale business is a business employing less than five employees but with a
maximum of fifty employees, with the value of assets, excluding land, building
and working capital of less than Uganda shillings 50 million and annual turnover
of between Ugandan shillings 10 and
50 million (Izere Eppy, 2004). Small
scale businesses usually have an investment of less than U& 50,000, have
less than 10 employees and have annual turnover of between U & 5000-50,000
and do not file returns to the commissioner (Namaja’s report 1998).
It is evident that good record keeping is
important and geared to enhancing the business performance, survey shows that
most small scale businesses are often strongly based on the owner-manager’s
know-how and expertise this evidenced in the new taxi park. A common assumption
is that the owner-managers have sufficient technical knowledge but they lack
managerial skills or sophisticated managerial practices (Maes et al., 2004).
Rantanen (2001) argues that small firms are more likely to engage in informal
management practices than to adopt sophisticated planning and control
techniques. Nooteboom (1994) has recognized that in small businesses much of
the operating knowledge is tacit, and it is connected to craftsmanship.
According to Martinsuos and Karlberg (1998),
small businesses have a limited capacity for marketing, strategy, acquisition
of new knowledge and technology. External pressure from large companies with
bigger budgets and provide products and services at lower cost. Running of
business with little or absolutely no formal training in the area of
management, hence poor or no records of transactions.
Majority of
these firms collapse in the first five years of their operation and the smaller
the size and age of the business, the more it is likely to collapse (K’
Obongo, 2000). According to the survey carried out by Enterprise Uganda (2007)
one of the most prevalent challenges identified during the business health
checks is that small scale business units are associated with poor accounting
and financial records which makes entrepreneurs unable to make business
decisions.
In new taxi
park small scale business performance is not readily predictable and some
businesses have fallen out. The researcher in this particular study wishes to
evaluate the relationship between record keeping and -performance of small
scale businesses.
1.2 Statement of the problem
Most small
scale business units in new taxi park collapse with in the first five years of
operation. According to the business health checks conducted by Enterprise
Uganda, in 2003 there were 75% of small scale businesses registered and by
june2007, 45% survived (Enterprise Uganda internal report, 2007)
Although
small scale business units have tried to increase their asset base to act as
security to acquire loans for working capital, they still lack enough asset
base and records to present to financial institutions to qualify for large loan
acquisition.
Collapse of
small scale business units in the first years could be attributed to improper
or incomplete records which result into huge taxes levied on them and denying a
chance to access loans and inappropriate decisions will be made.
1.3 Purpose of the study
The purpose of the study was to find
out the relation between accounting
record keeping and performance of small
scale business units in new taxi park Kampala District.
1.4 Research objectives
·
To find out whether traders in new taxi park
keep accounting records
·
To find out the performance level of small
scale business units in new taxi park.
·
To establish the relationship between
accounting record keeping and performance of small scale business units in new
taxi park.
1.5 Research questions
·
Do traders in new taxi park keep
accounting records?
·
What is the performance level of
small scale business units in new taxi park?
·
What is the relationship between
accounting record keeping and performance of small scale business units in new
taxi park?
1.6 Scope of the study
1.6.1 Subject scope
The researcher only looked on accounting record keeping and performance
of small scale business units in new taxi park.
1.6.2 Geographical scope
The study was carried out in
Kampala District on small scale business units in new taxi park.
1.7 Significance of the study
·
The results of the study will help
the business community to improve on methods of record keeping for efficient
and effective performance of their businesses.
·
The study will help policy makers
such as government agencies by provision of data about performance of small
scale business units for tax purposes.
·
The study will help other scholars
in further research into all aspects of management including record keeping.
·
The study will benefit the
researcher in partial fulfillment of the requirements for the award of a degree
of Bachelor of Commerce of Makerere University.
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