ACCOUNTING RECORD KEEPING AND PERFORMANCE OF SMALL SCALE BUSINESS UNITS

ACCOUNTING RECORD KEEPING AND PERFORMANCE OF SMALL SCALE BUSINESS UNITS

A SURVEY IN NEW TAXI PARK SMALL SCALE BUSINESS UNITS

BY

CHINEDU JAMES

  

JUNE 2011

TABLE OF CONTENTS

. v

CHAPTER ONE.. 5

1.0 INTRODUCTION.. 5

1.1 Background to the study. 5

1.2 Statement of the problem.. 5

1.3 Purpose of the study. 5

1.4 Research objectives. 5

1.5 Research questions. 5

1.6 Scope of the study. 5

1.6.1 Subject scope. 5

1.6.2 Geographical scope. 5

1.7 Significance of the study. 5

CHAPTER TWO.. 5

2.0 LITERATURE REVIEW... 5

2.1 Introduction. 5

2.2 Accounting record keeping concept 5

2.2.1 Accounting record keeping procedures. 5

2.2.2 Qualities of good recording keeping. 5

2.2.3 Accounting record storage and retrieval 5

2.2.4 Accounting record keeping manager 5

2.2.5 Record keeping systems. 5

2.2.6 Documents and books used in record keeping. 5

2.2.7 Record keeping books. 5

2.2.8 Bookkeeping Methods. 5

2.2.9 Benefits of good record keeping. 5

2.2.10 Problems involved with accounting record keeping. 5

2.3    Performance. 5

2.3.1 Performance management 5

2.3.2 Measuring performance. 5

2.3.3 Business Performance dimensions. 5

2.3.4 Methods of measuring performance. 5

2.3.5 Key Performance indicators. 5

2.4 Relationships between accounting records and performance. 5

Conclusion. 5

CHAPTER THREE.. 5

METHODOLOGY.. 5

3.0 Introductions. 5

3.1 Research design. 5

3.2 Study population. 5

3.3.0 Sampling method. 5

3.3.1 Sampling size. 5

3.3.2 Sampling procedures. 5

3.4 Sources of data. 5

3.3.1 Primary source. 5

3.3.2 Secondary source. 5

3.4 Data collection instruments. 5

3.4.1 Questionnaires. 5

3.4.2 Interviews. 5

3.5 Data processing. 5

3.6 Data analysis. 5

3.7 Presentation. 5

3.8 limitations of the study and anticipated solutions. 5

CHAPTER FOUR.. 5

PRESENTATION AND INTERPRETATION OF FINDINGS. 5

4.0 Introduction. 5

4.1. Demographic characteristics of respondents. 5

4.1.1 Age range of respondents. 5

4.1.2 Gender of respondents. 5

4.1.3 Level of education. 5

4.1.4 Types of businesses of respondents. 5

4.1.5 Number of people employed in business. 5

4.1.6 Period spent by respondents in business. 5

4.2 Findings on Accounting record keeping in small scale business units. 5

4.2.1 Businesses keep business accounting records. 5

4.2.2 Findings on whether records are kept on cash receipts, sales, purchases, creditors and debtors were considered and can be evidenced in the table below.. 5

4.2.3 Business owners and shop keepers are responsible for record keeping. 5

4.2.4 Manual record keeping system is used in business. 5

4.2.5 Receipts, invoices and payments vouchers are used as record keeping documents. 5

4.2.6 Record keeping is essential for decision making and business adjustment. 5

4.2.7 Cash books, ledgers and journals are the books used for record keeping. 5

4.2.8 Procedures are followed to document records until final accounts are prepared. 5

4.2.9 Record keeping reduces operating costs, improves efficiency and productivity. 5

4.2.10 Accounting records retrieval is done by an authorized person. 5

4.2.11 Business involves reliance on mental and verbal information. 5

4.2.12 Complete accounting records are essential for preparation of financial statements. 5

4.2.13 Accounting records support business audit and research. 5

4.2.14 Accounting records assists in resource allocation and performance planning. 5

4.2.15 Businesses relies on outside accounting firms to maintain business records. 5

4.2.16 Accounting records require skilled personnel and a lot of time. 5

4.2.17 Business prepare yearly financial statements. 5

4.3 Findings on performance of small scale business units. 5

4.3.1 Small scale business unit operators measure performance of their businesses. 5

4.3.2 Workers provide a strongest linkage to successful business performance. 5

4.3.3 Profitability is a widely used measure of financial performance. 5

4.3.4 Measuring business performance aims at facilitating employee development. 5

4.3.5 Performance indicators help to measure business progress towards its goals. 5

4.3.6 Effective business performance depends on the firm’s ability to control expenses. 5

4.3.7 Customer satisfaction and economic contribution affects business performance. 5

4.3.8 Performance entails economy, effectiveness and efficiency. 5

4.3.9 Business operators set yearly objectives for each performance indicator 5

4.3.10 Performance measures enable the business to achieve its strategic objectives. 5

4.3.11 Small scale business operators prepare budgets for performance appraisal 5

4.3.12 Performance measure initiatives fails due to difficulties in their implementation. 5

4.3.13 Effective business performance depends on the firm’s ability to satisfy staff. 5

4.4 Pearson correlation for the Relationship between Accounting record keeping and Performance of small scale business units. 5

CHAPTER FIVE. 5

SUMMARY, CONCLUSION AND RECOMMENDATIONS. 5

5.0 Introduction. 5

5.1 Summary of Major Findings. 5

5.1.1 Summary of General Findings. 5

5.1.2 Findings on accounting record keeping. 5

5.1.3 Findings on the performance of small scale business units. 5

5.1.4 Findings on Relationship between Accounting Record Keeping and Performance of Small Scale Business Units. 5

5.2 Conclusion. 5

5.2.1 Conclusion on Accounting Record Keeping. 5

5.2.2 Conclusion on performance of small scale business. 5

5.2.3 Conclusion on relationship between accounting record keeping and performance of small scale business units. 5

5.3 Recommendations. Error! Bookmark not defined.

5.3.1 Recommendation on accounting record keeping. 5

5.3.2 Recommendations on performance of small scale business units. 5

5.3.3 Recommendations on the relationship between accounting record keeping and performance of small scale units. 5

5.4 Areas for further research. 5

References. 5

Appendances. 5

Appendex 1: Questionnaire For The Research Project 5

LIST OF TABLES

Table 1: Age distribution of respondents. 5

Table 2: Gender of respondents. 5

Table 3: Level of education. 5

Table 4: Types of businesses. 5

Table 5: Number of people employed in business. 5

Table 6: Period spent by respondents in business. 5

Table 7: Businesses keep business accounting records. 5

Table 8: Records are kept on cash receipts, sales, purchases, creditors and debtors. 5

Table 9: Business owners and shop keepers are responsible for record keeping. 5

Table 10: Manual record keeping system is used in business. 5

Table 11: Receipts, invoices and payments vouchers are used as record keeping documents. 5

Table 12:Record keeping is essential for decision making and business adjustments. 5

Table 13: Cash books, ledgers and journals are the books used for record keeping. 5

Table 14:Procedures are followed to document record until final accounts are prepared. 5

Table 15: Record keeping reduces operating costs, improves efficiency and productivity. 5

Table 16: Accounting record retrieval is done by an authorized person. 5

Table 17: Business involves reliance on mental and verbal information. 5

Table 18: Complete accounting records are essential for preparation of financial statements. 5

Table 19: Accounting records support business audit and research. 5

Table 20: Accounting records assist in resource allocation and performance planning. 5

Table 21: Businesses rely on outside accounting firms to maintain business records. 5

Table 22: Accounting records require skilled personnel and a lot of time. 5

Table 23: Business prepare yearly financial statements. 5

Table 24: Small scale business unit operators measure performance of their businesses. 5

Table 25: Workers provide a strongest linkage to successful business performance. 5

Table 26: Profitability is a widely used measure of financial performance. 5

Table 27: Measuring business performance aims at facilitating employee development. 5

Table 28: performance indicators help to measure business progress towards its goals. 5

Table 29: Effective business performance depends on the firm’s ability to control expenses. 5

Table 30: customer satisfaction and economic contribution affects business performance. 5

Table 31: Effective performance entails economy, effectiveness and efficiency. 5

Table 32: Business operators set yearly objectives for each performance indicator. 5

Table 33: Performance measures enable the business to achieve its strategic objectives. 5

Table 34: Small scale business operators prepare budgets for performance appraisal 5

Table 35: performance measures initiatives fail due to difficulties in their implementation. 5

Table 36: Effective business performance depends on the firm’s ability to satisfy staff. 5

Table 37: showing the Relationship between Accounting record keeping and Performance of small scale business units. 5

       

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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APPRAISAL OF THE ECONOMIC IMPLICATION OF ELECTRONIC BANKING IN NIGERIA BANKS (A CASE STUDY OF DIAMOND BANK)

APPRAISAL OF THE ECONOMIC IMPLICATION OF ELECTRONIC BANKING IN NIGERIA BANKS

(A CASE STUDY OF DIAMOND BANK)

BY

CHINEDU JAMES E

DEPARTMENT OF BANKING AND FINANCE

FACULTY OF MANAGEMENT AND SOCIAL SCIENCES

CARITAS UNIVERSITY, AMORJ NIKE, ENUGU

AUGUST, 2010

CHAPTER ONE

1.1       BACKGROUND OF THE STUDY

                        Before the emergence of modern banking system, banking operation was manually done which lead to a slow down in settlement of transactions. This manual system involves posting transactions from one ledger to another which human handles. Figures or counting of money which should be done through computers or electronic machine were computed and counted manually which were not 100% accurate thereby resulting to human errors. Most bank then use only one computer in carrying out transactions which ameliorate the sluggish nature of banking transaction.

                        Nigeria do not embrace electronic banking early compared to developed countries. Nigeria adopted electronic banking system in the early 2000s.  During the introduction of electronic banking system, the use of raw cash was said to have bred corruption through the “cash and carry syndrome” usually linked with the swift movement of Ghana-must go” bags by some politicians. Such bags as some analyst say, are a major source of corrupt practices as dubious persons seeks to bribe their way to avoid been checked in some sensitive areas or places in a corrupt society.

                        Since electronic banking started in all Nigeria banks, it has been a woe for civil servants; checks show that some staff in establishments such as the national boundary commission for instance, are yet to receive their salaries for the previous months as efforts to electrically transfer salaries into their account have failed according to Ibrahim, D. (2009).

                        “One bank will tell you it has transferred your salaries but the supposed recipient bank will tell you it has not received anything leaving you even more confused”, says John, I. (2009). Olekah, J. (2009) while acknowledging the initial hiccups that dogged the system, advises stakeholders against being discouraged as such “teething problems” are normal.

                        James, A. (2009) a banker reported to vanguard annual report that “we should not destroy electronic-banking by looking at the negative aspects, we must strive towards perfecting it”. James, A. (2009) also says that the volume of data generated by the Government ministry Agencies is much making it a bit difficult for banks to cope, Mathew S. (2009) a worker says in his report to vanguard annual report on banks and cards that government should have done its home work “very well” before introducing the system, “they plugged us into a system they were not prepared for and the result is untold hardship visited on innocent people”.

            At this juncture, is good to know what e-banking is all about.

                        According to Anyawaokoro, M. (1999). Electronic banking is defined as the application of computer technology to banking especially the payment (deposit transfer) aspects of banking. He also defined electronic banking as a system of banking with an electronic communication network which permits on-line processing of the same day credit and debit transfers of funds between member institutions of a clearing system.

                        According to Clive, W. (2007) in his Academic dictionary of banking, electronic banking is defined as a form of banking in which funds are transferred through an exchange of electronic signals between financial institutions, rather than an exchange of cash, cheques or other negotiable instruments.

                        According to Omotayo, G. (2007) defines electronic banking as a system in which funds are moved between different accounts using computerized on line/real time systems without the use of written cheques.

                        According to Edit, O. (2008) in international Journal of investment and finance, electronic banking is defined as a system by which transactions are settled electronically with the use of electronic gadgets such as ATMs, POS terminals, GSM phones, and V-cards e.t.c. handled by e-holders, bank customers, and stake holders. 

1.2       STATEMENT OF PROBLEMS

                        As earlier pointed out, there is delay in payment of cheques which lead to the adoption of electronic banking system. Adoption of electronic banking which suppose to ease banking transactions rather resulted to woes to customer. Most people complain of time wasted in banks. This occurs when there is power failure in banks resulting to slow down in operation.

                        Another problem that emerged was that banks do not have information backup to fall back on should there be any computer break down.

                        In investing in electronic banking, the country will need a large amount of financial resources in computer technology, obviously, the resource is in short supply in Nigeria, couple with high level of poverty. For an efficient functioning of electronic payment system, there must be availability of infrastructural facilities such as electricity and telecommunication network, however, power supply fluctuates and there is still constant failure links in networks.

                        Since early 2000s banks have been developing and introducing payment cards for their customers as well as deploy ATM’s cards. Usage was however low due to lack of interconnectivity i.e. switching platform to interconnect the ATM’s for card holders.

1.3       OBJECTIVES OF THE STUDY 

                        This research work intends to assess the extent of electronic payment in banking activities as well as identify the various types of electronic banking.

            The researcher will also evaluate the major problems associated with the development of electronic banking system in Nigeria as well as evaluate possible solutions to these problems.

                        The effect of electronic banking on profitability of banks will also be assessed. There are different types of electronic banking used in Nigeria banks; the researcher will like to evaluate the impact of these e-payment systems on banking industry and also assess the impact of electronic banking in Nigeria economy.

1.4       RESEARCH QUESTION

                        In order to get information from respondents the following questions where formulated:

                        What are the various types of electronic payment and the extent of electronic payment in banking activities?

                        In what extent can e-banking improve or enhance banking services?

                        What are the major problems associated with the development of electronic banking system in Nigerian?

                        What are the solutions to the problems associated with the development of e-banking?

            What extent has e-payment affected banking activities?

            The research shall attempt to find answers to these questions in the next chapter.

1.5       SIGNIFICANCE OF THE STUDY

Electronic banking in our economy today is a welcome development and also its impacts in the society are over-whelming, so this research is significant in so many ways.

                        It will expose the strength and weakness of electronic banking.

It will motivate banks and other economic agents to computerize their services.

                        Knowledge in the area of electronic banking will be advanced.

Apart from contributing to the knowledge of electronic banking, it forms a reference for future research in this area.

1.6       SCOPE OF STUDY

This research is on economic implication of electronic banking in Nigeria banks and also the various forms of payment and electronic systems used by banks. The researcher will base this work on the entire deposit money banks in Nigeria but to Diamond Bank in particular.

1.7       LIMITATION OF STUDY

Time is a major factor to the researcher as research of this kind requires enough time in gathering of data, but it was not given to carryout the research, distribution, collection and analysis of questionnaire.

Also the school system has made it difficult for student to go out in search for information by not granting exeat for student. Some banks hud information from students who desires such information in other to maintain the banks secrecy thereby making it difficult for students to gather information for their research.

Finally, finance was infact the most limited factor, in spite of this the researcher have to travel out to the sampled organization to interview some of the managers and supervisors.

CHAPTER TWO

LITERATURE REVIEW

2.1       INTRODUCTION

Electronic banking have long been recognized to play an important role in economic development on the basis of their ability to create liquidity in the economy through financial intermediation between savers and borrowers. It also offers financial services and products that accelerate settlement of transactions and in the process reduce cash intensity in the financial system, encourage banking culture, and catalyses economic growth.
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