ACCOUNTING SYSTEM OF SMALL SCALE BUSINESS ORGANISATION WITH PARTICULAR REFERENCE TO AQUA RAPHA INVESTMENT AND MAJESTY BAKERY, ENUGU STATE

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Comparatively, most of Small Scale Businesses (SSBs) are not registered as corporate bodies but as sole proprietorship, this makes registration procedures quite simple and a bit easier than the other forms of business registration. Partly due to this phenomenon, SMEs has outnumbered all the other forms of business and could be found almost everywhere across the country. In spite of their numbers, and significance, recent studies show that 60% of the SSBs s fail within the first five years of operation Boachie- (2005). Studies also show that it is hard for the SMEs to access finances from the financial institutions since they lack proper financial records as a requirement (William, 2008). The SMEs inability, many times to live beyond their first few months of existence has been attributed partly to lack of finance. To become successful and be able to contribute meaningfully to the Nigerian economy, SMEs must attract and secure finance all by themselves.(Amoako, 2013). In most industries, comparability will be affected by size. Larger firms will be able to avail themselves economic and certain sophisticated quantitative management techniques that may not be practicable for small ones. Smaller companies may be able to maintain closer client relation and better customer relation than the larger ones. This difference in operation technique may influence deficit in accounting method employed in generating financial information, (Abdulrasheed, Khadijat and Oyebola, 2012).

Among the different principles that firm may employ are different inventory techniques, depreciation method, method of accounting for income taxes and revenue recognition procedures. Pacioli (1494) described in approach developed by Italian merchant to account for their activities as owner and managers of business as the basic accounting model that is used up to this days. As economic activities progressed from the fundable to agriculture continued to adapt to the need of the society. As business unit becomes more complex and broader on scope, accounting evolved in response to the increased planning and control responsibilities of management. As government grows in size and becomes more centralized, accounting was developed to meet the increased accountability. It is often stated that business decisions need to be supported by good and quality financial information which needs to be relevant, user friendly and available in a timely manner, (Abdulrasheed, Khadijat and Oyebola, 2012).

Where appropriate accounting should be an active steering tool to run and manage a business instead of representing another administrative burden that the sole proprietor has to comply with. It is important that the accounting systems for one man businesses should fulfill such functions as providing essential financial information for the owners and managers in order for them to be able to manage the business in a competitive environment and to make informed decisions to prevent business failure and to expand the business. However, owners of one man businesses may have particular needs and conditions, so that accounting systems need to be flexible in order not to impose unnecessary operative burdens. (Abdulrasheed, Khadijat and Oyebola, 2012).