THE ADOPTION LEVEL OF MODERN MANAGEMENT ACCOUNTING TECHNIQUES BY SMALL AND MEDIUM SCALE ENTERPRISES SMES IN KWARA STATE

CHAPTER ONE

INTRODUCTION

1.1 Background to the study

The small and medium scale enterprises sector has been recognized worldwide for its role in economic advancement through various ways like; wealth generation, employment creation, and poverty reduction. Small and medium scale enterprises are a fundamental part of the economic fabric in most developing countries, and they play a very important role in furthering growth, innovation and prosperity. Small and medium scale enterprises are defined as non- subsidiary, independent firms which employ less than a given number of employees, this number varies across national systems, other parameters other than the number of employees are used in categorizing businesses as small and medium scale enterprises. Small and Medium Scale Enterprises are mostly found in the service sector of various economies which in most countries account for two-thirds of employment levels.The primary objective of management accounting is to help managers in carrying out the tasks of: planning, organizing, directing, controlling, and decision making. Also, the major goal of every organization is to achieve satisfactory financial result and for a firm to be financially buoyant the management of that organization must be efficient and effective and this will depend on the management accounting techniques being used. According to Rehman, (2011) efficiency means maintaining a satisfactory relationship between a firms resource inputs and its outputs (the number of labor hours required to produce a product); effectiveness on the other hand refers to how well a firm attains its goal (for example, actual sale value against planned sale value).Nurturing of the small to medium size enterprises (SMEs) is being hailed for their pivotal role in promoting grassroots economic growth and equitable sustainable development, this nurturing has resulted in increased entrepreneur activities in the small and medium scale enterprises sector in developing countries. Small and medium scale enterprises play a key role in transition and developing countries.

These firms, constitute a major source of employment and generate significant domestic and export earnings, thus small and medium scale enterprises development emerges as a key instrument in poverty reduction efforts and their advancement is key to sustained economic growth, for they are an integral part of a country’s economic fabric and their success affects the well being of the society as engines of job creation, economic growth and innovation. In Kwara state, the small and medium scale enterprises play an important role in employment and wealth creation, income distribution, accumulation of technological capabilities and spreading the available resources among a large number of efficient and dynamic small and medium size enterprises.The small and medium scale enterprises sector acts as the incubating center for emerging entrepreneurial pursuits and thus complementing the process of adjustment in large enterprises by bringing backward and forward linkages for products as well as services previously not available in the market. If well utilized, the modern management accounting techniques can provide the firm’s management with the aid to be more efficient in its operations as well as being more effective in its end results.Small and medium scale enterprises (SMEs) are the life wire of every developing economy. Their role in the economy cannot be over looked as they contribute immensely to the growth of the nation’s economy and equally generates employment opportunities. The need for the adoption of modern management accounting techniques in these forms of enterprises therefore becomes paramount as this will enable them embrace and appreciate the benefits of management accounting and conduct their businesses to meet internationally accepted accounting standard.