THE EFFECT OF COST ACCOUNTING TECHNIQUES ON PERFORMANCE OF SMES A SURVEY OF SELECTED SMALL AND MEDIUM FIRMS
CHAPTER ONE
INTRODUCTION
Background of the Study
The business environment has become intensively dynamic and increasingly unpredictable in recent decades
and,correspondingly, managing company has become more demanding. Cost Accounting is a task of collecting,
analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on
the most appropriate course of action based on the cost efficiency and capability. The SMEs sector has been
recognized worldwide for its role in economic advancement through ways various like; wealth generation,
employment creation, and poverty reduction (Kithae, Gakure, & Munyao, 2012). 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 (Dalberg, 2011).
Small and Medium Enterprises are critical to the development of any economy has they possess great potentials for
employment generation, improvement of local technology, output diversification, development of indigenous
entrepreneurship and forward integration with large scale industries.
Cost accounting is a task of collecting, analyzing, summarizing and evaluating various alternative courses of action.
Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and
capability. Cost accounting provides the detailed cost information that management needs to control current
operations and plan for the future.
In Nigeria there has been gross under-development of SMEs sub-sector and this has undermined its contribution to
economic growth and development. The key issue affecting the SMEs can be group into four: unfriendly business
environment, poor funding, low management skill and lack of access to technology (FSS 2020 SME Sector Report,
2007). Small and medium enterprises (SMEs) play an important role in the development of a nation’s economy. The
reasons for this are the fact that SMEs provide benefits such as job creations, knowledge spillover, economic
multipliers, innovations driver and cluster development in an economy (Chinaemerem & Anthony, 2012). Given the
importance of SMEs in an economy, it becomes quite plausible to look at factors affecting their financial performance
which is a major determinant of their survival and growth.
An accounting system is an orderly, efficient scheme for providing accurate financial information and controls.
Regulatory requirements and internal administration policies are key considerations in the design of an effective
accounting system. Thus accounting systems show the books, records, voucher, and files and related supporting data
resulting from the application of the accounting process. It involves the design of documents and transactions flow
through an organization. The uniqueness of small and medium scale businesses call for careful consideration in the
design of accounting systems.Small and medium scale enterprises are a vast majority of businesses found in variety
of primary and intermediate production of the economy. These establishments have tremendous impact on the state
and well being of the nation in employment generation, as sources of national outputs and revenues, providing
feed stock for large corporations They may lack the sophistication to apply the detailed accounting processes, yet the value of accounting systems to these businesses is quite profound.
THE EFFECT OF COST ACCOUNTING TECHNIQUES ON PERFORMANCE OF SMES A SURVEY OF SELECTED SMALL AND MEDIUM FIRMS