Accounting Project Topics

Accounting Problems in Small and Medium Size Industries

Accounting Problems in Small and Medium Size Industries

Accounting Problems in Small and Medium Size Industries

Chapter One


The objectives of the study are;

  1. To investigate into the simple but effective systems of accounting for both small and medium scale industries.
  2. To determine the causes of poor management which prevent the progress and expansion of the organization.
  3. To determine the accounting record keeping of small and medium scale enterprises



Conceptual Framework

Concept of SMEs

Arriving at the definition of an SME is challenging as there are as many definitions as there are authors on the subject. What constitutes a small or medium enterprise has volumes of literature over the decades as there have been several attempts at defining what constitutes small and medium enterprises. Researchers and policymakers have used a variety of criteria from different perspectives which include; total worth, relatively size within industry, number of employees, value of products, annual sales or receipts, and net worth (Cochran, 1981). Usually, most SME definitions are based on the role they play in a country economy, policies and programs which are designed by particular agencies or institutions empowered to develop SMEs. For instance, a small business in the developed economies of countries like Japan, Germany and United States of America (USA), may be a medium or large-scaled business in a developing economy like Nigeria. Moreover, the definition of SME also varies overtime from one agencies or developing institutions to the other, depending on their policy focus (Etuk, Etuk & Baghebo, 2014). Despite these variations, SME definition can be based on either some quantitative or qualitative variables. The quantitative definition mainly expresses the size of enterprises in monetary terms as turnover, asset value, profit, as well as quantitative index like number of employees. However, in Nigeria, the asset base criterion is more commonly used. The Central Bank of Nigeria, in its 2005 guideline on Small and Medium Enterprise Investment Scheme (SMEIS), described SME as any enterprise with a maximum asset base of 200 million naira ( excluding land and working capital) with no lower or upper limit of staff. Using quantitative indices alone to define SMEs have proven unsatisfactory in many respects. This is because such indices are characterized by periodic alterations due to inflation and thus can sometimes be misleading. Noteworthy is the point that the CBN‟s definition of SME above may not accommodate many small businesses in Nigeria, which may be known as micro-enterprises. Also misleading is the fact that some enterprise may be labour intensive and so may be large in terms of number of workers employed, while on the other hand, a capital intensive firm may be large in terms of asset base but have fewer employees. And since all firms (big and small) may incur losses, profit is also not a preferred yard stick for categorizing small and medium enterprises. From the above limitation of the quantitative definitions, a qualitative definition based on pre-determined characteristics of SME is needful, although not considered in the scope of this work. The SME sector comprises of very different types of businesses across a wide range of economic sectors. There are essentially two categories: those that are growth oriented, and those small and micro enterprises that operate at the subsistence level to provide employment and income mainly for their owners and a relatively small number of external employees. Subsistence enterprises represent the vast majority of SMEs in developing countries. On the other hand, the growth-oriented type are innovative type of businesses which usually operate in growing markets, as well as businesses that are efficiency-oriented and/or network-intensive, which tend to grow through acquisitions

 Accounting Practices

Accounting practice are said to be the routine manner in which the day-to-day financial activities of a business entity are gathered and recorded. An SME‟s accounting practice refers to the method by which its accounting policies are implemented and adhered to on routine basis, typically by an accountant and/or auditor or a team of accounting professionals. Accounting practices are intended to enforce a SME’s accounting guidelines and policies. It exists as the daily recording of financial data that is important to the evaluation and monitoring of the SME’s economic activities. Accounting practice refers to the normal, practical application of accounting and/or auditing policies that occurs within a business entity. Accounting practice can also be seen as the system of procedures and controls that an accounting department uses to create and record business transactions. Accounting practice should ideally be extremely consistent, since there are a large number of business transactions that must be dealt with in exactly the same manner in order to produce consistently reliable financial statements. Auditors rely upon consistent accounting practice when examining a company’s financial statements. Examples of good accounting practice are:

  • Always keeping records of revenue and expenditure
  • Keeping records of sales and purchase day books
  • Always using the same calculation to determine the amount of overtime paid to employees
  • Always issuing bills to customers on the same day that goods are shipped to them
  • Always paying suppliers invoices on the day when they are due
  • Always using the same depreciation method for the same class of fixed assets




Research design

The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to accounting problems in small and medium size industries

Sources of data collection

Data were collected from two main sources namely:

(i)Primary source and

(ii)Secondary source

Primary source:

These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.

Secondary source:

These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.

Population of the study

Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on accounting problems in small and medium size industries. 200 staff of MR. BIGG’S & UNCLE JOE’S BREAD INDUSTRIES Enugu state was selected randomly by the researcher as the population of the study.




Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey.  This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.





It is important to ascertain that the objective of this study was on Accounting problems in small and medium size industries. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of accounting problems in small and medium size industries


This study was on Accounting problems in small and medium size industries. Three objectives were raised which included: To investigate into the simple but effective systems of accounting for both small and medium scale industries, to determine the causes of poor management which prevent the progress and expansion of the organization, to determine the accounting record keeping of small and medium scale enterprises. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff MR. BIGG’S & UNCLE JOE’S BREAD INDUSTRIES, Enugu state. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made managers, cashiers, senior staffs and junior staffs were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


Considering the study‟s findings, it is concluded that, SMEs in general are bedeviled with a lot of challenges. However, the pivotal of all these challenges is anchored on their inability to prepare financial reports as a result of poor records keeping, fear of exposing the business to danger if business information is made public, high cost associated with financial reporting and lack financial and accounting education. Thus, this affects the ability of SMEs in accessing financial assistance both from the government and private institutions and in most cases a major cause of business failure. The study further show that there is high level of illiteracy, in terms of basic financial records keeping and financial reporting, on the part of small business owners


  1. Regulators and monitors should ensure that there exist general accounting standards for SMEs to adopt and follow.
  2. Operators and management of SMEs should give more attention to proper financial record keeping and financial reporting procedures in SMEs. In addition, government should consider enacting a legislation that will make preparation of financial report by all registered SMEs a must.
  3. Presently, the government of Nigeria is trying very hard to promote and sustain small businesses in the country yet little is done in terms of financial management especially financial reporting practices of SMEs. It is suggested that the government through its tax authorities, in collaboration with Accountancy bodies in Nigeria for example Institute of Chartered Accountants of Nigeria (ICAN) and Association of National accountants of Nigeria (ANAN) should embark on massive financial record keeping and reporting education and training for the small business owners as well as help prepare their financial reports at minimal fee.


  • Abor, J. & N. Biekpe, N. (2006). Small Business Financing Initiatives in Ghana, Problems and Perspectives in Management, 4(3), 69-77
  • Adjei, H, Anokye, O. A. C., Mintah, E. K., & Offeh, M. C. (2014). Assessing Financial Reporting Practices among Small Scale Enterprises in Kumasi Metropolitan Assembly. European Journal of Business and Social Sciences. 2(10).
  •  Aryeetey, E., Baah-Nuakoh, A,, Duggleby, T., Hettige, H., & Steel, W. F. (1994). Supply and demand for finance of small enterprise in Ghana Discussion Paper Number 251. Washington, DC: World Bank.
  •  Boame, I., Kudadze, S. & Sulemana, I. (2014). Adoption of Accounting Practices and Its Effects on SMEs: Financial Perspective of Sachet Water Producers in Northern Region of Ghana. Research Journal of Finance and Accounting, 5(17), 166-180
  •  Cochran, A.B. (1981). Small business mortality rates: a review of the literature. Journal of Small Business Management, 19(4), 50-59.
  •  Etuk, R., Etuk, G. R., & Baghebo, M. (2014). Small and medium scale enterprises (SMEs) and Nigeria‟s economic development. Mediterranean Journal of Social Sciences, 5(7), 656-661.
  • Goltz (2011) in Boame, I., Kudadze S. & Sulemana I. (2014). Adoption of Accounting Practices and Its Effects on SMEs: Financial Perspective of Sachet Water Producers in Northern Region of Ghana. Research Journal of Finance and Accounting 5(17), 166 – 180
  • Gorton, M. (1999). Use of Financial Management Techniques in UK Based Small and medium sized enterprises: empirical research findings”, Journal of financial management & analysis, 12(1), 56-64.
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