Proper Bookkeeping and Basic Accounting Procedures in Small Scale Enterprises
The Objectives of the Study
The objectives of this research were to consider the following:
- To examine the importance of proper bookkeeping and basic accounting procedures in small-scale
- To determine the extent to which bookkeeping and basic accounting procedures have been implemented and applied in SSEs
Irwin; (1993) described proper bookkeeping procedure as one of the ways through which an organization can keep track of its financial activities in order to ensure proper financial discipline. There is no proper definition of small-scale enterprise; however, it may be defined as one that is independently owned and operated and it is non-dominant in its field of operation ((Meggenso et al; 1994). There are also certain peculiarities that differentiate the small-scale enterprises from other enterprises. It is independently owned and operated and does not therefore form part of any larger enterprise. It is usually managed by its owner(s) in a personalized way without the need for a formalized management structure (Broom et al; 1993).
There are a few things one needs to understand in order to make setting up your accounting system easier. They are basic and they will probably clear up any confusion you may have had in the past when talking with your Certified Public Accountant (CPA) or other technical accounting type.
History of Bookkeeping
Bookkeeping has certainly been practiced many years ago: for we read of it amongst the Ancient Romans in J. Caesar’ time; but should not be supposed, that it ever arrived to the perfection, as now it is. The Italians were the first merchants, we read of in Europe, and first invented this exact way of keeping accounts, now in use amongst all. Amsterdam has been a great nursery of this science, since it was brought there (Yamey et al; 1963). Appeals to the long history and early origins of accounting, whether as a generic activity or a specific practice such as double-entry bookkeeping, have served a number of purposes. First, they were seen by several writers of early treatises on accounting as ways of convincing their potential audience of the value and relevance of the methods that the writers wished to reveal and promote.
This study is grounded on the compliance theory of Rautiala; (2000). This theory is relevant in the context of adherence of SSEs to accounting. Raustiala grouped compliance theories into rationalist and normative models. Rationalist models focus on cooperation to prevent non-compliance. Under the rationalist model called the deterrence theory, costs open up a range of enforcement options and address the corporate non-compliance with domestic rules. Cost to the firm is relevant to the SSEs. Another rationalist model described by Raustiala; (2000) is the behavioural decision theory, which acknowledges that people act according to their rational calculation of how a particular choice is framed. The awareness of the accrual and cash bases of accounting sets the frame of choice between the two methods to be applied. On the other hand, one of the normative models called the complexity critique focuses on the capacity of the regulated firm. Complexity charges regulations as too numerous, too difficult to understand, and too fluid or ever changing. This would particularly be the case for SSEs, which generally lack the resources to stay apprised of complicated, changing regulatory requirements.
Each research problem is in some form unique and thus requires a custom-made research procedure. In this chapter, the research method that was used to collect, manage and analyze the data is presented. In other words, the chapter discusses the methodology of the study including the source of data, sample and sampling technique, data instrument, pilot testing of instrument, data distribution and collection as well as data management and analysis tool are described in this section.
To be able to accomplish the task at hand, there is the need to gather adequate and comprehensive data on Small-Scale Enterprises and National Board for Small-Scale Industries (NBSSI). This chapter seeks to explain the research instruments used in collecting data, the population of the research, sampling procedure, the type of data collected and the difficulties encountered during the survey.
The research was designed to cover the activities of two hundred (200) Small-Scale Enterprises (SSE’s) and key personnel from National Board for Small-Scale Industries were interviewed. They were; the director of research, public relation officer, the director of education, two field officers at the head office, district coordinators of Kanashie, Accra central, Madina, North Industrial Area and Tema. The survey method was used in gathering information from respondents. This included direct visits, observations, interviews and administration of questionnaires. The field data were edited, coded and punched. Frequencies, percentages and tabulations were used to score the data.
Questionnaires and personal interviews were the methods employed in gathering the field data.
A personal administration of the questionnaires was employed because of the time constraints on the part of these businessmen. As a prelude to the questionnaires personal interviews and discussions were conducted to prepare the minds of respondents and also to serve as a check on inconsistent and/or conflicting response. Personnel of NBSSI were interviewed to determine the extent to which they assist SSEs.
POPULATION AND SAMPLE SIZE
For the purpose of this study, the author was able to identify a population of three fifty (350) small-scale enterprises (SSE’s) from which two hundred (200) was selected for the research. Key personnels from NBSSI were also interviewed to determine the extent to which they help SSEs in recording their financial transaction.
DATA PRESENTATION AND ANALYSIS
This chapter seeks to analyse data collected from small-scale enterprises and National Board of Small- Scale Industries on their activities. As stated in the preceding chapter, a sample of 200 small-scale enterprises and personnel of NBSSI were interviewed. The information were analysed both qualitatively and quantitatively in this chapter. In order to get a comprehensive and orderly analysis of the data collected from the Small-Scale Enterprises (SSE’s). The following parameters were use:
CHAPTER FIVE (5)
SUMMARY OF FINDING, CONCLUSION AND RECOMMENDATIONS
SUMMARY OF FINDINGS
The contribution of the small-scale enterprises have been recognized by both governmental and non- government agencies. The research, aimed at finding out the need for proper bookkeeping and basic accounting procedures in SSEs. The research covered 200 SSEs and an interview conducted at NBSSI headquarters.
The study found out that there was lack of managerial skills especially in basic accounting principles and bookkeeping procedure among SSEs in the country.
The study shows the illiteracy rate in financial recording is generally high and NBSSI is doing every thing possible to correct this anomaly.
The study further found out that SMEs do not attach any importance to proper bookkeeping and basic accounting principles.
The study also revealed that there is an apparent non-existence of proper bookkeeping and basic accounting procedures in SMEs.
Principal among these functions were the training of business owners on various topics. But it seems their effort of educating these business owners on the need of proper bookkeeping is not enough.
Finally, SSEs do not employ account clerks not to talk of qualified accountant to prepare their financial books for the enterprise.
Conclusion drawn from the research indicated that the major problem of management of business was how to attract and maintain middle level accounting personnels to manage their accounting records and this affects the growth of enterprises and in most cases a major cause of business failure.
The research further revealed the illiteracy on the use of basic accounting and bookkeeping procedures is generally high and it therefore suggested that NBSSI and other agencies responsible for the growth of SSEs should step up their training activities especially in basic bookkeeping procedures and accounting principles.
Though, it was identified that there exist managerial problems among owners of businesses on bookkeeping in the country, the study cannot be said to be conclusive. For instance, the study could not identify the extent to which each managerial problem identified; affected the growth of the small-scale enterprises in the country.
It is hope therefore that, further research will be conduction on the topic to determine the level of accounting principles and bookkeeping needs of businesses in the country and to determine he extent of damaging effects of poor financial records in the growth of businesses.
Due to the enormous contribution of small-scale enterprises to the socio-economic up-liftment of the towns and village where they are located, and the country as a whole, much attention ought to be given to proper bookkeeping and basic accounting procedures in small-scale enterprises.
SOURCE OF EMPLOYMENT
It is an undeniable fact that SSE’s are great source of employment, and the development of local industrial entrepreneurship and should be encouraged to separate their personal finances from that of their business finances.
In appreciation of the contribution of SSEs the researcher put forward the following recommendations for the enhancement of SSE’s in the study area.
ROLE OF NBSSI
First and foremost, NBSSI, which is the major agency, established to see to the need of small scale industries must be the body around which other agencies can work to promote small-scale business.
Other institutions working in this direction may not even known each others existence in the country but the NBSSI can work to bring all such agencies together to ensure collaboration among them. This will eliminate duplication of activities or duties of these established organisations especially the NGO’s.
ROLE OF NGOs
A major finding in the research was that other institutions like NGO’s who assist SSEs rather dominate on the provision of financial and technical services ignoring the managerial needs of the SSE’s. These institutions should add to their activities the provision of managerial skills especially proper bookkeeping and accounting procedures and vigorously pursue them to enable them make productive use of resources and other forms of assistance offered.
Educational programmes, especially on the FM radio station through the Non-Formal Education Division (NFED) publication must be intensified to make business owners aware of the existence and activities of NBSSI and other assisting institutions in the country. Airtime could also be assigned to educate business owners on topics in bookkeeping and principles of accounting in managing a business.
MANAGEMENT OF SMEs
To solve the problem of management, it is been suggested that, businesses in the country should embark on serious planning on how to manage their affairs. The idea of managing businesses solely by individuals is not a good practice for effective performance. Businesses should therefore form partnership-pulling together resources and expertise. They should also employ qualified persons to help them in the management of their businesses.
FINANCIAL RECORD KEEPPING
Proper records and books of accounts are prerequisites for good performance and this should be encouraged. Thus, not only must they start keeping records of business transactions, but also they should separate the activities of their businesses from their personal activities. Indeed the culture of good business practices such as the above is crucial for effective business performance.
Before any assistance is given either by NBSSI or other organisations the SSEs should be contacted and studied properly to determine their needs.
Follow ups should also be made to beneficiary SSEs to determine the impact of such assistance and to also determine whether there is the need for further assistance.
Another way assistance to SSEs can be made beneficial to them is through the formation of co- operatives. SSEs should therefore be encouraged, especially those in the same area of business, to form co-operatives so that they can easily be accessed, assessed and assisted.
The NBSSI; the government and other assisting organisations should organize district and regional trade fairs to create a forum for local entrepreneurs to exhibit their wares. Furthermore, the NBSSI should make efforts to create awareness of the rich cultural and tourist potentials of the country through symposia and television broadcast for other equally interested persons can join the bandwagon SSEs to create the needed jobs for the youth.
The entrepreneurs themselves should embark on serious quality control exercise to help them outwit competitors and also to improve their sales as well. The government on his part should improve the poor infrastructural state especially the road network in the country to further ease the problems of distributions and marketing.
NBSSI should follow up on enterprises trained in basic bookkeeping and accounting to ensure that the SSEs follow what they were taught.
Further, NBSSI as a matter of urgency source finance from NGOs and other agencies to help SMEs prepare their financial records so that they can meet the demands of their financial institutions.
NSSBI should ensure strict adherence to these procedures in order to qualify these SSEs for further training programmes/assistance being offered.
Finally, since most policies are intended to boost large-scale firms, they invariable affect the growth and development of SSE’s negatively. Policy-makers must be conscious of such consequences on SSE’s when formulating such policies.
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