Accounting Project Topics

The Adoption Level of Modern Management Accounting Techniques by Small and Medium Scale Enterprises (SMEs)

The Adoption Level of Modern Management Accounting Techniques by Small and Medium Scale Enterprises (SMEs)

The Adoption Level of Modern Management Accounting Techniques by Small and Medium Scale Enterprises (SMEs)

Chapter One

Objectives of the study

The general objective of this study was to evaluate the management accounting practices (MAPs) of SMEs in Ilorin Metropolis, Kwara State. The specific objectives were as follows:

  1. examine the nature of MAPs by selected SMEs in Ilorin Metropolis.
  2. evaluate the factors that affects the extent of the use of MAPs among selected SMEs in Ilorin metropolis, Kwara
  3. assess the relationship between use of MAPs and the organizational performance of SMEs.




The literature review is sub-divided into the following sections: conceptual framework, theoretical framework and empirical evidences.


Definitions of SMEs

At present, there is no consensus international definition of what constitutes an SME. Variations exist between countries and industries. SMEs are defined by a number of criteria such as location, size, age, structure, organization, number of employees, sales volume, net worth, ownership structure, innovation and technology (Deros, Yusof, & Salled, 2006). SME Sector was also defined in terms of number of employees as cited by Yahaya, Osemene and Salman, (2011) as:

Types of Enterprise Size of Employees

Micro 1 – 9

Small 10 – 49

Medium 50 –249.

By definition in Nigeria, Small and Medium Industries Equity Investment Scheme (SMIEIS), defined SMEs as those enterprises with a total capital employed not less than N1.5million, but not exceeding N200million, including working capital, but exceeding cost of land and/or with a staff strength of not less than 10 and not more than 300. This definition

has included many small firms under the bin shade of SMEs. The nature of business transactions in most of these firms does not provide opportunities for outsiders to have clear knowledge of the goings on in these small firms. This is what is prominently referred to as information asymmetries. It is because of this that assessment of the viability of projects in small firms demand processes more reliable than mere feasibility reports. The methods in use so far rely heavily on accounting information thus revealing to the accountants the task ahead to serve the accounting need of the SMEs today.

Definition of Management Accounting

Scapens (1991) stated that there is no generally agreed definition of management accounting. Various definition are available; but some are too general to provide a suitable structure, while others simply emphasis a particular research approach.

The Institute of Management Accountants (IMA) has defined management accounting as “a profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy” (IMA, 2008). On the other hand, the Chartered Institute of Management Accounting [CIMA] (1987), defined management accounting as the provision of information required by management for such purposes as: the formulation of policies; planning and controlling activities of the enterprise; decision taking on alternative courses of action; disclosure to those external to the entity (shareholders and others); disclosure to employees; and safeguarding assets.

Financial Management and Management Accounting Committee (FMAC) of the International Federation of Accountants (IFAC) viewed management accounting as an activity that is interwoven in the management processes of all organizations. Management accounting refers to that part of the management process which is focused on adding value to organizations by attaining the effective use of resources by people, in dynamic and competitive contexts (IFAC, 1998).





This chapter involves the methods the researcher used in conducting the research work. It covers areas like research design, population of study, methods of sampling, methods of data collection, and methods of data analysis.

Research Design

A survey research design was used for this research study because it was considered most appropriate in social science to investigate behavioural phenomenon among people and it was also considered necessary since the topic requires looking at various Management Accounting Practices (MAPs) used by SMEs.

Population for the study

The target population used for this research was the list of SMEs compiled by the National Bureau of Statistics of which 50 SMEs are in the manufacturing category, 2 SMEs are in the mining category and 34 SMEs are in the wholesale and retail category within Ilorin metropolis, Kwara State. This makes a total of 86 SMEs.




This chapter present all necessary tables, data and analysis in relation to response of respondents, which was gathered from the questionnaire. Also the major task was carried out in testing of hypotheses stated earlier in chapter one and interpretations or results.

In preparation and analysis of data, descriptive statistics was used in form of simple percentage method to present data gathered and inferential statistics in form of Karl Pearson correlation and regression statistics technique was also used to for presentation in this chapter vis: analysis of response, analysis of respondents bio data, significance relationship between size of SMEs and Management Accounting Practice in place, significant relationship between technology and the use of MAPs, significant relationship between the existence of qualified internal accountant and the use of MAPs, significance relationship between owner/manager participation and the use of MAPs and the relationship between the use of MAPs and organizational performance.




This chapter focuses on the summary of the research findings, conclusion was drawn from the study and recommendations also were made based on the findings. Suggestions were made for further area of studies and the limitations of the studies.

Summary of findings

The primary focus of this research paper was to evaluate the management accounting practices in three sectors of SMEs within Ilorin metropolis, Kwara State. The study begins with a general overview of the SMEs and operational definitions of SMEs. A brief and exploratory literature review on management accounting techniques and the domain of operations was conducted. The review unearths various parameters to be considered as factors which affect the extent of use of management accounting techniques (such as size, technology, qualified internal accountant and owner/manager participation), the viability and application of the techniques within SMEs sectors considered.

Following an assessment through the study it was confer that the use of management accounting practices is still low in use and undocumented in SMEs in Ilorin metropolis, yet this SMEs are the social and economic drivers of the target economies.

This research was able to answer the questions raised in research question and fill the gap which necessitated this findings. On the nature of MAPs use by SMEs in Ilorin metropolis, it was discovered that most of the firms still use traditional method of accounting practices more such as budgeting and costing practices, it was also found that the firm in Ilorin metropolis had shifted a bit to the second stage of evolution which is characterized by provision of information for management decision making, planning and control through the use of technologies such as decision analysis and accounting responsibility e.g standard costing, CVP and break even analysis, as some of the tools are moderately use. This is in line with Adelegan, (2001) discovery.

On the factor that determine the extent of use of MAPs by firms of SMEs, five variables was tested and it was found that three of them (size, qualified internal accountant, and owner / manager participation of the firm) gave the same direction to the type of management accounting practices that will be put in place by firms of SMEs, i.e they all show that there is a no significance relationship between it and the MAPs use. Also all the management accounting practices used showed that no relationship existed individually to the factor that determine the extent of use of MAPs. But surprisingly, technology show relationship between it and the use of MAP, i.e it does have influence in determine the type of MAPs that may be employed. Furthermore, the MAPs was tested on the performance of the firm and it showed that same relationship existed between them i.e the type of MAPs identified have influence or determine the level of performance in an organization.

Research question three was also answered as the MAPs (budgeting, costing, decision making, Financial and non-financial performance practices) all show strong positive significance relationship with the performance of the firm. i.e the types of MPs do determine the performance of the firm.


The primary focus of this research paper was to evaluate the management accounting practices in three sectors of the SMEs within Ilorin Metropolis. Sample of small sized firms may not be representative of the total sample and therefore it is possible that the position is unrepresentative. The obvious concern is that responses from small sized firms are biased towards respondents who use MAPs.

The research therefore showed that the size of the firm do not depend on the nature of management accounting practices that will be implemented, this mean that irrespective pf the size of the firm, the MAPs use never changes. Also the extent of qualified internal accountant have no influence on the MAPs despite the fact that 45.3% are B.Sc/HND in Accounting/Finance holder as reported from the survey. Decision making practices was also use but not in totality. It was established that technology do have great impact on the use of MAPs and MAPs itself do have very strong positive relationship with overall performance of an organization.

Suggestions for further research

There is a need for further research to be done in investigating the practice and evaluation of management accounting practices in Ilorin metropolis, Kwara State. In order to improve the future study, the sample size could collected randomly and further extend research to other sectors of the SMEs across the metropolis. The researcher believes that extensive study with larger and more representative sample is important to give a more generalized picture of the work activities performed by the management accountants and the management accounting practices and evaluation within Ilorin metropolis. Therefore, the new findings could provide some insight in establishing the direction of management accounting practices.

Besides, future research is also required to examine the extent of usage of the advanced management accounting techniques, and the implications of those techniques being practiced by SMEs throughout the state. The benefits of applying the advanced management accounting techniques and the evaluation of management accounting application need to be more precisely documented to ensure that firms within Ilorin metropolis can benefit from the research findings.

Furthermore, it is suggested that future research investigates the reason why some business organizations fail to implement the least or the advanced management accounting practices in its organizations. The findings can be used to further enhance the application of management accounting practices that can improve the management accounting practice.

Limitation of the study

This research is limited as a result of finances and time constraint for the submission of this project. Also, it was only limited to three sectors of the SMEs, in future more sectors may be included.


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