Accounting Project Topics

The Effect of Accounting Techniques on Small Business Performances

The Effect of Accounting Techniques on Small Business Performances


 There have been the recent calls for additional research in order to enhance the understanding of the adoption of accounting techniques (ATs) in small and medium sized enterprises (SMEs). This, allied to an increasing importance of SMEs around the world especially in developing countries, is the motivation for this research. This research explores the uptake of a broad range of ATs in Nigerian SMEs; identifies the roles of ATs in the management of SMEs; determines factors that affect the extent of use of ATs in SMEs and lastly examines the relationship between the use of ATs and organizational performance of SMEs. A postal questionnaire was conducted to 1,000 Nigerian SMEs in manufacturing sector which elicited 160 useable responses.

The results show that the majority of respondents have used the five accounting areas identified. Use of the costing system, budgeting system and performance evaluation system are significantly higher than for the decision support system and strategic accounting, which indicates that the uptake of traditional ATs is greater than for sophisticated ATs. The results indicate that medium sized firms make greater use of all ATs as opposed to small sized enterprises. The most significant differences relate to the use of decision support system and strategic accounting. The increased uptake of sophisticated ATs by larger firms is in line with size being a contingent variable explaining the use of such practices.

This study enriches the existing body of knowledge of accounting by providing information as to the use of ATs in SMEs in Nigeria. The findings can be specifically informative for policy makers intent on developing accounting skills among Nigerian SMEs. This research will provide valuable insights into the nature of ATs in SMEs in a developing country and will promote interest among Nigerian researchers as well as researchers of other countries to make the SME sector a focus of interest in accounting research.


Based on the issues and problems discussed above, this study identifies four main objectives

  1. To investigate the extent to which ATs are employed by Nigerian SMEs.
  2. To identify the roles played by ATs in Nigerian SMEs ‘management.
  3. To determine the factors that affect the extent of use of ATs among Nigerian SMEs.
  4. To seek to demonstrate a positive relationship between AT use and the performance of SMEs.

1.4 Research questions

These objectives can be expressed in the following research questions:

  1. What is the extent of the use of ATs by Nigerian SMEs?
  2. What are the roles of accounting in Nigerian SMEs ‘management?
  3. What factors affect the extent of the use of ATs by Nigerian SMEs?
  4. Is there a positive relationship between the use of ATs and the performance of Nigerian SMEs?


Accounting was first known as cost accounting. This origin was reflected in the earlier title for practitioners of cost or works accountants (Wilson and Chua, 1988). Accounting historians have long endorsed the view that cost accounting is a product of the industrial revolution (Johnson, 1981). For example (Wilson and Chua, 1993) claimed that cost accounting was practiced by the mechanized, multi process, cotton textile factories that appeared in England and United States around 1800. This point of view was consistent with Garner (1947) who pointed out that cost accounting had emerged only after eighteenth century as a result of the rise of the factory system in the industrial revolution. The traditional view contends that cost accounting arose due to the increased use of fixed capital prompted accountants during the industrial revolution to graft cost accounting onto the double-entry system (Johnson, 1981)


According to Hair et al. (2007) representative samples are generally obtained by following a set of well-defined procedures, which are: defining the target population; selecting a sampling method; and determining a sample size. Therefore as been recommended by Hair et al. (2007), this section will briefly explain the study‘s approach to these three main procedures for selecting the representative sample.


Profile information relating to the respondents was collected in section 1 of the questionnaire. Four questions were asked and covered the number of years that the business had been in operation, the type of manufacturing activities; the number of employees; and annual sales turnover. This information is helpful for understanding the background of respondents and also for providing data for further statistical analysis.

Table 6.5 presents the information for the 160 responding firms.

Years of operations/business
1-3 years 2 1
4-10 years 17 11
More than 10 years 141 88
Total 160 100
Manufacturing activities
Furniture 3 2
Food and beverages 26 17
Non-metallic products 5 3
Basic metals 15 10
Rubber and plastic 16 10
Chemicals & chemical products 30 19



The importance of small and medium-sized enterprises for the Nigerian economy is undeniable. As discussed in chapter 3, SMEs in Nigeria play a crucial role by providing employment opportunities and boosting the growth of the economy. The SME sector has also proved valuable in helping Nigeria to achieve sustainable economic growth as the sector has been resilient to the adverse impact of global economic challenges that impact on the Nigerian economy. Among the different sectors in which SMEs operate, the manufacturing sector is most significant in terms of the contribution to GDP and exports from Nigeria, whereas the service and agriculture sectors contribute most in terms of employment. On balance it is reasonable to claim that the manufacturing sector is the most important SME sector in Nigeria and to make it the focus of the research.


Abdel-Kader, M. and Luther, R. (2006). Accounting techniques in the British food and drinks industry. British Food Journal, vol. 108, no.5, pp. 336-357.

Abdel-Kader, M. and Luther, R. (2008). The impact of firm characteristics on accounting techniques: A UK-based empirical analysis. The British Accounting Review, vol. 40, pp. 2-27.

Abdel-Maksoud, A. (2004). Manufacturing in the UK: contemporary characteristics and performance indicators. Journal of Manufacturing Technology Management, vol. 15, no. 2, pp. 155-171.

Abdel-Maksoud, A., Dugdale, D. and Luther, R. (2005). Non-financial performance measurement in manufacturing companies. The British Accounting Review, vol. 37, pp. 261-297.