Accounting Project Topics

The Impact of Accounting Systems for Improving the Performance of Private Businesses in Imo State

The Impact of Accounting Systems for Improving the Performance of Private Businesses in Imo State

The Impact of Accounting Systems for Improving the Performance of Private Businesses in Imo State


Research objectives

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

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



History and development of accounting

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 impact of fixed capital prompted accountants during the industrial revolution to graft cost accounting onto the double-entry system (Johnson, 1981). This widely held belief however was rejected by Johnson (1981) who argued that changes in the way textile mills and giant manufacturing firms organized economic activity, not just changes in the temporal structure of their costs, prompted the industrial organizations to develop internal cost accounting procedures. Cost accounting is defined as the equivalent of ‗direct costing‘designed to provide financial information for management decision-making and control (Johnson, 1981). Garner (1947) argued that the practices and theories of cost accounting origins can be traced to the fourteenth century. During this period there was a rapid growth of Italian, English, Flemish, and GeNan commerce, and various industrial enterprises were engaged in the manufacture of woollen cloth, books, coins, and other products (Garner, 1947). Cost accounting at this time was concerned with those specialized aspects of general accounting which have to do with recording and analysis of factory expenditure (Garner, 1947).

The first evidence of cost accounting found was ―job order‖ costing of the carding of wool in Italy (Abs et al., 1954). Parker (1969) also cites the accounts of Francesco di Marco Datini, merchant of Prato, who in 1390 kept double entry; records which show evidence of job cost accounting, accrual accounting and depreciation. In 1531, another example of cost accounting appeared in the accounts of Raffello di Francesco de ‘Medici, cloth manufacturers of Florence (Parker, 1969).

Additionally in the middle and later parts of the twentieth century, the growth of service industries like financial institutions and an expansion in the number of government, and quasi government organisations further supported the development of accounting (Wilson and Chua, 1988). The traditional cost concepts and costing techniques that were appropriate for a manufacturing process had to be modified to cater for a variety of organizations. With these changes in focus, the teN cost‘accounting no longer adequately described the accounting function within an organization. Hence, the terms of management ‘or managerial ‘accounting was gradually adopted.

The first known textbook in accounting emerged in 1950, written by Vatter, and titled Managerial Accounting (Kelly and Pratt, 1994). Vatter argued that accounting has the purpose of supporting managers, not of reporting to owners (Kelly and Pratt, 1994).

The changes from cost accounting to accounting was also manifested when The Institute of Cost and Works Accountants changed the name of its journal from Cost Accounting to Accounting in 1965 and its own name to the Institute of Cost and Accounting in 1972. In 1986 it received its royal charter and became The Chartered Institute of Management Accountants (CIMA) (Allot, 2000). In the United States the National Association of Cost Accountants changed its name to the National Association of Accountants in 1958 (Scapens, 1991, p.

9). This organization became the Institute of Management Accountants (IMA) in 1991.

Overall it can be seen that after nineteenth century the focus changed from cost accounting to an emphasis on the provision of information that was appropriate to the needs of managers.

Definition of accounting

Scapens (1991) stated that there is no generally agreed definition of accounting. Various definition are available; but some are too general to provide a suitable structure, while others simply emphasis a particular research approach (Scapens, 1991). The evolution of accounting will now be explored in terms of the changing definitions from three major accounting bodies: The Institute of Management Accountants (IMA); the Chartered Institute of Accounting (CIMA); and the International Federation of Accountants (IFAC).

Institute of Management Accountant (IMA)

The Institute of Management Accountants (IMA) has provided definitions of accounting that reflect changing demands by businesses for accounting information. The initial definition of accounting by IMA (IMA, 1981, p.




Research design

A research design provides the basic directions for carrying out the project. In particular, a research design should provide relevant information that will most efficiently and effectively address the research questions or hypotheses (Hair et al., 2007). Hair suggested that there are three distinct research designs: exploratory; descriptive; and causal. Of these three, descriptive and causal research designs match the need to provide the relevant information for the above research questions and hypotheses. Descriptive data are needed to answer the first two research questions concerning the extent of the impact of accounting systems in Private Businesses in Imo state and the roles fulfilled by accounting systems in the management of Private Businesses. Descriptive data will also provide information on contingent factors that affect the extent of the impact of accounting systems and the relationship between the extent of impact of accounting systems and firm performance for the causal research stage.

Target population

The research questions in this study concern the impact of accounting systems among Private Businesses in Imo state, it research focuses on Private Businesses in Port Harcourt, Rivers state. The research concentrates only on manufacturing sector in order to avoid irrelevant distractions arising from variations between sectors. As discussed in Chapter 3 section 3.5.6, the Businesses sector in Nigeria is responsible for an increase in Nigerian exports, contributes substantially to the economy in terms of employment and has been a key factor in sustained rapid economic growth. In recognition of this contribution, the Nigerian government is aggressively supporting this sector in various ways such as offering finance and business advice to boost its performance. Besides its importance to the Nigerian economy, this sector is suitable for research into Accounting systems as manufacturing SMEs have a higher proportion of medium sized firms who are most likely to use Accounting systems.

The target population can be divided into three possible sampling units. This is based on the three different sizes of enterprises that comprise Private Businesses in Imo state (micro, small and medium). The definition of these enterprises has been described earlier in Chapter 3. In deciding whether or not to include all SMEs in the sector as sampling units, the matter of suitability will be the root of selection. Accounting is only likely to be found in larger enterprises and therefore it was decided to exclude micro-sized firms as they have either a turnover of less than N 250,000 or fewer than five employees and are therefore likely to be too small to have management systems that rely on Accounting systems. For example, Hoque (2004) argued that a very small enterprise is less likely to have a real need for complex management systems, and Nayak and Greenfield (1994) stated that companies in the micro category will almost certainly have no qualified internal accounting capability and will also lack the resources to employ these systems. The research therefore will only focus on the small and medium enterprises within the Nigerian Private Business definition.



Accounting systems in Private Businesses in Imo state: Descriptive results

Profile of respondents

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 turn



The research problems and conclusions

The importance of small and medium-sized enterprises for the Nigerian economy is undeniable. As discussed in chapter 3, Private Businesses 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.

A major contributor to the success of Private Businesses has been support from the Nigerian government to this sector. Given the various potential advantages from a thriving SMEs sector, the Nigerian government/policy makers have enacted various policies and interventions to promote SME development and to ensure the sector‘s sustainability and survival. Financial assistance as well as training in technical aspects of business, marketing and management skills is among the support from the government for this sector. These policies and support have successfully stimulated the growth of this sector. Despite the increasing interest in the SME sector, there is a dearth of academic research into Private Businesses in Imo state including their impact of accounting systems.

Research has shown that Accounting systems have a role in ensuring that the management of a firm is efficient and effective and may also improve performance. Accounting systems also peNit firms to compete in the market place and reduce the likelihood of business failure. Given these advantages from AT use, it is important to promote knowledge and awareness of accounting systems among small business in Nigeria so that firms may benefit from the advantages that have been highlighted above. FurtheNore, in a Nigerian context, this lack of research into Accounting systems and SMEs may result in a failure by government to appreciate the importance of accounting systems for SMEs. For example, knowledge of accounting systems is not included in management skills training for entrepreneurs provided by the government. This research may ensure that policy makers are better infoNed. Therefore the thesis addressed this literature gap by investigating four research questions:

What is the extent of the impact of accounting systems by Private Businesses in Imo state?

  1. What are the roles of accounting in Private Businesses‘ management?
  2. What factors affect the extent of the impact of accounting systems by SMEs?
  3. Is there a positive relationship between the impact of accounting systems and the performance of the business?

Research questions 3 and 4 were expressed in terms of the following two general hypotheses for empirical testing:

H1: There are significant and positive relationships between selected contingent factors and the impact of accounting systems.

H2: There is a significant and positive relationship between the impact of accounting systems and organizational performance.  

The four research questions were answered through evidence obtained from a survey of 1,000 Private Businesses in Imo state, which elicited 160 useable responses. Three main type of analyses; descriptive; bivariate and multivariate were undertaken to help answering the above research questions. The main conclusions for each research question are as follows:

Implications and recommendation

This research concerns the impact of accounting systems by SMEs. Although there is a body of literature examining the impact of accounting systems, the focus has been on larger firms and no previous research has exclusively addressed the impact of accounting systems in Private Businesses particularly in a developing country. This research therefore makes its own specific contribution by providing knowledge of accounting systems in Private Businesses in a developing country. The research is distinct not only because it documents the uptake of accounting systems among SMEs; but also because it addresses the roles of accounting systems in the management of Private Businesses; investigates factors affecting the impact of accounting systems, and examines the impact of accounting systems on the performance of firms in Private Business sector. 

By filling this research gap, this study has sought to advance understanding of recent developments of accounting systems in Private Businesses particularly in a developing country context by adding new empirical evidence to the body of knowledge on the impact of accounting systems as well as responding to calls for research into Accounting systems in small business (see Mitchell et al., 1998; Mitchell and Reid, 2000; and Nimtrakoon, 2009).

This research considers a broad range of accounting systems instead of focusing on a single AT or a limited set of accounting systems. The information will increase an understanding on how far small businesses have taken advantages of the available Accounting systems and whether they have adopted newly developed techniques to some extent.

Using the notion of contingency theory as a foundation, this research has also advanced the current state of knowledge by shedding light on factors influencing the impact of accounting systems in small businesses in a developing country. The findings indicate that Accounting systems can be influenced by external environment as well as by factors within the organization. As such this research has responded to the recent calls for additional contingency based research in accounting in order to enhance understanding of potential contingency factors which explain the impact of accounting systems (Chenhall and Langfield-Smith, 1998; and El-Ebaishi et al., 2003). It extends the body of knowledge that use contingency theory to explore the significance of contingency variables in small businesses.

Further this research has made at contribution by exploring the roles of accounting systems in the management of Private Businesses and examining for a possible association between the some impact of accounting systems and improved firm performance. As such this research has highlighted the importance of accounting in the management as well as the relationship of their use to organisational performance. Consequently this research has extended the findings of Chenhall and Langfield-Smith (1998) and El-Ebaishi et al. (2003) among others.

This research has increased knowledge of accounting systems in a SMEs context. Nigeria as a developing country has strived to move to parity with more developed economies, and find the research useful to provide relevant knowledge that can support efforts to enhance the performance of Private Businesses in Imo state. The findings will be informative for policy makers intent on developing accounting skills among Private Businesses in Imo state. In specific it is hoped that the Nigerian government will enhance the existing training programmes to the Nigerian entrepreneurs or young graduates by subsidising the training in the impact of accounting systems so that the SMEs. The training should bring more awareness to the impact of accounting systems particularly to the impact of  more modern Accounting systems. More broadly this research will promote interest among Nigerian researchers as well as researchers of other countries to take the SMEs sector as a focus of interest for their research. This study can be also a starting point for further investigations and analysis of accounting systems among SMEs in Nigeria.

The study suggests that there is ample room to increase both awareness of and understanding of the importance of accounting systems within smaller firms since these practices are vital ingredients in the success of any organizations. The results indicated that traditional and financially oriented Accounting systems have high level of usage but the adoption of newly-developed Accounting systems remains patchy. Perhaps Nigerian policy makers could provide training in these techniques for entrepreneurs or future graduates in Nigeria.

In conclusion, the work presents a comprehensive survey and explanations of the impact of accounting systems in Private Businesses and therefore makes a contribution to the awareness of accounting in small firms particularly in a developing economy.

 Recommendations for future research

The results of this research raise several issues that warrant future research.

First, the sample of small firms should be extended to achieve a valid set of responses. This would enable differences based upon size to be clearly identified and highlight the effect of contingent factors in different contexts. However, this may prove difficult as there must be the possibility that small firms without Accounting systems will be much less likely to complete the questionnaire and thus bias the responses.

Second, in the context of contingency theory it might be advantageous to focus on a sample from one particular industry such as electric and electronics or food and beverages in the manufacturing sector. This would mean that the sample would be more homogeneous and might be expected to use certain types of accounting systems or certain techniques. This might make the contingent factors explaining differences more distinct. Alternatively a case study approach might be employed to highlight differences and reasons for them in a more detailed context so that how and why practices and techniques are applied or not applied would be identifiable.

Third the nature of the dependence between traditional and recently-developed Accounting systems needs further investigation. The lower impact of sophisticated Accounting systems raises the question of the conditions necessary to effectively implement these techniques within smaller firms. Again a qualitative case study approach would be likely to provide additional insights beyond those that can be gleaned from a questionnaire survey approach.

Fourth, the next few years are likely to see increased global competitiveness in the Nigerian industrial markets; therefore it would be interesting to expand the survey to provide a longitudinal study of accounting change by documenting changes over time in the adoption of specific accounting systems in a more detailed way.

Lastly, research in this area can be developed by conducting a comparative study of the Nigerian situation on adoption of accounting systems against that in other developing countries in order to explore differences in terms of cultural and other contingent factors.


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  •  Abdel-Maksoud, A., Asada, T. and Nakagawa, M. (2008). Performance measures, managerial practices and manufacturing technologies in Japanese manufacturing firms: state-of-the-art.  International Journal Business Performance Management, vol. 10, no. 1.
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