The Importance of Financial Accounting Literacy on the Growth, Development, Survival, Productivity, and Performance of SMEs in Kwara State
Objectives of the Study
The main objective of this study will be to determine the importance of financial accounting literacy on the growth, development, survival, productivity, and performance of SMEs in Kwara state.
The specific objectives are to:
- determine the impact of financial accounting literacy on the growth of small and medium-scale enterprises.
- determine the impact of financial accounting literacy on the survival of small and medium-scale enterprises.
Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.
Precisely, the chapter will be considered in two sub-headings:
- Conceptual Framework
- Theoretical Framework
- Chapter Summary
Financial Accounting of Nigerian Companies are regulated by the requirements of the Nigerian Accounting Standards Board (NASB) through its pronouncement referred to as Statement of Accounting Standards (SAS). Although originally fashioned after the standards promulgated by the International Accounting Standard Board, the similarities between both sets of standards have dwindled with time and machineries are presently put in place to full align the local standards with the international ones. The disclosure requirements of these standards (SAS and IAS) define the way accounting information was presented in financial statements. The conceptual framework can be divided into two parts. The first part examines the concept and usefulness of Financial Accounting Information System in organization. The second part examines the value relevance of Financial Accounting Information in assisting investors’ investment decisions. Hence accounting information system could be described as systems used for record the financial transactions of a business or organization. These system combine the methodologies, controls and accounting techniques with the technology of the industry to track transactions provide internal reporting data, external reporting data, financial statements, and trend analysis capable of affecting organizational performance (Grande, Estebanez and Colomina, 2010).
THE FINANCIAL ACCOUNTING SYSEM
The financial accounting system is one that is well designed to facilitate the smooth, efficient and uninterrupted flow of data from the point where a transaction occurs through the various stages of data processing to the final stage, thereby culminating in a report. A financial accounting system is made up of three distinct stages which are:
- Data recording.
- Information summarization and interpretation.
- Information reporting
FINANCIAL ACCOUNTING RECORDS
The starting point for the financial accounting is the recording and analysis of transactions. A definite step is followed in the traditional accounting approach, the steps in the processing and generating of output of the accounting system are:
- Identification and analysis of relevant transitions in the journal.
- Making entries of the transactions in the journal.
- Posting from the journal to the ledger.
- Preparation of trial balance.
- Determining and recording of the adjusted entries in the journal the ledger. vi. Preparation of the adjusted trial balance.
- Preparation of the final accounts and statement which are the profit and loss account and the balance sheet.
It must be noted that in the emerging business environment where e-commerce is the procedure of doing business, the majority of business are conducted electronically. Whereby transactions happen paperless, it is worthy of note that the steps may not followed sequentially but in essence. They very need for all the step is satisfied in the electronic system. But because accounting focuses on the transactions and the financial information content rather than the steps taken to actualize or document it, accountants have adapted themselves to the current e-commerce business environment and the product which is d a financial report is still the same.
AREA OF STUDY
Kwara is a state in Western Nigeria. Its capital is Ilorin. Kwara is located within the North Central geopolitical zone. The primary ethnic group is Yoruba, with significant Fulani, Nupe, and Bariba minorities.
Research designs are perceived to be an overall strategy adopted by the researcher whereby different components of the study are integrated in a logical manner to effectively address a research problem. In this study, the researcher employed the survey research design. This is due to the nature of the study whereby the opinion and views of people are sampled.
POPULATION OF THE STUDY
According to Udoyen (2019), a study population is a group of elements or individuals as the case may be, who share similar characteristics. These similar features can include location, gender, age, sex or specific interest. The emphasis on study population is that it constitute of individuals or elements that are homogeneous in description.
This study was carried out on the importance of financial accounting literacy on the growth, development, survival, productivity and performance of SMES In Kwara State. The population size is the entire SMEs in Illorin Kwara State.
DATA PRESENTATION AND ANALYSIS
This chapter presents the analysis of data derived through the questionnaire and key informant interview administered on the respondents in the study area. The analysis and interpretation were derived from the findings of the study. The data analysis depicts the simple frequency and percentage of the respondents as well as interpretation of the information gathered. A total of one hundred and seventy five (175) questionnaires were administered to respondents of which one hundred and fifty (150) were returned and all were validated. For this study a total of 150 was validated for the analysis.
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS:
This chapter summarizes the findings on the importance of financial accounting literacy on the growth, development, survival, productivity and performance of SMES In Kwara State. The chapter consists of summary of the study, conclusions, and recommendations.
Summary of the Study
In this study, our focus was on the importance of financial accounting literacy on the growth, development, survival, productivity and performance of SMES In Kwara State. The study specifically was aimed at determining the impact of financial accounting literacy on the growth of small and medium scale enterprises and determining the impact of financial accounting literacy on the survival of small and medium scale enterprises.
The study adopted the survey research design and randomly enrolled participants in the study. A total of 150 responses were validated from the enrolled participants where all respondent are owners/managers of selected SMEs in Illorin Kwara State.
Based on the findings of this study, the researcher made the following conclusion.
- Effective resources management, effective financial planning, effective financial decision making are among others the impact of financial accounting literacy on the growth of small and medium scale enterprises.
- The impact of financial accounting literacy on the survival of small and medium scale enterprises include; it aids financial risk assessment, it aids debt management, it aids effective financial planning and it aids effective financial decision making.
- There is a significant relationship between financial accounting literacy and the growth of SMEs in Kwara state.
- There is a significant relationship between financial accounting literacy and the survival of SMEs in Kwara state.
Based on the findings and conclusion the researcher recommended branded and SME-targeted financial literacy programmes and schemes, instilling sound financial knowledge and positive financial attitude and behaviour, with emphasis on new technologies with a view to sustaining the sector financially and technically. Also financial institutions should penetrate rural areas by developing personalized banking relationships and opening of more SME oriented micro credit windows, as there exist many unbaked SMEs. Such penetration should be coupled or preceded with rolling off financial literacy training programmes to boost and instill confidence and better usage of the services.
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