CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF STUDY

Accounting serves as a practical technique used to streamline the operations of a business. Accounting information generated from the activities of an organization primarily reveals the financial performance and financial position periodically. This information apparently enables management to effectively plan and control activities. Every economic entity has certain objectives and the main objective of commercial entities is to make profit and increase shareholders wealth. Before attaining these objectives, a firm needs to plan and control the activities in such a way to merit the expected profitability inflow. Basu, Blavy and Yulek (2004) stated that in a contemporary economy, Micro and Small Scale Industries (MSSIs) in the industrialization process have gained much prominence in developing countries. Their prominence came into the limelight in the late 1970s and early 1980s due to the economic recession which led to the decline of industrial growth and employment in many developing countries especially in Africa. Governments of such countries adopted a new policy approach towards the Small Scale Industries (SSIs) because of their promise to adapt flexibility to the unprecedented foreign exchange constraints. They were seen as providing a viable alternative to the large scale industries which were so dependent on foreign exchange. The contribution of SME’s to the national economy is potentially very large and is seen in the contribution to the Gross Domestic Product (GDP).

According to Boachie-Mensah and Marfo-Yiadom 2005) stated that in spite of their numbers, about 60% of the SSBs fail within the first five years of operation. Most SMEs fail because of their inability access finance from most of the financial institutions since they lack proper financial records as requirement according to (William, 2008). It has been attributed that the inability of most small scale business to survive beyond the first few month of establishment and operation was due to lack adequate financing.

According to (Amoako, 2013) stated that to become successful and be able to contribute meaningfully to the economy of Nigeria, SMEs must be able to attract and secure finance by themselves.

Recent studies shows that larger firms will be able bring to themselves economic and certain sophisticated quantitative management techniques that may not practicable for small and medium scale enterprises. Small scale business may be able to maintain closer client relation and better customer relation than the bigger companies.

According to (Abdulrasheed, Khadijat and Oyebola, 2012) stated that the differences in operation techniques may influence the deficit in accounting method employed in generating financial information. Most firms can employ different principles such as different inventory techniques, depreciation method, method of accounting for income taxes and revenue recognition procedures etc.

In recent times most business unit become complex and broader on scope, accounting evolved in response to the increased planning and control responsibilities of management.

According to (Abdulrasheed, Khadijat and Oyebola, 2012) stated that as government grows in size and become more centralized in nature, accounting was developed to meet the increased accountability; business decision need to be supported by good and quality financial information which need to be relevant, user friendly and available in timely manner.

1.2 STATEMENT OF PROBLEM

The study came about due to the poor accounting method among the small scale business; poor accounting practice has limited the performance of SSBs in recent times, some the major problem faced by small business due to poor accounting or irrelevant accounting method includes their inability to access fund and other financial benefits such as loans from most of the financial institutions due to poor account records. The pivot behind the survival of small business (SSBs) is availability of capital, when most of the small business can no longer access finance then their operation becomes ineffective.

1.3 AIM AND OBJECTIVE OF STUDY

The main of the study is to examine the relevance of accounting in the growth of small scale business in Uhunmwonde. Other specific objectives of the study are stated below as follows:

1. To examine the relationship between accounting records and the growth of SMEs in Uhunmwonde
2. To examine the effect of relevance of account on the performance of SMEs in Uhunmwonde
3. To investigate on other factors affecting the growth of SMEs in Uhunmwonde, Edo State
4. To examine the role of accounting in the growth and survival of small scale business
5. To proffer solution to the above stated problems

1.4 RESEARCH QUESTIONS

The study came up with the following research questions in order to ascertain the aim and objectives of the study. The research questions are:

1. What is the relationship between accounting records and the growth of SMEs in Uhunmwonde?
2. What is the effect of relevance of account on the performance of SMEs in Uhunmwonde?
3. What are the factors affecting the growth of SMEs in Uhunmwonde, Edo State?
4. What are the roles of accounting in the growth and survival of small scale business?

1.5 RESEARCH HYPOTHESIS

H0: There is no significant relationship between accounting records and the survival of SMEs in Uhunmwonde, Edo State

H1: There is significant relationship between accounting records and the survival of SMEs in Uhunmwonde, Edo State

1.6 SIGNIFICANCE OF STUDY

The study will be of immense benefit to the small business owners in Nigeria, the state and the federal government of Nigeria, the study will also benefit the financial institutions in Uhunmwonde, Edo State and other researchers that wishes to carryout research similar to the above topic as it will discuss the relevance of account in the growth and survival of SMEs in Nigeria

1.7 SCOPE OF STUDY

The study the relevance of account in the growth and survival of SMEs in Nigeria is limited the small scale enterprises, the financial institutions in Uhunmwonde, Edo State

1.8 LIMITATION OF STUDY

Financial constraints: financial constraints tend to impede the speed of the researcher in getting all the relevant materials needed for the research work; however the researcher was able to get meaningful information from the available materials for the purpose of the research work

Time constraints: the researcher being a student will be involved in other departmental activities like attending lectures, submission of assignment and presentation of seminars; the research student however was able to meet up with the research work before the deadline of the project defense

1.9 DEFINITION OF TERMS

RELEVANCE: is simply the noun form of the adjective "relevant," which means "important to the matter at hand