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THE RELEVANCE OF ACCOUNTS DEPARTMENT IN A SMALL AND MEDIUM BUSINESS ENTERPRISE (A CASE STUDY OF SOME SELECTED SMES IN ETSAKO WEST LOCAL GOVERNMENT AREA)
This study is to examine the relevance of accounts department in a small and medium business enterprise (Using some selected SME’s in Etsako West Local Government Area as a case study). In this study, the extent to which the presence of the accounts department is being felt in an organization and the significant role between the accounts department and the management of the organization was looked at. The research also examines the relationship between the accounts department and the various departments of the organization and how their activities are co-ordinated to achieve the overall objective of the organization. The study also seeks to find out the problems encountered by the accounts department in the course of carrying out their operations and how it can be resolved. Relevant journals, textbooks and related work on the relevance of accounts department in small and medium scale business enterprises written by different authors were consulted. The stratified random sampling technique was used and questionnaires and personal interview were the research tools used in collection of vital information and the method of data analysis adopted was the chi-square method of data analysis. Some of the result from the research was that the accounting personnel are honest in terms of keeping the books of accounts of the organization, the accounts department does not fulfill its obligation of preparing and publishing regular information to third parties, the accounts department assist the organization in carrying out research and development for new improved methods etc. The following recommendations were also arrived at; regular accounting information should be published and made available to third parties, incentive measures be put in place to compensate workers so as to reduce the issue of fraud in the organization, there should be a good working relationship between the accountant and the management of the organization etc.
TABLE OF CONTENTS
Title Page i
Chapter One: Introduction
1.1 Background to the study 1
1.2 Statement of problem 2
1.3 Research questions 3
1.4 Objectives of the study 4
1.5 Research hypothesis 5
1.6 Significance of the study 5
1.7 Scope of the study 7
1.8 Limitation of the study 8
1.9 Definition of terms 8
Chapter Two: Review of Related Literature
2.1 The Contributions of the Accounts Department in the Profit Planning of an Organization 11
2.2 The Accounting System 12
2.3 Fundamental Accounting Concepts and Conventions 15
2.4 Financial Planning 19
2.5 Cash Management 20
2.6 Material Control/Management 21
2.7 General Nature of Accounts Department 23
2.8 Types of Accounting Records/Books and their
2.9 Bank Reconciliation Statement 29
2.10 The Role of Accounts Department n an Organization 30
Chapter Three: Research Method and Design
3.1 Introduction 31
3.2 Research Design 31
3.3 Description of Population of the Study 32
3.4 Sample Size 32
3.5 Sampling Techniques 33
3.6 Sources of Data Collection 33
3.7 Method of Data Presentation 34
3.8 Methods of Data Analysis 35
Chapter Four: Data Presentation, Analysis and Interpretation
4.1 Introduction 37
4.2 Presentation of Data 37
4.3 Data Analysis 38
4.4 Hypothesis Testing 45
Chapter Five: Summary of Findings, Conclusion and Recommendations
5.1 Introduction 52
5.2 Summary of Findings 52
5.3 Conclusion 54
5.4 Recommendations 55
Appendix I 60
Appendix II 61
1.1 Background to the Study
The word “Account” as defined in Oxford Advanced Dictionary is a written record of money that is owned to a business and of money that has been paid by it.
An account department is one of the different divisions into which organizations activities are assigned for effective performance so as to achieve desired objectives.
The accountants and the accounting clerks are the account personnel that make up the account department. In most organizations, it has been observed that more often than not, the account department is not appreciated. The researcher have observed that in the past, companies without reliable accounts department always fold up because they cannot ascertain their revenue and expenditure. The situation is the same whether the business organization is small or often associated with organizations without efficient accounts department.
For an organization to be financially operative, all other departments of the organization must be accountable to the accounting department of the organization so as to achieve financial prudency.
1.2 Statement of Problem
Over the years, there has been the problem of ascertaining the importance of accounts department in any organization. The lack of capable and honest accounting personnel has a negative effect to the proper account of an organization. Hence, this research is in view of finding the important role of the accounts department in an organization.
Moreso, suggesting some remedies on the incompetency on the part of the personnel in the collection of information and preparation of the financial statements to the various shareholders or general public to use or work with. Meanwhile, there are numerous problem which will be looked into; this include among others the ineptitude (lack of required and necessary skills) on the part of the accounting clerk who is appointed to keep records of various expenses and receipt incurred by the organization, but due to the boring nature of the work, he/she tend to post erroneously thereby creating an avenue for overcastting or undercasting of the account. Hence, there is need to motivate them with proper incentives so as to bring out the best of the accounting clerk.
1.3 Research Questions
Based on the problem stated above, the following research questions were formulated.
1. Are the accounting personnel honest in terms of keeping the books of account of the organization?
2. Has there been any significant contribution of the accounts department in the planning of the organization?
3. Has the department been efficient in reconciling the cash book and the bank statement at times of disagreement?
4. Has the presence of the department led management in developing and attaining the purpose of the organization?
5. Is the budgets prepared by the accounts department been able to achieve financial prudence.
1.4 Objectives of the Study
The objective of this study is to uncover or find out:
1. If the accounting personnel are honest in terms of keeping the books of account of the organization.
2. If there is any significant contribution of the accounts department in the planning of the organization.
3. If the department has been efficient in reconciling the cash book and the bank statement at times of disagreement.
4. If the presence of the department has led management in developing and attaining the purpose of the organization.
5. If the budget prepared by the account department have been able to achieve financial prudence.
1.5 Statement of Hypothesis
According to the Oxford Advanced Learners’ Dictionary, hypothesis is an idea or explanation of something that is based on a two known facts but that has not yet been proved to be true or correct.
Ho (Null): There is no significant difference between organizations without accounts department and organizations with accounts department.
Hi (Alternative): There is a significant difference between organizations without accounts department and organizations with accounts department.
1.6 Significance of the Study
The importance of accounts department cannot be over emphasized when viewed from the point that accounting personnel supply information that are relevant to various bodies and institutions such as:
1. Management: The accounts department supplies management with information that helps management in planning and controlling routine operations for strategic decisions and formulation of major policies. It is also needed to enable management make decisions concerning the past, present and future of the organization. Timely, complete and regular financial information is also needed to enable management of organizations to monitor performance and compare actual performance with planned objectives so that necessary corrective actions are taken.
2. Shareholders: Financial information supplied by the accounts department is also needed by shareholders to enable them know if the organization is properly runned, managed by the managers in terms of profit maximization so as to know if they will receive their dividend as at when due and therefore continue to invest in the organization or not.
3. Investors: Investors who want to become potential shareholders also need the information of the accounts department to make that important decision of whether to invest their money in that organization or to take their money elsewhere where proper accounts can be given and dividend declared in terms of money invested.
4. Employee: Employees in the organization are also supplied with information regarding the financial position and profitability of the firm as this would influence the trade union negotiations demand for improvement in employees remuneration and condition services.
5. Government as well as the society at large, also requires the financial information supplied by accounts department.
Therefore, the accounts department is of great importance since it supplies all accounting information to end users for various and different purposes.
1.7 Scope of the Study
The research work is limited to:
· Small and medium enterprises.
· It is to be carried out for a period of six months (that is, from May – October) 2014.
· The participants are drawn from the staffs of winners bakery (Auchi) and Auchi Poly bakery.
· The research work is to be carried out in Etsako West Local Government Area.
1.8 Limitations of the Study
· Response of study participants: Having to get response from the staffs of the different enterprises with different level of understanding was a limitation.
· Secret: There was also the problem of secrecy among participants who found it difficult to release some vital information needed.
1.9 Definition of Terms
· Accounting: This has been variously defined as the process of identifying, generating, collecting, measuring and communicating of economic and financial information to enable intelligent judgement and decision by users of such information.
· Accounting Personnel: They are accounting staff or persons employed in an organization with the qualification of carrying out accounting duties. They consist of accountants and clerks.
· Organization: This is a system, body or society consisting of parts acting in coordination and having the unified whole engaging in rendering its services with a focus of achieving its aims of operation.
· Purchase Ledger: This is a book where transactions are recorded on purchases involved by the organization with other company.
· Sales Day Book: This is the book where transaction executed by the company on credit basis is recorded in every day basis.
· Creditors Book: This is a book where transactions between the organization and its creditors (that is, those the organization are owing as a result of its transactions) are recorded.
· Overcastting: This is when financial records are willfully or unintentionally increased due to mistakes in recording the transaction.
· Stakeholders: These are either individuals or government bodies who might be interested in the financial transactions of an organization.