Effect of Good Accounting System on the Performance of Small Scale : Current School News

Effect of Good Accounting System on the Performance of Small Scale Enterprises in Nigeria

Effect of Good Accounting System on the Performance of Small Scale Enterprises in Nigeria.


According to (Hussy, 2014), accounting system is defined as “the system designed to record the accounting transactions and events of a business and account for them in a way that complies with its policies and procedures.

The basic elements of the accounting system are concerned with collecting, recording, evaluation, and reporting transactions and events”.

Accounting system has also been considered as an integral aspect of the internal control system of an entity which entails the recording, keeping, analyzing, summarizing, interpretation and communication of various financial transactions for the purpose of planning, control and decision making.

All forms of business organization, regardless of their sizes and nature of operation, require functional and reliable accounting system (Gabriel, 2012)

An accounting system is an orderly, efficient scheme for providing accurate financial information and controls. Regulatory requirements and internal administration policies are key considerations in the design of an effective accounting system.

Thus accounting systems show the books, records, voucher, and files and related supporting data resulting from the application of the accounting process. It involves the design of documents and transactions flow through an organization.

The uniqueness of small and medium scale businesses call for careful consideration in the design of accounting systems (Atijosan, 2013).

Small and medium scale enterprises are a vast majority of businesses found in variety of primary and intermediate production of the economy (Ayozie, 2013).

These establishments have tremendous impact on the state and well-being of the nation in employment generation, as sources of national outputs and revenues, providing feedstock for large corporations.

They may lack the sophistication to apply the detailed accounting processes, yet the value of accounting systems to these businesses is quite profound.

Background of the Study

Many new business owners are daunted by the mere idea of book keeping and accounting. But in reality, both are pretty simple.

Keep in mind those book keeping and accounting share two basic goals: to keep track of income and expenses, which improves chances of making a profit, and to collect the financial information necessary for planning, decision making and for filing various tax returns (Barbara, 2016).

There is no clear requirement that records should be kept in any particular way. As long as records accurately reflect the business’s income and expenses, there is a requirement, however, that some businesses use a certain method of crediting their accounts: the cash method or accrual method.

Depending on the size of the business and amount of sales, one can create own ledgers and reports, or rely on accounting (Williams et al 2013).


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