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AN EVALUATION OF THE EFFECT OF ACCOUNTING RECORDS ON THE PERFORMANCE OF SME IN NIGERIA: A STUDY OF SELECTED SMES IN LAGOS METROPOLIS

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

SME’s in Nigeria need the necessary financial back up to improve operations build capacity and grow. But these laudable objectives are besieged with the poor nature with which SME’s are operated and managed. Many SME’s lack accurate financial record of their business operations, the inability to make proper accounting, results to waste and loss of profit. Lack of basic accounting practices in most SME’s in Nigeria tends to compound their financial challenges. Most SME’s can’t access funds because banks and other financiers cannot readily verify their vibrancy and their access to quality projects (Strinwas, 2005) Stigliz and Wass (1981) expressed the view that small and medium scale firms with opportunities to invest in positive net present value project may block from doing so because of adverse selection and moral hazard problems. Such discriminations arise because the SME’s don’t have comprehensive accounting records to be utilized in proper project evaluation and budgeting. In relation to the above are improper investments in both current and fixed assets. The research therefore focuses on appraising the effect of accounting records on the performance of SME’s in Nigeria.

1.2  STATEMENT OF THE PROBLEM

SME’s constitute a large proportion of business segment in Nigeria. Providing employment and playing important roles in the process of industrialization and sustainable economic growth. However the persistent inability of most SME’s to grow and expand business is critically affecting the laudable vision and plan of government to accelerate the rapid development of SME in Nigeria. Government has severally drawn policy measures through financial institutions like banks to provide the needed funding for SME’s. However, lack of basic accounting practice and information in most SME’s tends to compound to their financial challenges. Most SME’s can’t access funds because banks and other financiers cannot readily verify their vibrancy and their access to quality projects as a result of poor and lack of accounting information and records. Therefore the problem confronting this research is to evaluate the effect of accounting information or records on the performance of SME in Nigeria.

1.3  RESEARCH OBJECTIVES

1.     To determine the nature and significance of accounting record. 
2.     To determine the nature and significance of SME’s in Nigeria. 
3.     To determine the effect of accounting records on the performance of SME’s in Nigeria.
4.     To determine the effect of accounting records on the performance of selected SME’s in Lagos metropolis.

1.4  RESEARCH QUESTIONS

1.     What is accounting records? 
2.     What is the nature and significance of SME’s in Nigeria? 
3.     What is the effect of accounting records in the performance of SME’s in Nigeria? 
4.     What is the effect of accounting records on the performance of selected SME’s in Lagos metropolis?

1.5  STATEMENT OF HYPOTHESIS

Hypothesis 1
Ho the volume of SME’s in Lagos metropolis is low 
Hi the volume of SME’s in Lagos metropolis is high 
Hypothesis 2
Ho the performance of SME’s in Lagos metropolis is low. 
Hi the performance of SME’s in Lagos Metropolis is high 
Hypothesis 3
Ho the effect of accounting records on the performance of SME’s in Lagos metropolis is low. 
Hi the effect of accounting records on the performance of SME’s in Lagos metropolis is high.
1.6  SIGNIFICANCE OF THE STUDY 
1.     The research shall provide a detail appraisal on the nature and significance of accounting information. 
2.     It shall appraise the effect of accounting records on the performance of SME’s in Nigeria.
3.     The research shall elucidate the effects of accounting records on the performance of selected SME’s Lagos metropolis. 
1.7  SCOPE OF THE STUDY 
The research shall evaluate the effect of accounting records on the performance of SME’s in Nigeria.   
1.8  DEFINITION OF TERMS 
SME: small and medium-scale enterprise 
SME DEFINED: by definition in Nigeria small and medium industries equity investment scheme (SMIEIS) define SME’s as those enterprise with a total capital employed not less than N1.5 million, but not exceeding N200 million including working capital, but exceeding cost of land and or with a stall strength of not less than 10 and not more than 300. 
ACCOUNTING INFORMATION: accounting information is the result of business understandings stated in financial terms. Improved accounting information enhances the quality of financial reporting in SME’s. It is the satisfactory aggregation of business activities achieved in forms of records. 
OBJECTIVES: objectives specifies what the firm intends to achieve for given period of time objectives are the ends of the business Ansoll (1985) identifies proximate objectives which is concerned with the short term performance of the business, proxy objectives which is concerned with the long term performance of the business and flexibility objective which is concerned with safe guarding against risk and uncertainty.

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