Financial Record Keeping in the Success of Small Scale Business
Constituents of Proper and Financial Record Keeping – The company and Allied mother Decree (CAMO) 90 section 332(29) states that the accounting records shall be sufficient to who and explain the transaction of the company and shall be such are to disclose with reasonable accuracy, at any time the financial position of the company. This implies that accuracy is one of the most important criteria for adequate accounting.
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Osisiome Benjamin agrees that adequate accounting information most be accurate and reliable. He states that “accounting information irrespective of whether it is serving the incorporated business shall reveal and disclose in net resources accurately.
In addition, adequate and proper accounting records should direct attention to problem soling. In essence, it should point out the best course of future action, highlight possible alternative solution to organizational possible problem and aid in establishment of a decision model for the selection of the best alternatives accounting information must be efficient, by not only highlighting existing deficiencies and providing abuse for appropriate action but it must future the internal of the business organisation by recommending chances for the improvement of the plans, policies, procedures and various phases of business operation in monetary term said Glautie.
Accounting information must be clear, coaline and consistently applied throughout the period under review. In practical term, the business environment of an enterprise is a foundation for determining the extent of sophistication of simplicity of any financial record keeping system. Each business unit decides on its information requirements and this requirement given sight on the design that gives the best satisfaction.
Eno L. Imanga postulated that “accounts records keeping should make it possible to give answers to the following question in a typical business organisation.
i) Who are our customers and how much are they owing us?
ii) Who are our suppliers and how much are we owing them?
iii) How much have we paid our employees in wages this month?
iv) Are our different lines of activities operating profitable?
v) Should one line of activity continue or be discontinued?
vi) How much capital is employed? Is profit earned on capital adequate?
BENEFITS OF PROPER AND ADEQUATE RECORD KEEPING IN BUSINESS
The needs and benefit of a sound accounting system can be understood in the words of C. S. Ola which statement “the benefit arising from maintaining proper records cannot be numbered’. Good accounting record helps a business man to know when his employees are robbing the business. if there are no good stock records, it will be difficult to know when a staff is stealing from the stores. Improper cash accounting is a direct invitation for the cashier to defraud. Lack of proper wages record often leads to wages being fraudulently paid to facilitation employees. He further stated that ‘good records cannot but held[, the business in its financing, it is only not. The help of account records that a businessman can know how much finance he need and how long it will lake to action it. A business man should therefore, maintain accurate recording his cash position to enable him to make sound investment decision.
Oshisomi and Peter N. P, categorically gave the following linite “obviously, accounting information can contribute usefully to the exercise of many management factions.
FUNCTION CONTRIBUTION OF ACCOUNTING
i) Efficient use of analysis cost in relation to output and resources output and objectives and responsibility cost centres.
ii) Conservation of managing fixed assets, stocks and resources debtors.
iii) Co-ordination establishing appropriate cost centres for collection of cost and for exercise of responsibility for costs programme accounting.
iv) Control setting of budgets analysis of variable be actual and budget.
v) Strategic decision approving investment proposal making programme.
It is reasonable at this point to ask can any business grow in geometrical progression or even in arithmetical progression, without having its management performing substantial function as pointed out by Oshisam and Dean above. They are indispensable possible, no doubt in a business that wants to meet the challenges of our dynamic and modern economy however, the homes of the authors cannot be said to be exhaustive especially s they relate the contribution of accounting in the management function mentioned.
In enlarging the importance of a sound accounting system, Buffer et al state that ‘accounting allow manager to identify problems which can the be corrected”. If one firm’s financial statements are better than these of other firms in the same industry the differences might well be better management.
They also stated that ‘accounting information is a very important part of the communication between firm’s manager and interested outside parties, shareholder, lunders financial analysis, suppliers customers, union officials, government agencies and even competitors.
An adequate accounting system is a primary necessary of a business geared towards an effective and efficient operation cost and revenue data have to be in constant supply to the interested parties especially the management so that reasonable and logical conclusion can be arrived. To solve any business problem that needs financial decision making. The importance of an adequate accounting system is narrated by Eno L. Incaga for an organisation to function effectively, it requires constant supply of different types of information. Information is needed for information about the valve of output generated by the organisation economic activities without such, profit cannot be measured.
CAUSES OF INADEQUATE RECORD KEEPING IN SMALL SCALE BUSINESS
Most small scale business men are allergic to the production and use of accounting information vital for the growth of business and for this reasons, the refuse keeping any accounting system. But where there are some, they are inadequate and unsystematic. Grieco revealed that ‘too many small businesses keep a file of bills and others maintain simple single entry books”.
Some studies have reveled a number of resources for the inadequacy of financial record keeping among our small business owners. Some of these reasons includes the following:
A) IGNORANCE: The most fundamental in ignorance or lack of appreciation of the advantages inherent in a good system of financial record keeping.
To most businessmen, the need to keep accounting record is a problem to them. They cannot understand why they have to waste their procrea time and money on maintaining good financial record which are not seen as a valuable, for profitability. After all, many successful businessmen succeeded in the past without maintaining any financial accounting records.
B) INSUFFICIENT SIMPLE AND WELL PUBLISHED ACCOUNTING STATIONARY AND LITERATURE
Complete lack of simple and well publicized accounting stationary, documents, literature etc, makes it difficult for those who are not experienced in accounting to maintain the records of their own. These poses challenges to accounting schools, practicing accountants and professional bodies, to come up with such documents to help small businessmen to keep their own records.
C) SECURITIZATIONS AND FRAUDULENT DESIRE
Improper and complete lack of account records among no small business owner in frequently due to their intention to be secretive and fraudulent. Some of them who can afford to maintain accounting records refuse to do so for fear of revealing the secret of their trade or exposing the size of their profit in this workers who may on that ground turn out to demand for increase in their salaries. Also they feel that accounting records are usually for the purpose of enabling the government to extort more than enough tax from them. in effect, many small business owners choose to go without any financial records in order not to expose the size of their profits which way attract heavy income tax or maker their workers ask for higher pay.
D) ILLITERACY
The ability or an illiterate entrepreneurs to perceive the need for accounting records more than a literate entrepreneurs in very much in doubt. People in this category can hardly understand the importance of permanent accounting records. rather on illiterate businessmen is of the view that although he is not learned, he purports to have sufficient intelligence to keep him figures of debtors and creditors of sale and expenses in him lead.
E) EMPLOYMENT OF UNSKILLED BOOK-KEEPING
Some business owners who are willing and able to employ book-keepers and accountants usually make the mistake of employing unskilled and untrained book keepers on accountants who sometimes produce inadequate financial record.
THE TASK OF DESIGNING FINANCIAL RECORD KEEPING SYSTEM
A professional carpenter design a chair not just any design but to meet the desire and specification of the customers. In the same vain, on accounting system designer, consider the desired accounting reports needed by management for efficient and effective running of the business as well as interested outsides parties need. According to John “in designing an accounting system the accountant should always bear in mind the purpose for which the system is o be set up, the statement desired, should govern the system”.
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“THE PLACE OF PROPER AND ADEQUATE FINANCIAL RECORD KEEPING IN THE SUCCESS OF SMALL SCALE BUSINESS”
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Financial Record Keeping in the Success of Small Scale Business
that is true