THE IMPACT OF ACCOUNTING STANDARD ON THE DEVELOPMENT OF SMALL SCALE BUSINESS IN AKWA IBOM STATE (A STUDY OF USMAR TABLE WATER COMPANY)
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
There is on body that strives for self-actualization where there is no need for it. It has been applied to businesses. A small scale business is a privately owned and operated business, characterized by a small number of employees. Small scale businesses are the back bone of our economy, creating jobs and adding new and innovative product to the market.
The future relies on the small scale business operator or promoters in the economic development of the nation. This can be enhanced by complying with the accounting standard set to guide business operations, otherwise known as General Accounting Principle (GAAP). GAAP refers to the standard framework of guideline for financial accounting used in any given jurisdiction. These include the standards, convention and rules that accountant follows in recording and summarizing and in the preparation of financial statement. Many countries use or are converging on the International Financial Reporting Standard (IFRS).It was established and is maintained by the International Accounting Standards Board .IFRS are designed as a common global language for business affairs so that companies are understandable and comparable across international boundaries. In some countries, local accounting principle are applied for regular companies but listed or large companies much conform to IFRS, so statutory reporting is comparable internationally across jurisdictions.
However, in the development of small scale business, adherence to Accounting Standard would go a long way. Therefore this research is carried out mainly to make small scale business be aware of ways of resolving their business accounting problem which liquidate their business or financial transaction.
1.2 STATEMENT OF THE PROBLEM
As institution, firm and government have certain specified rules and regulations governing them, so do businesses have rules that guide or give standards to which transactions are recorded, summarized and prepared for financial statement in a given jurisdiction. These set of guidelines in accounting is known as Accounting Standard, otherwise referred to as Generally Accepted Accounting Principles (GAAP).
Most business does not abide by these rules especially the small scale business, which has led to their down fall (or folding up).Large scale business also have begun to fold up as a result he of not adhering to these standards. If they are not folded up completely, they resort to small scale businesses. Now the question arise “If they were unable to follow the accounting standard when large how much more then will they be able to follow these standard while small in Nature”?
The cause of these problems such as the issue of misapplication of accounting policies, clerical mistake in accounting date, omission of transactions records or document etc., is what has prompted the researcher to carry out a study on it which will peradventure result in preferring suggestion that will lead to solutions to them with reference to “Usmar Table Water Company, Mbak Itam”.
1.3 OBJECTIVES OF THE STUDY
No research would be carried out without the objectives. The objectives of the study include the following.
- To show the impact of accounting standard on small scale businesses.
- To identify the problems created by non-existence of accounting records and inadequate accounting information.
- To ascertain the reason why qualified personnel are not engaged in the service of small scale business.
- To give recommendations that is appropriate for controlling and monitoring of small scale business in order to make reasonable profit in the business by the owner(s).
1.4 RESEARCH QUESTIONS
- How can accounting standard enhance the development of small scale business?
- To what extent can accounting standard be applied in small scale business?
- What are the causes of small scale business failure?
- What are the challenges faced by small scale businesses in the application of accounting standard?
1.5 RESEARCH HYPOTHESIS
Ho: Accounting Standards do not have significant impact on the development of small scale business.
Hi: Accounting Standards have significant impact on the development of small scale business.
Ho: There is no significant effect of internal and external economic objective on the development of small scale businesses.
Hi: There is significant effect of internal and external economic objective on the development of small scale businesses.
1.6 SIGNIFICANCE OF THE STUDY
The significance of this study is to help in knowing some of the accounting problems encountered by small scale business proprietors and managers. Besides, it also helps in knowing why these small scale business proprietors have been keeping few records and/or in some cases, not keeping any record at all.
Again this research will help in revealing the problems encountered by those small scale businesses and providing a lasting solution to it in order to help the investigators and managers expand their businesses and finally solving their solvency problems if record of accounting is followed. Also, it will create an avenue whereby the impact of professionalism would be felt in accounting system and in which accounting network is built in the world of business.
Finally, this research work will in no small way assist those interested in self-employment, fresh graduates who are looking forward to having their own business and entrepreneurs to invest their hard earned capital in small scale business and on the other hand, relief the government of the overburden of huge capital expense.
1.7 SCOPE OF THE STUDY
The study is a based on the impact of accounting standard on the development of small scale business a study of Usmar Table Water Company, Mbak Itam Akwa Ibom State. The following areas are covered with the scope of the Study, basic account problems of small scale business, account books needed by small scale business, interpretation of account and analysis of financial statement.
1.8 LIMITATION OF THE STUDY
The researcher as a result of limited time factors, anti-research attitude and lack of finance are the limitation involved in putting the project together.
1.9 DEFINITION OF TERMS AND ACRONYMS
- Accounting Standard: Is a principle that governs current accounting practice and that is used as a reference to determine the appropriate treatment of complex transactions by Nsebong Jonathan (2011) also investopedia explains accounting standard as a guidelines for financial accounting, such as how a firm prepares and presents it business income and expenses, assets and liabilities.
- Business: According to Stephenson (2012) defines business as the regular production or purchase and sale of goods undertaken with an objective of earning project and acquiring wealth through the satisfaction of human wants.
- Conventions: A body of principles that regulates the practice of accounting profession, so that the preparation of financial statement is guided by consistent and acceptable principles by Joseph Udoh (2013).
- Profit: Money gained by selling a product or services for more than it cost produce or supply-Ifiokabasi A.(2012)
- Book Keeping: This is the recording on a day to day basis of the financial transaction and information pertaining to a business by Ojo (2010).
- Financial Ratio: Is an instrument used in assessing the performance of a company according to Agbo (2010)
Internal Control: Is a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency reliable financial reporting and compliance with laws, regulations and policies. According to Chukwuemeka O.Ojo (2007).
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