CHAPTER 1 : INTRODUCTION

1.1 INTRODUCTION THE IMPACT OF ACCOUNTING RECORDS

ON PERFORMANCE OF BUSINESS ORGANISATIONS
1.1.1BACKGROUND OF THE STUDY

Accurate accounting records enable the business to manage its

finances and make good financial decisions which in turn
improves the performance of the business. Data were collected
through interview, questionnaires as well as reviewing other
secondary sources including reports, memos and charters.

The impact of Financial Accounting Reporting on the corporate

performance of Business Organizations”, basically aims at
ascertaining how financial accounting reporting has helped in
advancing the objectives of corporate organizations. In the
process, it investigated the effect that financial accounting bear
on the performance of a business. Furthermore, it sought to
ascertain the compliance of relevant statues by corporate
organizations and the overall satisfaction of stakeholders in
corporate organizations.

Problems inherent in financial reporting ranges from non-

disclosure of vital information, subjective judgments of financial
information and most times non-compliance to relevant
statues. There were recommendations given such as strict
compliance to the relevant statute. The government needs to
strengthen its regulatory agencies in order to ensure that the
financial statements show a “true and fair view and comply
with the relevant statues at all times. The research shall
therefore seek to determine the impact of accounting records
on the performance of Business organization.

1.1.2 STATEMENT OF THE PROBLEM

The basis of this research lies with the deficiencies in the

preparation and presentation of accounting records
ranging from non disclosure of vital and sufficient
financial information to non compliance to standard
accounting regulatory framework. The consequence is
that it is difficult to determine the true and fair view of
the financial position of the organization and the
corporate performance of the organization. It is in this
perspective that the research intends to investigate the
impact of accounting records on the performance of
business organization. with a case study of Nigerian
bottling company Plc.
1.1.3 OBJECTIVE OF THE STUDY

To determine the nature of accounting records

To determine the standard and relevance of

accounting information

To appraise the impact of accounting records on the

performance of business organization

To determine the impact of accounting records on the

performance of Nigerian bottling company plc

1.1.4 LIMITATION OF THE STUDY

FINANCIAL PROBLEM; The study needed a lot of money

for many functions. For example, printing questionnaires,
feeding, traveling to the places where the respondents
were located. Financial problem seem to be a big factor
that affected the study.
Time management; the time allocated for the research
was not enough to gather the information from the field
and interpret it. However, the researcher tried to do
most of the activities of the research in time basing on
the researcher’s work plan.

Lack of cooperation; Respondents’ unwillingness to

disclose financial information on their businesses created
data collection problems, which affected the reliability of
the findings.

Lack of financial records in SBEs in Uganda and ambiguity

surrounding quality measurement led use of to restricted
and subjective measures. Consequently, performance
measurement was as well restricted thus the use of
performance indicators.

1.1.5 DEFINITION OF TERM

MICRO-FINANCE:
A very small deposit and loans are refer together as
microfinance (Johnson, 1999).
CONTROL:
This is concerned with the efficient use of scarce
resources to achieve a previously determined objectives
or set of objectives contained with a plan (Lucey, 2000).

FRAUD:
When a person dishonestly with a view to gain for
himself or another or with intent to cause loss either
destroys, defaces, conceals or falsify an account or
record or makes an account to his knowledge is
misleading, false or deceptive (Alan 1984).

MISMANAGEMENT:
This is the deliberate use of funds meant for other things,
for personal activities.

SMALL SCALE:
Not large in size or extent, limited in what it does and in
relation to organization.
TRANSACTION:
A piece of business that is done between people
especially an act of buying and selling or service
rendering.

FILING SYSTEM:
The act of putting several documents, letters together or
placed in an official record for the purpose of
safeguarding and evidence of transaction.
ORGANIZATION:
A group of people who form a business together in order
to achieve a particular goal.

1.1.6 CITATION PREVIEW

The Impact of Accounting Records on the Performance of

a Business Organization An accounting system is an
organized, productive plan for providing precise financial
data and controls. Accounting records are the original
source documents, journal, and records that depict the
accounting flow of exchange of a business. Accounting
records reinforce the creation of Statement of financial
position. They are to be held for various years, so that
outside sources can examine them and confirm that the
fiscal summaries got from them are right. Auditors and
taxing authorities are the establishment destined to
investigate accounting records. Accounting has been
depicted as the way toward distinguishing, estimating
and conveying financial data to allow informed decisions
and choices by the clients of the data. It is portrayed as
the language of business. It includes the plan of report
and exchange of transaction through an organization.
When we talk about record keeping and management,
we think about managers making the correct decision
when making all the decisions. While making decisions,
management needs the support of data and information
to determine the cost analysis or opportunity cost of a
certain decision. Hence, managers depend more on
financial and economic information in accounting data.
Medium and large enterprises are more regular and pay
more attention to bookkeeping while small business
sometimes lag. Financial records are an indicator of how
the management of an organization is. Poor records
indicate lower education level among staff, finite
resources, lack of command and comprehension, and
insufficient training. Record keeping plays a vital role in
performance of an organization. Accounting records and
management often go side by side as it is the duty of the
management to keep the financial records of the
business up to date to avoid consequences. Present day
accounting system generates financial
statements/information automatically on different
software through the record of day-to-day transactions
of the business. However, it is still necessary to know the
impacts of these accounting records on organization,
how it can be beneficial and unfavorable for the
organization. Following are some

Benchmarking is developing a threshold of best practices

and judging other activities based on that baseline. In
benchmarking comparison is done. A company compares
its recent financial position or other accounting record
with last year’s budgetary goals and operating results.
Not only prior year’s performance but compare the
records/evaluation of financial statements with other
organizations’ performance and gains. It gains an
independent viewpoint about how well the company
performed in contrast with different organizations. Also,
it creates a competitive environment internally and
externally as it creates an opportunity for improvement,
encourage individuals/organizations for creative ideas
which gives more value to the business. Managers should
always be vigilant when comparing due to forged records
and window-dressing of financial statements.

1.1.7 PERFORMANCE MANAGEMENT

Appropriate record keeping gives proof of how the

exchange was dealt with and proves the means that
were taken to agree to business norms. The financial
statement provides details and accurate information
regarding operating expenses and incomes which helps
to identify employee’s fraud, theft, wastage, and
bookkeeping errors. Hence, it is the foundation on which
the modern-day business depends. Decision making
becomes easier when records are maintained and there
are more chances to grow. Times is saved when regular
bookkeeping is done and there is no loss of information.
The company knows where the money is going as the
business keeps track on where the money is going or
coming from which in return keeps track on how much
the business spends in contrast to its income and value.
This helps the organization to finance the budget
efficiently and be cost effective.

1.1.8 RECOMMENDATIONS :

Based on the findings made in the course of this study,

the following recommendations are hereby suggested:

Small scale business operator units should ensure that

complete and accurate business records are kept
because they are essential for decision making. This can
be ensured by undertaking course training about records
keeping, and hiring knowledgeable and skilled workers.

There is need for the owners and managers of the small

scale enterprises to embrace proper accounting records
keeping practices in order to be successful in their
financial performance

More efforts need to be on accounting record keeping

for effective performance of small scale business units
because accounting record keeping strongly affects
performance of small scale business
 CHAPTER 2
RESEARCH METHODOLOGY
1.2.1 INTRODUCTION
The method used in the generation of ideas and
collection of data for
this research as well as the methods employed in the
analysis of the data
shall be discussed briefly in this chapter. The researcher
employed various
method and procedures to achieve the objectives of this
research. The
methods that were used in the collection and analysis of
data are outlined
together with how these methods led to the conclusion
drawn with regards
to the research question.
1.2.2RESEARCH DESIGN
This section which could be referred to as either research
design or
research method is very critical to the entire research
process. It is in this
section that the research stamps his scientific status on
the process.
research design therefore is a blue print or scheme that
is used by the
research for specific structure and strategy in
investigating the relationship
that exist among variables of the study so as to enable
him or her collect
the data which will be used for the study. Research
designs are basically of
four types, which are experimental, historical, survey and
case study
research design. For the purpose of this study, I adopted
the case study
approach in evaluating the impact of financial accounting
on the
performance of business organizations.
1.2.3 SOURCES OF DATA
Both primary and secondary sources of data were
adhered to on the
course of this study and the attitude and responses of
those interviewed
were noted.
Primary Sources of Data: The primary sources of data are
the sampling
or study unit from which information is obtained on a
first hand basis . It is very important to note here that the
researcher did not
adopt any difficult method in the collection of data;
rather the data for the
research were collected in response to the requirements
of the research
problem. Creativity and judgment also played a vital role
at this stage of the
project, bearing in mind that the final judgment will be
partly constrained be
the type and value of information collected. The primary
data were
gathered from the following sources.
Oral Interview: personal interviews were conducted
in addition to the
questionnaires which were duly administered. The
information obtained
through the oral interview was use in cross-
checking the responses to the questionnaire. It
either affirmed or disproved the data collected
1.2.4 METHOD OF DATA COLLECTION
Collection of data refers to the research
instruments used by the
researcher to collect whatever data needed. The
research
instruments used in this research include
questionnaires, interviews
and library research. Questionnaires were
employed by the
researcher because it is most practical, economical
and easiest way
of obtaining information about events. They also
helped in collecting
information that are valid. Interview schedule was
made use of by the
researcher because of its usefulness in following up
an unexpected
result in order to validate other method or problem
motivation of
respondents and their reasons for responding the
way the did.

1.2.5 RESEARCH QUESTION

1) Should I open a separate business bank
account?
2) What are common business financing
options?
3) How should I record transactions?
4) Should I use cash-basis or accrual
accounting?
5) How do I file my small business taxes?
6) Do I need to create invoices?  
7) How can I get customers to pay me on
time ?
CHAPTER 3: LITERATURE REVIEW
1.3.1 OVERVIEW OF THE ACCOUNTING SYSEM

The accounting system is one that is well designed to

facilitate
the smooth, efficient and uninterrupted flow of data
from the point where a
transaction occurs through the various stages of data
processing to the
final stage, thereby culminating in a report.
A accounting system is made up of three distinct stages
which are:
a. Data recording.
b. Information summarization and interpretation.
c. Information reporting

1.3.2 ACCOUNTING RECORDS

The starting point for the financial accounting is the
recording and analysis of transactions. A definite step is
followed in the traditional
accounting approach, the steps in the processing and
generating of output
of the accounting system are:
i. Identification and analysis of relevant transitions in the
journal.
ii. Making entries of the transactions in the journal.
iii. Posting from the journal to the ledger.
iv. Preparation of trial balance.
v. Determining and recording of the adjusted entries in
the journal the
ledger.
vi. Preparation of the adjusted trial balance.
vii. Preparation of the final accounts and statement
which are the profit and loss account and the balance
sheet.
It must be noted that in the emerging business
environment where e-
commerce is the procedure of doing business, the
majority of business are conducted electronically.
Whereby transactions happen paperless, it is worthy of
note that the steps may not followed sequentially but in
essence.
They very need for all the step is satisfied in the
electronic system. But because accounting focuses on
the transactions and the financial
information content rather than the steps taken to
actualize or document it,
accountants have adapted themselves to the current e-
commerce business
environment and the product which is d a financial
report is still the same.

1.1.3 THE SUBSIDIARY BOOKS THE GENERAL JOURNAL

[PROPER]
This is used for the following:
a. Opening entries.
b. Closing entries.
c. Transactions of a special nature
It should be noted that every transaction is capable of
entry in the journal
proper, but in order to economize resources, other books
are used in place
of the general journal. A golden rule in accounting is that
all transaction
must pass through the journal proper before posting to
the ledger. Each accounting transaction is entered in the
journal in a chronological order,
analysed into debit and credit, made self-contained and
separated from any
other transactions. Specifically a journal entry consists of:
a. The transaction data.
b. The amount of each debit and credit.
c. A brief narration of the transaction.
The journal provides in a permanent form a full
descriptive record of financial transaction and thus
facilitates the entries into the ledger. The entering a
transaction in journal is called journalizing.
1.3.4 ADVANTAGES OF A JOURNAL
Some of the advantages are:
a. The journal uniquely provides in one place complete
picture of each transaction.
b. The journal provides a complete chronological history
of all transactions, as such if serves as a source for future
reference to the accounting transactions, of an entry.
c. The use of a journal reduces the possibility of an error
when transaction are first recorded.
d. A journal provides concede but informative narrative
sufficiently detailed to prove or disprove the accuracy of
a transaction.
1.3.5 SALES DAY BOOK
Each sale, with the exception of cash sales shall be
entered in thesales day book with such details as dates,
name, reference to duplicate invoice, and posted to the
debit of the buyer’s account in the ledger. At the end of
any interval provided that if does not overlap the period
for which the final accounts are to be prepared, the
whole accounts are added and the total posted to the
credit of sales account.

1.3.6 SOURCE DOCUMENT

Sources documents are original documents from which
accounting records are kept. The importance of source
documents derive from the fact that they capture the
details of transactions at the original and subsequent
recording of the transactions will be based on details on
the source documents. A typical source document will
have the following key information:
a. Data of the transaction (s).
b. Brief details about the transaction (s).
c. Amount of the transaction in naira.
d. Signature of authorizing or approving officer.
The examples of source documents are:
a. INVOICE: an invoice is a business document prepared
when goods are sold on credit and is normally sent by
the seller to the buyer. It gives the detail of the goods
and the value of the transaction to the seller of the goods
as well as the buyer.
b. RECEIPTS: these are business documents issued by a
creditor to a debtor when cash is received in the
settlement of debt or a situation of outright cash sales in
acknowledgment for the receipt of cash.
c. DEBIT NOTES: a debit note is a document prepared by
a customer who returns some of the goods previously
bought on credit, given to the creditor indicating that he
has debited his account in his book to the amount
replaced in the debit note. It has various uses between
the seller and the buyer.
d. CREDIT NOTE: when the returned goods are received
by the supplier, a document to evidence this, is prepared
and forwarded to the customer. This document is called
a creditnote, because the document involved is entered
on the credit side of the customer’s personal account
and debit to the returns inward. This has the effect to
reducing the amount of his debit balance.
e. VOUCHERS: these are evidence to transactions thus a
voucher provides evidence of certain transaction.

1.3.7 THE PRUDENTIAL GUIDELINES FOR LICENSED

BANKS
Banking is essentially an international business especially
now that
internationalization of most domestic financial markets
in many countries
are happening at a greater pace. One implication of
international banking is
the necessity to develop and continuously review the
reporting systems
which allow for a high degree of compatibility of banking
performance across nation boarders. It is on this note
that the apex institution in the banking system, the
central bank of through the
Banking Supervision Department (BSD) issued on
November 7, 1990
circulation letter N0: BSD/DO/23/VOL: 1/11 to all
licensed banks and their
auditors. The circular addressed requirement for assets
classification and
disclosure, provisions, interest accruals and off-balance
sheet engagements.
This guideline is to be strictly adhered to be all licensed
banks
because it bears heavily on the financial accounting
reporting of bank in
The inter-relationship between source documents, the
sales day book and
the ledger may be shown with the following diagram.
The inter-relationship between source documents, the
sales day book and
the ledger may be shown with the following diagram.