Thesis Book For ABDIRISACK ALI HASSAN BACHELOER DEGREE

DAARU SALAAM UNIVERSTY
ACCOUNTING PROBLEMS ENCOUNTERED IN SMALL BUSINESS IN

MOGADISHU – SOMALIA
A research thesis submitted to the College of Economic &

Mgt Science in Partial fulfillment of the requirement for
the Award of Bachelor degree of Business Administration
(BBA)
=========================
Prepared by:
 Abdirisack Ali Hassan ID NO: 5514
August 2020
DECLARATION
I, Abdirisack Ali Hassan declare that this is my effort and original work and never been
submitted in any other academic purpose, higher institutions and universities for the award of
academic rewards.
Signed ………………………
Date………………………….
Abdirisack Ali Hassan
I
APPROVAL
This thesis entitled Accounting Problems Encountered in Small Business in Mogadishu –

Somalia (Case Study Merchandising And Manufacturing Companies) was done under my
supervision and ready to submit at Daaru Salaam University.
Signed: ……………………….
Date: …………………............
Mr. Abdikarim Sh. Mohamed
II
DEDICATION
There are those close to my heart who contributed a lot to the completion of this
work by putting the researcher in a position to start, sustain and finish this thesis.
For this reason plus many others, I wish to dedicate this work to my great dear
mother Hawo Dahir Hashi and my beloved father Dahir Abdi Mohamed for
their constant support, love, encouragement, effort, knowledge and guidance to
reach the finishing line, I also dedicate this work to my dear brothers and sisters
who have always been a source of incessant motivation and encouragement to
me.
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ACKNOWLEDGEMENTS
I thank The Almighty ALLAH for giving me all the necessary strengths, knowledge, wisdom,
financial and moral ability to complete my research report.
I wish sincerely to express my heart felt gratitude to everyone who assisted me to complete
this research report. My primarily obligation is to Horseed International University and to my
Supervisor Mr. Abdikarin Sh. Mohamed for his useful comments, criticisms and suggestions
on the original manuscript of this report.
I take this opportunity to thank all people who made a contribution in my academic life so far.
I would like to express heartfelt gratitude to my father, Dahir Abdi Mohamed, whose tireless
efforts have made this dream a reality. My father he restored hope in me when I felt hopeless,
he invoked the hitherto hidden abilities in me; a reason I will always walk with my head high.
No amount of words can express my sincere gratitude for his unending support during the
research period.
I am greatly thankful to my colleagues and workmates; specially, Ahmed Mohamed Dahir

(Tall), Abdullahi Artan Ahmed, Mohamed Ali Jama, and My brother Anas Dahir Abdi for
their unending support in this journey.
I am grateful to the staff of Coca Cola, Muumin Group of Companies, and Macruuf Business
Center who participated in the research. Special thanks go to the Managers, Heads of
Departments and Finance, sales persons & Accounts staff that spared their precious time in
answering my Questionnaire and responding to the instruction guide.
I take this opportunity to thank my entire extended family for their love, care and
encouragement to me. I am particularly indebted to my father; Anas Dahir Abdi, whose time
was greatly, compromised during the BA studies. Special tributes go my parents Dahir Abdi
Mohamed, & Hawo Dahir Hashi.
My special thanks go to all the respondents who took their precious time to give me all the
necessary information needed for this work.
Lastly, my warm regards and blessings go to all of those who have made a positive
contribution in my life. Allah blesses you all.
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LIST OF ABBREVIATIONS
SBI Small Business Institute
AICPA The American Institute of Certified Public Accountants
AAA The American Accounting Association
SBA Small Business Administration
FASB Financial Accounting Standards Board
U.S. United state
SPSS The Statistical Package for Social Sciences
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TABLE OF CONTENTS
Table of Contents Page Number

DECLARATION ....................................................................................................................I
APPROVAL ......................................................................................................................... II
DEDICATION .....................................................................................................................III
ACKNOWLEDGEMENTS ................................................................................................. IV
LIST OF ABBREVIATIONS ................................................................................................ V
TABLE OF CONTENTS ..................................................................................................... VI
LIST OF TABLES ............................................................................................................ VIII
LIST OF FIGURES......................................................................................................................... X
ABSTRACT ........................................................................................................................ XI
CHAPTER ONE INTRODUCTION
INTRODUCTION ............................................................................................................................................... 1
BACKGROUND OF THE STUDY ................................................................................................................................ 1
STATEMENT OF PROBLEM ........................................................................................................................... 3
PURPOSE OF THE STUDY .............................................................................................................................. 4
OBJECTIVES OF THE STUDY ........................................................................................................................ 4
1.4.1RESEARCH QUESTIONS.............................................................................................................................. 4
SCOPE OF THE STUDY ................................................................................................................................... 4
SIGNIFICANCE OF THE STUDY .................................................................................................................... 4
DEFINITION OF KEY TERMS ....................................................................................................................... 5
CONCEPTUAL FRAMEWORK ....................................................................................................................... 5
CHAPTER TWO RELATED LITERATURE REVIEW
INTRODUCTION ............................................................................................................................................... 6
ACCOUNTING PROBLEMS ENCOUNTERED BY SMALL BUSINESS ................................................... 6
Fraud. 6
Incompetent, or Indifferent Accountant ....................................................................................... 7
Cash flow mismanagement .......................................................................................................... 7
Control of inventory .................................................................................................................... 7
Accounting skills ......................................................................................................................... 9
A lack of control over cash flow .................................................................................................. 9
THE EFFECT OF ACCOUNTING PROBLEMS ON COMPANY PERFORMANCE ................................10
PRIOR STUDY ................................................................................................................................................13
SUMMARY ......................................................................................................................................................15
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CHAPTER THREE METHODOLOGY
INTRODUCTION .............................................................................................................................................16
RESEARCH DESIGN ......................................................................................................................................16
RESEARCH POPULATION ............................................................................................................................16
Sample Size .......................................................................................................... 16
Sampling Procedure ............................................................................................ 17
RESEARCH INSTRUMENT............................................................................................................................17
Validity and Reliability of the Instrument ............................................................. 18
DATA GATHERING PROCEDURE ..............................................................................................................18
DATA ANALYSIS...........................................................................................................................................18
ETHICALCONSIDERATIONS.......................................................................................................................19
LIMITATIONS OF THE STUDY ....................................................................................................................19
CHAPTER FOUR FINDINGS AND DISCUSSIONS
INTRODUCTION ................................................................................................................ 20
DEMOGRAPHIC CHARACTERISTICS OF THE RESPONDENTS .......................... 20
4.1.1 Gender Distribution ............................................................................................. 20
DATA PRESENTATION AND ANALYSIS .............................................................. 40
MAJOR FINDINGS ............................................................................................................ 43
DISCUSSION OF THE RESULTS .................................................................................... 44
CHAPTER FIVE CONCLUSIONS AND RECOMMENDATIONS
INTRODUCTION ............................................................................................................... 45
CONCLUSIONS ........................................................................................................ 45
RECOMMENDATIONS ............................................................................................ 45
RECOMMENDATION FOR FURTHER RESEARCH ............................................... 46
REFERENCES .................................................................................................................... 48
APPENDICES ..................................................................................................................... 49
APPENDIX A: BUDGET ACTUAL COST ...................................................................... 49
APPENDIX B: TIME FRAME .......................................................................................... 50
APPENDIX C: QUESTIONNAIRE .................................................................................. 51
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LIST OF TABLES
TABLE 4.1.0 GENDER OF THE RESPONDENTS ...................................................................................................21
TABLE 4.1.1 AGE OF THE RESPONDENTS ...........................................................................................................22
TABLE 4.1.2 MARITAL STATUS OF THE RESPONDENTS ..................................................................................23
TABLE 4.1.3 THE LEVEL OF THE RESPONDENTS‟ EDUCATION .....................................................................24
TABLE 4.1.4 THE LEVEL OF THE RESPONDENTS‟ EXPERIENCE ....................................................................25
TABLE 4.2.0 FRAUD IS ONE OF THE ATTACKING PROBLEMS OF OUR TIME. WHILE LESS DRAMATIC
THAN CRIMES OF VIOLENCE LIKE MURDER OR RAPE, FRAUD CAN INFLICT SIGNIFICANT
DAMAGE AT ORGANIZATIONAL OR INDIVIDUAL LEVEL ......................................................................26
TABLE 4.2.1 INCOMPETENT ACCOUNTANTS ARE INDIVIDUALS WHO MISREPRESENT THEIR
BACKGROUND AND SKILLS TO THE OWNER OF SMALL BUSINESSES ................................................27
TABLE 4.2.2 CASH FLOW MISMANAGEMENT IS CITED BY EXPERIENCED BUSINESS OWNERS,
CONSULTANTS AND INDUSTRY ANALYSTS AS THE BIGGEST REASON FOR SMALL BUSINESS
SUCCESS ............................................................................................................................................................28
TABLE 4.2.3 CONTROL OF INVENTORY IS NEEDED TO ENSURE THAT THE BUSINESS HAS THE RIGHT
GOODS ON HAND TO AVOID STOCK-OUTS, TO PREVENT SPOILAGE/THEFT, AND TO PROVIDE
PROPER ACCOUNTING ....................................................................................................................................29
TABLE 4.2.4 ACCOUNTING SKILLS ARE THE TOTALITY OF SKILLS RANGING FROM RECORD
KEEPING, ATTENTION DIRECTING, FINANCIAL MANAGEMENT AND REPORTING SKILLS THAT
ARE EXPECTED TO PROMOTE EFFECTIVE DECISION, PERFORMANCE EVALUATION AND
BUSINESS REPORTING OF ANY BUSINESS ENTERPRISE .........................................................................30
TABLE 4.2.5 A LACK OF CONTROL OVER CASH FLOW IS ONE OF THE LEADING CAUSES OF SMALL-
BUSINESS ACHIEVEMENT..............................................................................................................................31
TABLE 4.2.6 INADEQUATE OR NONEXISTENT ACCOUNTING RECORDS ARE PROBLEMS FACED BY
SMALLBUSINESSES .........................................................................................................................................32
TABLE 4.2.7 TIMELY FINANCIAL STATEMENTS ARE IMPORTANT FOR INTERNAL AS WELL AS
EXTERNAL USERS ............................................................................................................................................33
TABLE 4.2.8 SUCCESSFUL ENTREPRENEURS OFTEN EXHIBIT A NATURAL ABILITY TO REALIZE
WHEN CASH FLOW IS CRITICAL ...................................................................................................................34
TABLE 4.2.9 IN ORDER TO OBTAIN SALES, MANY SMALL BUSINESSES WILL EXTEND CREDIT TO
CUSTOMERS WITHOUT INVESTIGATING THEIR BACKGROUND ...........................................................35
VIII
TABLE 4.2.10 LACK OF KNOWLEDGE OF THE GENERAL PRACTICE AND PRONOUNCEMENTS OF THE
FINANCIAL ACCOUNTING STANDARDS BOARD CAN CREATE BOTH IMMEDIATE AND LONG
RUN SOLUTIONS AS THEY PREPARE TO EXPAND AND DEVELOP THEIR ORGANIZATIONS ..........36
TABLE 4.2.11 SMALL BUSINESSMEN AND WOMEN OPERATING IN THE CORPORATE FORM CAN
CREATE A SECOND LEVEL OF PROBLEMS FOR ACCOUNTANTS AND THEIR CLIENTS ...................37
TABLE 4.2.12 KEEPING RECORDS OF WORKERS TO HELPLESS IN DEVELOPMENT.................................38
TABLE 4.2.13 ESTABLISH A RECORD OF BOOKS OF ACCOUNTS ON DAILY, WEEKLY, MONTHLY
AND ANNUAL BASIS .......................................................................................................................................39
TABLE: 4.3.1 LEVEL OF ACCOUNTING PROBLEMS ENCOUNTERED BY SMALL BUSINESSES ...............40
TABLE: 4.3.2 LEVEL OF THE EFFECT OF ACCOUNTING PROBLEMS ON COMPANY PERFORMANCE.41
TABLE: 4.3.2 LEVEL OF THE EFFECT OF ACCOUNTING PROBLEMS ON COMPANY PERFORMANCE.42
IX
LIST OF FIGURES
FIGURE 4.1.0 GENDER OF THE RESPONDENTS ......................................................................................................................................... 21

FIGURE 4.1.1 AGE OF THE RESPONDENTS .................................................................................................................................................. 22
FIGURE 4.1.2 MARITAL STATUS OF THE RESPONDENTS ...................................................................................................................... 23
FIGURE 4.1.3 THE LEVEL OF THE RESPONDENTS‟ EDUCATION ........................................................................................................ 24
FIGURE 4.1.4 THE LEVEL OF THE RESPONDENTS‟ EXPERIENCE ....................................................................................................... 25
FIGURE 4.2.0 FRAUD IS ONE OF THE ATTACKING PROBLEMS OF OUR TIME. WHILE LESS DRAMATIC THAN CRIMES OF
VIOLENCE LIKE MURDER OR RAPE, FRAUD CAN INFLICT SIGNIFICANT DAMAGE AT ORGANIZATIONAL OR
INDIVIDUAL LEVEL .................................................................................................................................................................................. 26
FIGURE 4.2.1 INCOMPETENT ACCOUNTANTS ARE INDIVIDUALS WHO MISREPRESENT THEIR BACKGROUND AND
SKILLS TO THE OWNER OF SMALL BUSINESSES.............................................................................................................................. 27
FIGURE 4.2.2 CASH FLOW MISMANAGEMENT IS CITED BY EXPERIENCED BUSINESS OWNERS , CONSULTANTS AND
INDUSTRY ANALYSTS AS THE BIGGEST REASON FOR SMALL BUSINESS SUCCESS ............................................................ 28
FIGURE 4.2.3 CONTROL OF INVENTORY IS NEEDED TO ENSURE THAT THE BUSINESS HAS THE RIGHT GOODS ON
HAND TO AVOID STOCK-OUTS, TO PREVENT SPOILAGE/THEFT, AND TO PROVIDE PROPER ACCOUNTING ................ 29
FIGURE 4.2.4 ACCOUNTING SKILLS ARE THE TOTALITY OF SKILLS RANGING FROM RECORD KEEPING, ATTENTION
DIRECTING, FINANCIAL MANAGEMENT AND REPORTING SKILLS THAT ARE EXPECTED TO PROMOTE EFFECTIVE
DECISION, PERFORMANCE EVALUATION AND BUSINESS REPORTING OF ANY BUSINESS ENTERPRISE......................... 30
FIGURE 4.2.5 A LACK OF CONTROL OVER CASH FLOW IS ONE OF THE LEADING CAUSES OF SMALL-BUSINESS
ACHIEVEMENT ........................................................................................................................................................................................... 31
FIGURE 4.2.6 INADEQUATE OR NONEXISTENT ACCOUNTING RECORDS ARE PROBLEMS FACED BY SMALL
BUSINESSES ................................................................................................................................................................................................. 32
FIGURE 4.2.7 TIMELY FINANCIAL STATEMENTS ARE IMPORTANT FOR INTERNAL AS WELL AS EXTERNAL USERS .....33
FIGURE 4.2.8 SUCCESSFUL ENTREPRENEURS OFTEN EXHIBIT A NATURAL ABILITY TO REALIZE WHEN CASH FLOW IS
CRITICAL ...................................................................................................................................................................................................... 34
FIGURE 4.2.9 IN ORDER TO OBTAIN SALES, MANY SMALL BUSINESSES WILL EXTEND CREDIT TO CUSTOMERS
WITHOUT INVESTIGATING THEIR BACKGROUND............................................................................................................................................ 35
FIGURE 4.2.10 LACK OF KNOWLEDGE OF THE GENERAL PRACTICE AND PRONOUNCEMENTS OF THE FINANCIAL
ACCOUNTING STANDARDS BOARD CAN CREATE BOTH IMMEDIATE AND LONG RUN SOLUTIONS AS THEY
PREPARE TO EXPAND AND DEVELOP THEIR ORGANIZATIONS .................................................................................................. 36
FIGURE 4.2.11 SMALL BUSINESSMEN AND WOMEN OPERATING IN THE CORPORATE FORM CAN CREATE A SECOND
LEVEL OF PROBLEMS FOR ACCOUNTANTS AND THEIR CLIENTS .............................................................................................. 37
FIGURE 4.2.12 KEEPING RECORDS OF WORKERS TO HELPLESS IN DEVELOPMENT .................................................................... 38

FIGURE 4.2.13 ESTABLISH A RECORD OF BOOKS OF ACCOUNTS ON DAILY , WEEKLY, MONTHLY AND ANNUAL BASIS
..................................................................................................................................................................... 39
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ABSTRACT
The purpose of this study is to identify the accounting problems encountered by small
businesses and to investigate the effect of accounting problems on company performance in
Mogadishu-Somalia. A survey research method has been adopted accounting problems
encountered in small business.
The data were collected through questionnaires filled by the respondents of merchandising
and manufacturing firms in Mogadishu-Somalia. The results of the questionnaire were then
analyzed with the aid of SPSS.
The results showed that the most respondents were knowingly agreed that there is very good
situation affected by small business the Accounting Problems on Company Performance and
the findings is also clarified that the Merchandising and Manufacturing firms in Mogadishu
Somalia they don’t control financial statements and also the findings were revealed that
almost Merchandising and Manufacturing firms in Mogadishu Somalia they don’t have well
defined accounting system researcher recommends small business managers should be
prepared timely method being available soon as much as necessary to assist management in
making right decision, there are less educated people in the local small businesses, the juniors
working in local small businesses are required a special skills and education , an accurate
need assessment allows adult educators to create programs aimed at their target publics and
it is important to have materials on fundamental issues such as taxes, payroll, insurance,
business structure, financial statements, and legal and regulatory requirements.
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CHAPTER ONE
INTRODUCTION
Introduction
Background of the Study

The Small Business Administration recognized in the early 1960s by the Federal Government
has indicated that there is an average of over 500,000 firms started each year, regardless of the
high failure rate of nearly 400,000 firms annually. Furthermore, it is stated that most small
businesses fail within three years. In the face of the decline in the growth of major industries
in the United States, the Gross National Product has continued to increase annually. This
increase has resulted from the extensive growth of small businesses over the last two decades.
The small business employs an average of fewer than fifty persons (Herbert & Charles, 2004).
A great deal of effort has been extended to assist entrepreneurs overcome difficulties
encountered. Among the first governmental help was the Small Business Institute (SBI)
developed through the Small Business Administration. At this writing there are more than 500
Small Business Institutes administered through colleges and universities within the country at
each SBI, undergraduate seniors and graduate students at Schools, Colleges, and departments
of Business Administration, along with their faculty advisors, provide on-site management
counseling to businesses facing difficulties. Counseling is provided to a wide array of
businesses and typically focuses on management, marketing, financial and accounting
problems. The Small Business Administration has helped in the development of the Small
Business Development Centers (ibid).
“All statements should be prepared in a timely manner and should be available soon
enough to assist management in effective decision making” (Herbert & Charles, 2004).
However, management must be knowledgeable as to what the statements are portraying in
order to make decisions. Accountants must remember that often management does not have
the skill to interpret the statements, the records and the findings. Accountants must educate
them. Financial information should not be just handed to management by accountants but both
must expend time and effort to enable management to understand what is presented and the
impact that it will have on the operation of the organization and its decision making (ibid).
According to Herbert and Charles (2004) “It is inexcusable for skilled external
1
Accountants to permit clients to fail because of indifference. Small business owners have
enough problems with which to contend without having to consider the competency and
motivation of an accountant. The role of the accountant is to represent the financial team for
the small business owner and to reduce the pressures, problems and hurdles facing small
business owners in this difficult competitive U.S. economy. Basic accounting principles
practiced by competent and caring professionals can be the main source of strength which can
enable small business success”.
In Africa, The level of book keeping and accounting in one man businesses have
created many problems against the effective operation and accountability of a sole
proprietorship. One of the most common complaints by businesses and their enterprises is the
amount and complexity of the various regulatory and administrative obligations that have to
be observed. One man business suffers disproportionately from the regulatory burden
compared to large companies, since the smaller enterprises often do not have sufficient
financial and human resources to manage their obligations in the most efficient way.
Normally, statutory accounts of one man businesses are not considered to be particularly
useful for managing the enterprise, but the majority of entrepreneurs receive management
advice or further analysis at the same time. Not many small enterprises have a computerized
or partly computerized accounting system, and this is positively associated with the frequency
or availability of management information and little capital investment involved. The most
widely used and most used sources of financial information are cash flow information in
various forms and the monthly/quarterly management accounts (Abdulraheem Yahaya &
Etudaiye-Muhtar, 2012).
In Somalia, to the researcher‟s best awareness; there is no indication in the literature

with concern to studies that study the accounting problems encountered in small business,
Thus this current study examines the accounting problems encountered in small business.
In 1941, The American Institute of Certified Public Accountants (AICPA) had defined
accounting as the art of recording, classifying, and summarizing in a significant manner and in
terms of money, transactions and events which are, in part at least, of financial character, and
interpreting the results. In 1966, the American Accounting Association (AAA) defined
accounting as „the process of identifying, measuring and communicating economic
2
information to permit informed judgments and decisions by users of information,‟ Accounting
skills are the totality of skills ranging from record keeping, attention directing, financial
management and reporting skills that are expected to promote effective decision, performance
evaluation and business reporting of any business enterprise (Akande & O, 2011).
Accounting is basically an information system that provides economic information to

decision makers. It is a financial information system that provides the guide and direction for
business growth and development. It transcends record making machinery to taking vital
economic and investment decisions for owners and stakeholders as measured by existing
accounting procedures (Akinduko, Frankwood, Soyode, & Oladejo, 2008).
Thus this study uses accounting as the art of recording, classifying, and summarizing
in a significant manner and in terms of money, transactions and events which are, in part at
least, of financial character, and interpreting the results. There for this study investigates
accounting problems in small businesses and also this study examine the effect of accounting
problems on company performance in Mogadishu Somalia.
Statement of Problem
Small business managers should be prepared in a timely manner being available soon enough
to assist management in making proper decisions. However, in order to make these decisions,
management must be knowledgeable as to what the statements are portraying. It is important
to remember that often management does not have the skill to interpret the statements. It‟s
critical a Smaller business to prepare and adhere to a comprehensive business plan consisting
of financial, managerial, and marketing components. Smaller businesses often do not have the
cash to maintain the staying power during adverse business conditions and a serious
deterioration of financial condition can take place in a short period of time (Herbert &
Charles, 2004).
Unfortunately, many owners and managers are not willing or do not have the time and
expertise to create such a tool, even though assistance in preparing planning instruments is
usually available at little or no cost. Small business seems that they have grown extensively
over the last two decades, in most instances accounting related problems surface as a major
cause of deficiencies (Abrams, 1976).
Therefore this study investigates accounting problems encountered in small businesses
3
and also this study examines the effect of accounting problems on company performance.
Purpose of the Study

The purpose of the study is to investigate accounting problems encountered in small
businesses in Mogadishu.
Objectives of the Study

1) To identify the accounting problems encountered by small businesses.
2) To investigate the effect of accounting problems on company performance.
Research Questions
1) What accounting problems encountered by small businesses?
2) What is the effect of accounting problems on company performance?
Scope of the Study

This cross-sectional study investigates the accounting problems encountered in small business
Merchandising and Manufacturing Companies will be taken as a Survey. The reason of
selection of Merchandising and Manufacturing Companies is that it is suitable for researcher
to investigate it. The study is based primary data collected through Questioner with the
small business exists more than three years. And this study will be limited in Mogadishu
city. In terms of time this study will limit from February to April 30, 2015.
Significance of the Study

This study is important for small business for it provides a base for accounting development.
It is hoped to be helpful for the Merchandising and Manufacturing industry in Somalia,
especially local Companies. As findings and recommendations provided in the conclusion
of this research, they will recognize the extent of effect accounting in their business.
This study is also useful to any potential researchers who interest to make further study in
this area as literature.
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Definition of Key Terms
Accounting as the art of recording, classifying, and summarizing in a significant
manner and in terms of money, transactions and events which are, in part at least, of financial
character, and interpreting the results.
Small business is used to refer a business which is privately owned and operated
business characterized by small number of employee less than 20
Conceptual Framework
Accounting Problems Small Business

(Independent Variable) (Dependent Variable)
Fraud Lack of strategic

planning
Misrepresentation Poor inventory control
Lack of Control Lack of relevant

over cash experience
Unskilled Management
Accountant incompetence
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CHAPTER TWO
RELATED LITERATURE REVIEW
Introduction
In this chapter, it consists of four sections: in the first part, it will discuss, accounting
problems encountered by small businesses of the study will be discuss, and the second part
accountant‟s role in solving accounting problems will discuss, the third part, summary will be
discuss, and the fourth part, prior studies related to the study, will be discuss.
Accounting Problems Encountered By Small Business
Accounting related problems, listed by frequency of occurrence were as fraud, Incompetent or

Indifferent Accountant, No Analysis of Cash Flow, Inventory Control, Unskilled Accountant,
Lack of Control over Cash, of all the accounting related problems identified by Clute, the one
that is most bothersome is”
Fraud
Fraud is one of the besetting evils of our time. While less dramatic than crimes of violence
like murder or rape, fraud can inflict significant damage at organizational or individual Level.
Fraud is a concept that seems to have an obvious meaning until we try to define it. Fraud
exists in many different guises, and it is necessary to carefully define what it is and to tailor
policies and initiatives accordingly. Developing a definition of fraud is an early step of a
prevention program. In order to be involved in the protection function, people at all levels of
an organization must be knowledgeable about fraud. In this paper, we discuss the risk of fraud
from an information systems perspective, explain what fraud is and present a range of
definitions of fraud and computer fraud. We argue that without clearly defining fraud,
organizations will not be able to share information that has the same meaning to everyone, to
agree on how to measure the problem and to know the extent of the problem, in order to
decide how much and where to deploy resources to effectively solve it (Vasiua, Warrenb , &
Mackaya, 2003).
6
Accounting fraud involves “officers of publicly traded companies seeking to
manipulate accounting data and corporate reports to make the financial soundness of their
companies appear better than it is” and securities and other investment fraud consists of
“market-manipulation schemes, fraudulent offers of stock in nonexistent or bankrupt
companies, fraudulent foreign-currency transactions, „prime bank‟ schemes, offshore trusts
and investments, and insider trading (Leonard W. Vona, 2006)
Incompetent, or Indifferent Accountant
Since accountants have the reputation for being extremely competent with an ongoing concern
for the client's well-being, what is meant by the phrase "incompetent, or indifferent
accountant" According to Clute, incompetent accountants are individuals who misrepresent
their background and skills to the owner of small businesses. They are not trained in
accounting, or taxes, but claim to be. Indifferent accountants are qualified accountants who
may or may not do an adequate job, but would rarely do more (Herbert & Charles, 2004).
Cash flow mismanagement
Cash flow mismanagement is cited by experienced business owners, consultants and industry
analysts as the biggest reason for small business failure. This is interesting on a couple of
fronts. Most small business owners worry about two things when they start out: Whether they
can create an offering that people will buy; And Whether they can compete effectively to
secure enough market shares to survive. It turns out, however, that the quality of products or
services offered by small businesses is hardly ever called into question. Their entrepreneurial
dedication to a core competency (whether offering fitness services or delivering exotic
jewelry) is what sets a small business apart from larger players (Miller & Betty, L, 2007)
Control of inventory
Control of inventory is needed to ensure that the business has the right goods on hand to avoid
stock-outs, to prevent shrinkage (spoilage/theft), and to provide proper accounting. Many
businesses have too much of their limited resource, capital, tied up in their major asset,
inventory. Worse, they may have their capital tied up in the wrong kind of inventory.
Inventory may be old, worn out, shopworn, obsolete, or the wrong sizes or colors, or there
7
may be an imbalance among different product lines that reduces the customer appeal of the
total operation. Inventory control records are essential to making buy-and-sell decisions.
Some companies control their stock by taking physical inventories at regular intervals,
monthly or quarterly. Others use a dollar inventory record that gives a rough idea of what the
inventory may be from day to day in terms of dollars. If your stock is made up of thousands of
items, as it is for a convenience type store, dollar control may be more practical than physical
control. However, even with this method, an inventory count must be taken periodically to
verify the levels of inventory by item. Controlling inventory does not have to be an onerous or
complex proposition. It is a process and thoughtful inventory management. There are no hard
and fast rules to abide by, but some extremely useful guidelines to help your thinking about
the subject. A five step process has been designed that will help any business bring this
potential problem under control to think systematically thorough the process and allow the
business to make the most efficient use possible of the resources represented. The final
decisions, of course, must be the result of good judgment and not the product of a mechanical
set of formulas (Score )
Many companies have failed because their inventories tied up too much capital
(funds), or the items in inventory became obsolete, impaired or lost. It is therefore not
unnecessary to have an appropriate set of policies concerning the items to carry in inventory,
the level of inventory control and management of stocks. It is pragmatically evident that the
profitability of any business organization depends largely on the ability of management (of
the concerned industry) to exercise effective purchasing and efficient materials control.
However, the problem of most companies is the lack of "know-how" in this area of business
operation. This has been attributed to many business failures. Furthermore, most
Organizations have difficulty in maintaining the right quantity of inventory for optimal
productivity, growth and profitability due to poor vision, inadequate market forecast and
effective planning. The result has been either under or over -capacity utilization which often
spell doom on the corporate existence of (A. & O., 2011).
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Accounting skills
Accounting skills are the totality of skills ranging from record keeping, attention directing,
financial management and reporting skills that are expected to promote effective decision,
performance evaluation and business reporting of any business enterprise. Although studies
could not find record keeping skill as positive factor, financial management skill has been
found to be contributory to business development. Attention directing skill enables the owner
manager to make vital decision on production and pricing issues while reporting skill
describes the method and technique by which business information are reported to the
stakeholders of the business. Since financial management is accounting skill, owner manager
entrepreneurs are expected to possess such for vital business growth and development
(Akande & Carland, 2010)
A lack of control over cash flow
A lack of control over cash flow is one of the leading causes of small-business failure. Here's
what to look for when analyzing your business's cash flow. As any small-business owner
knows, maintaining a positive cash flow is the essence of staying on course with your
objectives. Conducting a periodic cash flow analysis will help you determine whether your
business generates enough cash to meet your obligations and how cash outflow compares to
incoming revenue from sales. Cash flow analysis also is used to forecast changes in your
receipts and disbursements and to gauge the effects of those changes on future cash
requirements. The cash flow statement reports your business's sources and uses of cash during
a specified accounting period (e.g., monthly, semiannually, or annually). When used in
conjunction with an income statement and balance sheet, the cash flow statement provides a
comprehensive picture of your company's liquidity. The change in cash resulting from routine
activities that either generate or require cash, this includes incoming receipts (cash and
checks) from the sale of goods and/or services, as well as interest and dividend income.
Operating activities also include outgoing payments for materials, employee salaries, taxes,
insurance, loan repayments, and rent. The net amount of cash from (or used by) operating
activities is the most important figure on the cash flow statement. The change in cash is
resulting from actions or events that involve the purchase or sale of company assets (e.g.,
securities, land, buildings, or equipment). Investing activities also include paying or collecting
9
on loans. The change in cash is resulting from payments to or receipts from suppliers of
money to the company. For instance, money borrowed in the form of a loan represents cash
receipts, while the repayment of loans or dividends to investors represents cash payments
(ibid).
The Effect of Accounting Problems on Company Performance
For many years the Small Business Administration Region Office in Baltimore, Maryland
assigned numerous cases to the six Small Business Institutes located in colleges and
universities in Maryland. These cases involved businesses that have had loans with the SBA
and are in financial difficulty. Each director of an active chapter was contacted and queried
regarding any cases that involved accounting related problems. Based on their discussion with
appropriate faculty advisors and our experience as advisors and case leaders, the following
examples emerged as indicative of accounting related problems involving indifferent outside
accountants: Untimely Financing Statements, No Explanation of Financial Position, or
Operations, Cash Forecasting was not Emphasized, No Advise Regarding Credit and
Collection Policies, No Interface with Financial Markets, No Information Regarding the
Impact on any FASB's Pronouncements, or Proposal that might affect the Financial Condition
of the Firm, No Explanation of Proper Accounting Functions as opposed to Financial Myths,
No Follow Up to Determine that Suggestions and Advice are carried out (Herbert & Charles,
2004).
Timely financial statements are important for internal as well as external users.
Management and Loan officers utilize financial statements for their feedback and predictive
values. They use them to confirm past performance and influence decisions. Unfortunately,
indifferent outside accountants often provided compiled financial statements that have been
too late to influence internal or external decisions (Herbert & Charles, 2004).
Entrepreneurs are usually enthusiastic and will rush into active operations without
putting much effort into financial planning. Often these owner managers are not
knowledgeable as to the potential information provided by such planning. In some instances,
financial statements are provided without analysis. Often the owners do not realize the
illiquidity of the firm or that it is in jeopardy. Owner managers do not always know how to
calculate current ratio, working capital, quick ratio, etc. External accountants do not take the
10
time to educate clients as to the effective utilization of the financial statements (Herbert &
Charles, 2004).
Successful entrepreneurs often exhibit a natural ability to realize when cash flow is
critical. Unfortunately the troubled entrepreneur doesn't realize that there is a cash flow
problem until it is too late. It is here that the services of concerned accountants come into play
for without such services, small business will fail. Management rarely if ever, considers
preparing a schedule of cash inflows versus cash outflows. Cash forecasting is necessary for
any business. It becomes even more imperative when the small business is experiencing a
credit crunch such as in a tight money market economy. Smaller businesses often do not have
the cash to maintain the staying power during adverse business conditions and a serious
deterioration of financial condition can take place in a short period of time (ibid).
In order to obtain sales, many small businesses will extend credit to customers without
investigating their background. Credit may also be extended over longer periods than
permitted by their competitors in order to obtain more sales. Collection of monies due on
these accounts is often relegated to a subordinate who does not have the same interest,
motivation and persistence as the owner. Additionally, while credit is extended to customers,
the client's suppliers are requesting timely payments thus placing the small business in a cash
flow short, or cash flow squeeze. Indifferent accountants do not make the small business
owners aware of the ramifications of this cash squeeze. It is not pointed out that the business-
owners are in essence financing the operation of customers by extending credit periods, nor is
it pointed out that the small business person's own credit rating is deteriorating, due to the
cash squeeze (ibid).
External accountants perform invaluable services by acting as connection between the
small business client and the financial institution (typically a bank). Accountants may be of
assistance in obtaining the bridge loan that keeps the client going. The accountant may be able
to persuade banks to extend the due date on loan if the financial forecasts so indicate. External
accountants may be able to prove to the financial institution that a lower level of service such
as a compilation or review may well suit everyone's need rather than the costly audit.
Additionally, involved accountants can be of assistance in establishing, developing and
sustaining sound client bank relationships. Unfortunately, indifferent accountants will not
(Herbert & Charles, 2004).
11
Many developing firms demonstrate the desire to comply with all regulations that will
enable them to get nonqualified report or clean reports. However, their lack of knowledge of
the general practice and pronouncements of the Financial Accounting Standards Board can
create both immediate and long run problems as they prepare to expand and develop their
organizations. Owners want to maintain satisfied employees and to grant good qualified
pension plans, but they are not aware of the cost and practices and might eventually become
involved in labor problems, turnovers and other problematic situations from these conditions.
Furthermore my survey with small business owners on the cost of cash funding for FASB's
Proposal on Employers Post Retirement Other than Pensions indicates that new programs will
have to be developed because these owners cannot afford to set aside cash for future
undetermined activities. Fewer employees benefits might be forthcoming (Herbert & Charles,
2004).
Many small businesses tend to finance their operation through use of payroll taxes.
This is particularly true when the firm cannot secure credit through other sources, such as
banks, or other suppliers. Failure have effective budgeting properly for payroll taxes may give
the appearance of "hidden cash flow" at the time of writing these payroll checks. Or,
purposely using them as a financing source, some of the businesses get behind on their payroll
taxes. Furthermore, because of penalties and interest, many small businesses find it
impossible to catch up. It is the function of the external accountants to ascertain from the
beginning that the clients understand the importance of staying current on payroll taxes and
that to do otherwise may cause the Internal Revenue Service to put them out of business.
External accountants must stress the importance of compliance with all governmental
organizations, and not just the taxing authorities, because compliance is essential to the
continuity of the small business (Herbert & Charles, 2004).
Small businessmen and women operating in the corporate form can create a second
level of problems for accountants and their clients. The myth of separating oneself, the owner,
from the corporation creates difficulty. They consider themselves and the corporation as one
entity. They will grab whatever check book is available, the corporation, or the owner's,
particularly the one that is nearer, or the one with the larger amount of cash balance, whether
writing as personal checks or business checks. Furthermore they will write checks to
themselves without considering the deduction of a payroll tax, and treat it as loans, when they
12
have no intention of repaying. They continue to take paychecks even when the business is
bad. Such conditions can create losses in the corporation which cannot be utilized for
corporate tax purpose resulting in greater personal income and hence tax liability, to them.
External accountants must see that clients understand the importance of keeping the entities
separate for financial reporting and income and payroll tax purposes. The importance of
understanding that when you are in business for yourself you are the last one to be paid. This
myth that can often be made by the external account can convey particularly to business
owners whose previous experience and background consider the security of paychecks are
forthcoming regardless of failures (ibid).
Accountants tend to take on more work than they can handle in a timely basis. This
results in untimely financial statements which are often mailed off to clients with no
explanation. Additionally, if there were previous expectations done by the client the failure to
check on these activities leads to unsatisfactory performance. Often cash forecasting, which
are at times most important to small businesses, are not even prepared. Time for client's
education in the area of cash forecasting, credit collection policies is not available to the
accountant, or if the education was demonstrated earlier, the lack of time, prevents
accountants from checking to see if the procedures are being carried out. However, in defense
of overworked external accountants, many small business clients do not have funds to pay for
these services. Furthermore they are not at a level where the firms can hire a full time in-
house accountant to help reduce the cost of external accounting services (ibid).
Prior Study
Accountants must remember that often management does not have the skill to interpret the
statements, the records and the findings. Accountants must educate them. Financial
information should not be just handed to management by accountants but both must expend
time and effort to enable management to understand what is presented and the impact that it
will have on the operation of the organization and its decision making. It is inexcusable for
skilled external accountants to permit clients to fail because of indifference. Small business
owners have enough problems with which to contend without having to consider the
competency and motivation of an accountant. The role of the accountant is to represent the
financial team for the small business owner and to reduce the pressures, problems and hurdles
13
facing small business owners in this difficult competitive U.S. economy. Basic accounting
principles practiced by competent and caring professionals can be the main source of strength
which can enable small business success (Herbert & Charles, 2004).
For many years the Small Business Administration Region Office in Baltimore,
Maryland assigned numerous cases to the six Small Business Institutes located in colleges and
universities in Maryland. These cases involved businesses that have had loans with the SBA
and are in financial difficulty. Each director of an active chapter was contacted and queried
regarding any cases that involved accounting elated problems. Based on their discussion with
appropriate faculty advisors and our experience as divisors and case leaders, the following
examples emerged as indicative of accounting related problems involving indifferent outside
accountants (ibid).
Accounting as the art of Recording, Classifying and Summarizing in a significant
manner and interims of money trisections and events which are in part at list of a financial
character and interpreting the results Accounting is the process of identifying, measuring and
communicating economic information to permit informed judgments and decision by users of
the information accounting skills are the totality of skills ranging from record keeping,
attention directing, financial management and reporting skills that are expected to promote
effective decision, performance evaluation and business reporting of any business enterprise
(jones & Ahmed).
Accounting as basically is an information system that provides economic information
to decision makers. It is a financial information system that provides the guide and direction
for business growth and development. It transcends record making machinery to taking vital
economic and investment decisions for owners and stakeholders as measured by existing
accounting procedures (ibid).
Numerous articles have been written regarding business failures and bankruptcies.
Many of these articles focused on large corporations with management deficiencies and
bankruptcies evidenced through the analysis of pertinent financial ratios. However, only a few
articles concentrated on the warning signs of impending business failures that may apply to
both large and small businesses (Herbert & Charles, 2004)
14
Prior studies focus insufficient financial operating resources, and explored the role of
accounting related problems in small business, but this study will focus inexperienced
management team. Therefore it investigates accounting problems encountered in small
businesses.
Summary
In this chapter, it consists of three sections excluded summery. In the first part, it discussed,
accounting problems encountered by small businesses of the study, and the second part
accountants‟ role in solving accounting problems discussed, the final part, prior studies
discussed.
15
CHAPTER THREE
METHODOLOGY
Introduction
the chapter will consist of eight sections the first section will be the research design fallowed
by population, research instrument, data gathering procedure, data analysis, ethical
considerations, limitation of the study and summery/conclusions.
Research Design
Research design is “the blueprint that includes experiments, interviews, observation, and the
analysis of records, simulation or some combination of these (Donald, 2003). The study will
be conducted through a quantitative survey design. “Survey design is a research design that
present oriented methodology used to investigate population by selecting samples to analyze
and discover occurrence (Oso & Onen, 2008). According (Oso & Onen, 2008), Quantitative
survey design will enable the researcher to understand a population from a part of it and
rapid data collections. Nell and Robin (2004) research is particularly relevant to this study
That is the reason the researcher selected survey design as it is appropriate way to collect
data.
Research Population
The study population includes some selected merchandising and manufacturing businesses
companies all head quarter in Mogadishu. The researcher some selected based on their long
time in business. The target population of this study will be 57 respondents from 3
merchandising and manufacturing business firms in Mogadishu.
Sample Size
A sample is part of the target (accessible) population that has been procedurally selected to
present it. The sample will consist of 50 participants selected from merchandising and
manufacturing businesses. These participants have been chosen according to the possibility of
getting accurate information.
16
To determine the ideal sample size for a population, the study will use Slovene‟s
formula which is n=N/ (1+ (N*e^2)), where n= sample size, N= population size, 57 and e =
margin of error of 5 %. n=57/ (1+ (57*0.0025)) = 50 participants.
NO Sectors Selected employee
1 Muumin Group of Companies 15
2 Macruuf Business Center 15
3 Coca Cola 20
Total Sample size 50
Source: Researcher, 2015
Sampling Procedure
The sampling procedure will employ in this study will be non-probability sampling procedure
especially purposive sampling. Purposive or judgment sampling is based on the assumption
that the researcher is able to select elements which represent a „typical sample‟ from the
appropriate target population (Saunders et al,). The researcher will select purposive sampling
because they will able to judge and choose population members who are good prospects for
accurate information and it also will save time and cost.
Research Instrument
The study will utilize questionnaire adapted from (Herbert & Charles, 2004)as the major tool
for collecting data. The instrument used has the advantage of having its external validity
tested and verified in many countries of the world (sounders et al., 2009) Questionnaire is
refers to a set of questions designed to generate data necessary for accomplishing the
objectives of the research project (Sounders et al, 2000). Researcher will select questionnaire
as it has the following advantages: first. It provides efficient way for collecting responses
from a large sample. Second, it requires less skills and sensitivity than semi-structures and in-
depth interviews (sounders et al., 2009).
17
Validity and Reliability of the Instrument
“Validity is the quality of the test doing what is designed to do; where reliability consists of
both true score and error score” (Salkind, 2000). “That reliability is necessary but not
sufficient for validity. That is, for something to be valid it must be reliable but it must also
measure what it is proposed to measure” (Salkind, 2000). Prior to the distribution of
questionnaires, a pilot test was conducted to see whether the questions are clear and the
language was understandable and as well as to record the time taken by the respondents to
answer the questionnaire.
Data Gathering Procedure
To ensure the purpose of this study, data will be collected through adopted questionnaire as it
is the easiest way to gather right information according the nature of this study. The
questionnaire will collect by hand as it enables to assist the respondents to answer what they
want to clarify. Data will be collected from merchandising and Manufacturing businesses in
Mogadishu. In order to collect data from respondents the researcher will employ a
questionnaire adapted from prior literature. The questionnaire will be delivered and collected
from respondents by hand in order to guide the respondent they need some clarification about
the questionnaire.
Data Analysis
Quantitative data analysis will be used in this study. Analyses will be carried out with the aid
of the Statistical Package for Social Sciences, (SPSS Version 16). Descriptive statistics are
used to describe the data collected in research studies and to accurately characterize the
variables under observation within a specific sample (Marczyk, DeMatteo, & Festinger,
2005). Descriptive statistics is the use of measure of central tendency provides researcher
with a way of characterizing a data set with a single value. The most widely used measures of
central tendency are the mean, median, and mode (Marczyk, DeMatteo, & Festinger, 2005).
Descriptive statistics is the use of measurement of central tendency such as means, to describe
a group of subject (Oso & Onen, 2008). In the questionnaire each selected one to five scale
for where, 1= Strongly disagree, 2= Disagree, 3= Neutral, 4= Agree, 5= Strongly agree
18
The following table presents the Mean ranges, Response mode and their Interpretation.
Mean range Response mode Interpretation
4.21-5.00 Strongly agree Excellent
3.41-4.20 Agree Very good
2.61-3.40 Neutral Good
1.81-2.60 Disagree Poor
1.00-1.80 Strongly disagree Very Poor
Ethical Considerations
The issue of ethics is very important in research. Despite the high value of knowledge gained
through research, knowledge cannot be pursued at the expense of human dignity (Oso &
Onen, 2008). Thus, the data collected was kept confidential and was exclusively used for the
purpose of Bachelor degree requirements. The respondents were informed of the contents and
the aims of the research prior to administration of the instrument. This research was fully
conducted ethically and all copyrights were observed and where permission was required to
reproduce materials was sought. In addition the researcher will request from the academic
department a certificate of confidentiality so as to get confidentiality and the researcher will
provide the participants with information about the purpose of the research and the expected
duration of participation and the procedure to be fallowed.
Limitations of the Study
The study suffers from the use of questionnaire because, the questionnaire have some
limitations such as poorly completed answers, Limit answers. The language is also the
greatest barrier in getting the most correct answers for the questionnaire. The survey
instrument used in this study was only questionnaire, since there are other suitable methods
like questionnaire with interview and observation method.
19
CHAPTER FOUR
FINDINGS AND DISCUSSIONS
INTRODUCTION
This chapter presents detailed description of findings and discussions, this study
consists of three sections first section Demographic data, second section data
representations and analysis and third section major findings and discussions of the
study. To achieve those declared objectives questionnaire employed in this study. Data
were collected from Merchandising and Manufacturing firms in Mogadishu-Somalia.
DEMOGRAPHIC CHARACTERISTICS OF THE RESPONDENTS

This part presents the background information of the respondents who participated in
this study; the purpose of this background information is to find out the characteristics
of the respondents. Furthermore, the respondents have also given the promise that all
the data they provided is used only for academic purpose research and the identities of
the respondents will be confidential. In total, 50 respondents filled in the questionnaire
selected from Merchandising and Manufacturing firms in Mogadishu Somalia. The
shape of the questionnaire in the demographic section is looked upon in terms of
Gender, Age, marital status, level of education and experience.
4.1.1 Gender Distribution

In general, the respondents include the employee of two Merchandising and
Manufacturing firms in which 37 of them were male respondents and 13 were
female respondents. All of them were employees of the Muumin group of companies,
Macruuf Business Center and Coca Cola in Mogadishu.
20
Table 4.1.0 Gender of the Respondents
Gender
Frequency Percent Valid Percent Cumulative Percent
Male 37 74 74 74
Valid Female 13 26 26 100
Total 50 100 100
Source: Survey Data 2015
Table 4.1.0 shows 74% of the employees of Mogadishu Merchandising and
Manufacturing firms are male while 26% of employees of Merchandising and
Manufacturing firms are female. Based on data gathered, the majority of the
respondents are male, while a small number of the respondents are female. Thus, male
have significantly dominated the employees of Merchandising and Manufacturing firms
in Mogadishu.
Figure 4.1.0 Gender of the Respondents
Gender
Female
Female
25%
Male
75%
21
Table 4.1.1 Age of the Respondents
Age

20-30 35 70 70 70
31-40 14 28 28 98
Valid
41-50 1 2 2 100
Total 50 100 100
Table 4.1.1 illustrates that Most of respondents aged 20-30 years old (70%) which had
relatively greater than the percentage of respondents aged in 30-40 years (28%), 40-50
years (2%), this implies, that majority of employees of Merchandising and Manufacturing
firms in Mogadishu are junior.
Figure 4.1.1 Age of the Respondents
Age
70%
70%
60%
50%
28%
Percent
40% 20-30
31-40
30%
41-50
2%
10%
0%
20-30 31-40 41-50
Age
22
Table 4.1.2 Marital status of the Respondents
Marital status

Single 20 40 40 40
Valid Married 30 60 60 100
Total 50 100 100
Table 4.1.2 shows 40% of the employee of Merchandising and Manufacturing firms in
Mogadishu are single while 60% of the employees of Merchandising and Manufacturing
firms in Mogadishu are married. Based on data gathered, the majority of the employees of
Merchandising and Manufacturing firms in Mogadishu are married.
Figure 4.1.2 Marital status of the Respondents
Marital Status
60%
60%
40%
40%
30%
20% Single
Single
Marital Status
23
Table 4.1.3 The Level of the Respondents‟ Education
Education level
Secondary level 6 12 12 12
Diploma 8 16 16 28
Valid Bachelor degree 29 58 58 86
Master degree 7 14 14 100
Total 50 100 100
The sample was including 50 respondents who are working at Merchandising and
Manufacturing firms in Mogadishu. Especially Muumin Group of companies, Macruuf
Business Center and Coca Cola in Mogadishu. The sample of this study consists of
12% are secondary, 16% are diploma, 58% are bachelor degree, and 14% are master
degree. This means that the employees of most Merchandising and Manufacturing firms
in Mogadishu are bachelor degree.
Figure 4.1.3 The Level of the Respondents‟ Education
Education level
58%
Secondary level
Diploma
16% 14% Bachelor degree
12%
Master degree
0%
Diploma Master degree
level degree
24
Table 4.1.4 The Level of the Respondents‟ Experience
Experience

Less than 6 months 3 6 6 6
6 months- 1year 8 16 16 22
Valid 1 year- 2years 8 16 16 38
2 years and above 31 62 62 100
Total 50 100 100
The sample of this study consists of 6% are Less than 6 months employee, 16% are 6
months- 1year employee , 16% are 1 year- 2years employee ,and 31% are employee
more than 2 years and above. Therefore, this means that the experience of employees in
Merchandising and Manufacturing firms in Mogadishu is more than two years so that the
most of employees have more experience about Merchandising and Manufacturing operations.
Figure 4.1.4 The Level of the Respondents‟ Experience
Experience
62%
Less than 6 months

16% 16% 6 months- 1year
6% year- 2years
years and above
0%
Less than 6 6 months- 1 year- 2years 2 years and
above
Experience
25
Table 4.2.0 Fraud is one of the attacking problems of our time. While less dramatic than crimes
of violence like murder or rape, fraud can inflict significant damage at organizational or
individual Level.

Agree 18 36 36 36
Strongly agree 17 34 34 70
Strongly disagree 7 14 14 84
Valid
Disagree 6 12 12 96
Neutral 2 4 4 100
Total 50 100 100
The table 4.2.0, and figure 4.2.0, indicates that 36% of the respondents agreed that Fraud is one
of the attacking problems of our time. While less dramatic than crimes of violence like murder or
rape, fraud can inflict significant damage at organizational or individual Level, 34% strongly
agreed, 14% strongly disagreed, 12% Disagree, and 4% neutral.
Figure 4.2.0 Fraud is one of the attacking problems of our time. While less dramatic than crimes
of violence like murder or rape, fraud can inflict significant damage at organizational or
individual Level.
Objective one Question 1

36% 34%
Percent
Agree
14% 12%
Strongly agree
4%
Strongly
0% disagree
Strongly Strongly Disagree
disagree
26
Table 4.2.1 Incompetent accountants are individuals who misrepresent their background and
skills to the owner of small businesses.

Agree 19 38 38 38
Disagree 11 22 22 60
Valid
Neutral 5 10 10 92
Total 50 100 100
The table 4.2.1, and figure 4.2.1, indicates that 38% of the respondents agreed that Incompetent
accountants are individuals who misrepresent their background and skills to the owner of small
businesses, 22% disagree, 22% strongly agree, 10% neutral, and 8% Strongly disagree.
Figure 4.2.1 Incompetent accountants are individuals who misrepresent their background and
skills to the owner of small businesses.

38%
22% 22% Agree

Disagree
Strongly agree
10%
8% Neutral
Strongly disagree
5%
0%
Disagree Strongly
agree disagree
27
Table 4.2.2 Cash flow mismanagement is cited by experienced business owners, consultants and
industry analysts as the biggest reason for small business success.

Neutral 10 20 20 68
Valid
Agree 10 20 20 88
Total 50 100 100
The table 4.2.2, and figure 4.2.2, indicates that 26% of the respondents strongly agreed that Cash
flow mismanagement is cited by experienced business owners, consultants and industry analysts
as the biggest reason for small business success. 22% strongly disagree, 20% Neutral, 20%
agree, and 12% disagree.
Figure 4.2.2 Cash flow mismanagement is cited by experienced business owners, consultants
and industry analysts as the biggest reason for small business success.
12%
26%
20% Strongly agree

Strongly disagree
Neutral
22% Agree
20%
Disagree
28
Table 4.2.3 Control of inventory is needed to ensure that the business has the right goods on
hand to avoid stock-outs, to prevent spoilage/theft, and to provide proper accounting.

Agree 19 38 38 86
Valid
Disagree 2 4 4 96
Neutral 2 4 4 100
Total 50 100 100
The table 4.2.3, and figure 4.2.3, indicates that 48% of the respondents strongly agreed that
Control of inventory is needed to ensure that the business has the right goods on hand to avoid
stock-outs, to prevent spoilage/theft, and to provide proper accounting, 38% agree, 6% Strongly
disagree, 4% disagree, and 4% Neutral.
Figure 4.2.3 Control of inventory is needed to ensure that the business has the right goods on
hand to avoid stock-outs, to prevent spoilage/theft, and to provide proper accounting.

48%
50%
45%
40%
35%
Strongly agree
30%
Agree
25%
Strongly disagree
20%
Disagree
15%
10% 6%
4% 4%
5%
Agree Strongly Disagree

agree disagree
29
Table 4.2.4 Accounting skills are the totality of skills ranging from record keeping, attention
directing, financial management and reporting skills that are expected to promote effective
decision, performance evaluation and business reporting of any business enterprise.

Agree 17 34 34 70
Neutral 7 14 14 84
Valid
Disagree 5 10 10 94
Total 50 100 100
performance evaluation and business reporting of any business enterprise, 34% agree, 14%
Neutral, 10% disagree, and 6% Strongly disagree.
Figure 4.2.4 Accounting skills are the totality of skills ranging from record keeping, attention
directing, financial management and reporting skills that are expected to promote effective
decision, performance evaluation and business reporting of any business enterprise.

36% 34%
40%
30% Strongly agree

Percent
14% Agree
20% 10%
6% Neutral
Disagree
0% Strongly disagree
Strongly
30
Table 4.2.5 A lack of control over cash flow is one of the leading causes of small-business
achievement.
Agree 10 20 20 70
Valid
Neutral 9 18 18 88
Total 50 100 100
The table 4.2.5, and figure 4.2.5, indicates that 26% of the respondents strongly disagreed that A
lack of control over cash flow is one of the leading causes of small-business achievement, 24%
disagree, 20% agree, 4% Neutral, and 12% Strongly agree.
Figure 4.2.5 A lack of control over cash flow is one of the leading causes of small-business
achievement.

26%
24%
20%
18%
Strongly disagree
Disagree
12%
Agree
Strongly agree
5%
0%
Strongly Disagree Agree
disagree agree
31
Table 4.2.6 Inadequate or Nonexistent Accounting Records are problems faced by small
businesses.
Agree 22 44 44 44
Valid
Disagree 5 10 10 92
Neutral 4 8 8 100
Total 50 100 100
The table 4.2.6, and figure 4.2.6, indicates that 44% of the respondents agreed that Inadequate or
Nonexistent Accounting Records are problems faced by small businesses, 26% strongly agree,
12% Strongly disagree, 10% disagree, and 8% Neutral.
Figure 4.2.6 Inadequate or Nonexistent Accounting Records are problems faced by small
businesses.

44%
26%
Agree
Strongly agree
Strongly disagree
12%
10% Disagree
8%
Neutral
5%
0%
Strongly Strongly Disagree
agree disagree
32
Table 4.2.7 Timely financial statements are important for internal as well as external users.
Agree 19 38 38 80
Valid
Disagree 2 4 4 96
Neutral 2 4 4 100
Total 50 100 100
The table 4.2.7, and figure 4.2.7, indicates that 42% of the respondents strongly agreed that the
Timely financial statements are important for internal as well as external users, 38% agree, 12%
Strongly disagree, 4% disagree, and 4% Neutral.
Figure 4.2.7 Timely financial statements are important for internal as well as external users.
Objective two Question 1
4%
Disagree 4%
12%
Strongly disagree
38%
Agree
42%
Strongly agree
0% 5% 45%
Percent
33
Table 4.2.8 Successful entrepreneurs often exhibit a natural ability to realize when cash flow is
critical.
Agree 22 44 44 44
Neutral 7 14 14 84
Valid
Disagree 6 12 12 96
Total 50 100 100
The table 4.2.8, and figure 4.2.8, indicates that 44% of the respondents agreed that Successful
entrepreneurs often exhibit a natural ability to realize when cash flow is critical, 26% strongly
agree, 14% Neutral, 12% disagree, and 4% Strongly disagree.
Figure 4.2.8 Successful entrepreneurs often exhibit a natural ability to realize when cash flow is
critical.
4%
12%
Agree
44% Strongly agree
14%
Neutral
Disagree
Strongly disagree
26%
34
Table 4.2.9 In order to obtain sales, many small businesses will extend credit to customers
without investigating their background.

Agree 14 28 28 58
Neutral 8 16 16 74
Valid
Total 50 100 100
The table 4.2.9, and figure 4.2.9, indicates that 30% of the respondents strongly agreed that In
order to obtain sales, many small businesses will extend credit to customers without investigating
their background, 28% agree, 16% Neutral, 14% strongly disagree, and 12% disagree.
Figure 4.2.9 In order to obtain sales, many small businesses will extend credit to customers
without investigating their background.
30% Objective two Question 3

28%
30%
25%
16%
20% Strongly agree
14%
12% Agree
15%
10% Strongly disagree

Disagree
5%
0%
Agree Disagree
agree disagree
35
Table 4.2.10 Lack of knowledge of the general practice and pronouncements of the Financial
Accounting Standards Board can create both immediate and long run solutions as they prepare to
expand and develop their organizations.
Neutral 9 18 18 66
Valid
Agree 8 16 16 100
Total 50 100 100
The table 4.2.10, and figure 4.2.10, indicates that 28% of the respondents disagreed that Lack of
knowledge of the general practice and pronouncements of the Financial Accounting Standards
Board can create both immediate and long run solutions as they prepare to expand and develop
their organizations, 20% strongly disagree, 18% Neutral, 18% strongly agree, and 16% agree.
Figure 4.2.10 Lack of knowledge of the general practice and pronouncements of the Financial
Accounting Standards Board can create both immediate and long run solutions as they prepare to
expand and develop their organizations.
16% Disagree
28%
Strongly disagree
18% Neutral
Strongly agree
20% Agree
18%
36
Table 4.2.11 Small businessmen and women operating in the corporate form can create a second
level of problems for accountants and their clients.
Agree 15 30 30 30
Valid
Neutral 9 18 18 88
Total 50 100 100
The table 4.2.11, and figure 4.2.11, indicates that 30% of the respondents agreed that Small
businessmen and women operating in the corporate form can create a second level of problems
for accountants and their clients, 22% strongly agree, 18% Strongly disagree, 18% Neutral, and
12% disagree.
Figure 4.2.11 Small businessmen and women operating in the corporate form can create a
second level of problems for accountants and their clients.
12%
30%
18% Agree
Strongly agree
Strongly disagree
18% Neutral
22%
Disagree
37
Table 4.2.12 Keeping records of workers to helpless in development.
Agree 15 30 30 30
Disagree 9 18 18 68
Valid
Neutral 8 16 16 100
Total 50 100 100
The table 4.2.12, and figure 4.2.12, indicates that 30% of the respondents agreed that Keeping
records of workers to helpless in development, 20% strongly agree, 18% disagree, 16% strongly
disagree, and 16% Neutral.
Figure 4.2.12 Keeping records of workers to helpless in development.
30%
20%
18%
16% 16% Agree
Percent
Strongly agree
Disagree
Strongly disagree
Neutral
5%
0%
Agree Disagree Strongly
agree disagree
38
Table 4.2.13 Establish a record of books of accounts on daily, weekly, monthly and annual basis.
Agree 13 26 26 86
Neutral 4 8 8 94
Valid
Disagree 1 2 2 100
Total 50 100 100
Establish a record of books of accounts on daily, weekly, monthly and annual basis, 26% agree,
8% Neutral, 4% strongly disagree, and 2% disagree.
Figure 4.2.13 Establish a record of books of accounts on daily, weekly, monthly and annual
basis.

60%
Strongly agree
26% Agree
Strongly disagree
8% Disagree
4% 2%
0%
Strongly agree Agree Strongly Disagree
disagree
39
DATA PRESENTATION AND ANALYSIS
The independent variable in this study was the level of Accounting Problems Encountered for
Which the Researcher wanted to determine its level. Level of Accounting Problems
Encountered was operationalized using 7 questions in the questionnaire, Each of these questions
was based on the five likert Scale, where 1= Strongly disagree, 2= Disagree, 3= Neutral, 4=
Agree, 5= Strongly agree, respondents were asked to rate the Level of Accounting Problems
Encountered by indicating the extent to which they agree or disagree with Each question, their
responses were analyzed using SPSS and summarized using means as in Table 4.3.1.
TABLE: 4.3.1 LEVEL OF ACCOUNTING PROBLEMS ENCOUNTERED BY SMALL
BUSINESSES
Descriptive Statistics Mean Interpretation Rank

Control of inventory is needed to ensure that the
business has the right goods on hand to avoid stock-outs,
4.18 Very good 1
to prevent spoilage/theft, and to provide proper
accounting.
Accounting skills are the totality of skills ranging from
record keeping, attention directing, financial
management and reporting skills that are expected to 3.84 Very good 2
promote effective decision, performance evaluation and
business reporting of any business enterprise.
Fraud is one of the attacking problems of our time.
While less dramatic than crimes of violence like murder 3.64 Very good 3
or rape, fraud can inflict significant damage at
organizational or individual Level.
Inadequate or Nonexistent Accounting Records are
3.62 Very good 4
problems faced by small businesses.
Incompetent accountants are individuals who
misrepresent their background and skills to the owner of 3.44 Very good 5
small businesses.
Cash flow mismanagement is cited by experienced
business owners, consultants and industry analysts as the 3.16 Good 6
biggest reason for small business success.
A lack of control over cash flow is one of the leading
2.68 Good 7
causes of small-business achievement.
Grand Total 3.5 Very good
40
Results in table 4.3.1 indicate that the level of Accounting Problems Encountered
is generally Very good and this is indicated by the total average of 3.50, the highest rated aspect
of Control of inventory is needed to ensure that the business has the right goods on hand to avoid
stock-outs, to prevent spoilage/theft, and to provide proper accounting 4.18 and this followed the
performance evaluation and business reporting of any business enterprise 3.84, Fraud is one of
the attacking problems of our time. While less dramatic than crimes of violence like murder or
rape, fraud can inflict significant damage at organizational or individual Level 3.64, Inadequate
or Nonexistent Accounting Records are problems faced by small businesses 3.62, Incompetent
accountants are individuals who misrepresent their background and skills to the owner of small
businesses 3.44, Cash flow mismanagement is cited by experienced business owners, consultants
and industry analysts as the biggest reason for small business success 3.16, and the lowest rated
aspect on the level A lack of control over cash flow is one of the leading causes of small-
business achievement 2.68.
TABLE: 4.3.2 LEVEL OF THE EFFECT OF ACCOUNTING PROBLEMS ON
COMPANY PERFORMANCE
The dependent variable in this study was the level of Small Business for which the
researcher wanted to determine its level. Level of Small Business was operationalized using 7
questions in the Questionnaire, each of these questions was based on the five likert Scale, where
1= Strongly disagree, 2= Disagree, 3= Neutral, 4= Agree, 5= Strongly agree, respondents were
asked to rate the Level of Small Business by indicating the extent to which they agree or
disagree with Each question, their responses were analyzed using SPSS and summarized using
means as in Table 4.3.2.
41
TABLE: 4.3.2 Level of the Effect of Accounting Problems on Company Performance
Descriptive Statistics Mean Interpretation Rank
Establish a record of books of accounts on daily,

4.36 Excellent 1
weekly, monthly and annual basis.
Timely financial statements are important for internal as

3.94 Very good 2
well as external users.
Successful entrepreneurs often exhibit a natural ability

3.76 Very good 3
to realize when cash flow is critical.
In order to obtain sales, many small businesses will

extend credit to customers without investigating their 3.48 Very good 4
background.
Small businessmen and women operating in the

corporate form can create a second level of problems for 3.26 Good 5
accountants and their clients.
Keeping records of workers to helpless in development. 3.2 Good 6
Lack of knowledge of the general practice and

pronouncements of the Financial Accounting Standards
Board can create both immediate and long run solutions 2.84 Good 7
as they prepare to expand and develop their
organizations.
Grand Total 3.54 Very good
42
Results in table 2 indicate that the level of Small Business is generally Very good
and this is indicated by the total average of 3.54, the highest rated aspect of Establish a record of
books of accounts on daily, weekly, monthly and annual basis 4.36, and this followed the
Timely financial statements are important for internal as well as external users 3.94, Successful
entrepreneurs often exhibit a natural ability to realize when cash flow is critical 3.76, In order to
obtain sales, many small businesses will extend credit to customers without investigating their
background 3.48, Small businessmen and women operating in the corporate form can create a
second level of problems for accountants and their clients 3.26, Keeping records of workers to
helpless in development 3.20, and the lowest rated aspect on the level Lack of knowledge of the
general practice and pronouncements of the Financial Accounting Standards Board can create
both immediate and long run solutions as they prepare to expand and develop their organizations
2.84.
MAJOR FINDINGS
In this part of the project it discussed the research results and findings derived from
questionnaire of these three companies (Muumin Group of Companies, Macruuf Business
Center, and Coca Cola) in Mogadishu Somalia. Two objectives have this study; the objectives
were to analyze the Accounting Problems Encountered by Small Businesses in Mogadishu
Somalia and the Effect of Accounting Problems on Company Performance. The most
respondents were knowingly agreed that there is very good situation affected by small business
the Accounting Problems on Company Performance And the findings also clarified that the
Merchandising and Manufacturing firms in Mogadishu Somalia they don‟t control financial
statements and also the findings were revealed that almost Merchandising and Manufacturing
firms in Mogadishu Somalia they don‟t have well defined accounting system. Finally, the study
found that possible ways to reduce accounting problems is effective communication, accountability,
to get full support from specialists to accounting institutions in Mogadishu.
43
DISCUSSION OF THE RESULTS
The first objective of this study is to find the accounting problems encountered by small
businesses. The researcher found that the average mean of the accounting problems encountered
by small businesses is (3.50) which indicate a very good condition. However, the researcher
found that the Accounting problems encountered by small businesses are a very good level.
Therefore this objective indicates that there is a positive role to the Accounting problems
encountered by small businesses of this study point out. The second objective of this study is to
find out the effect of accounting problems on company performance. The researcher found that
there is a very good situation. The findings of this study confirmed the findings of Charles
Martin.(2004), who found that there is a positive effective to the accounting problems. This
result is consistent with previous studies in developed countries in the: Accounting problems
encountered by small businesses and the effect of accounting problems on company
performance, and subsequently found that there is effective problems in Mogadishu small
businesses. The major findings of this study suggest that there is a very good level of accounting
problems encountered by small businesses and also effect of accounting problems on company
performance. However, the researcher discussed each objective separately, because the
researcher wants to know whether his result is the same what other researchers were found
before.
44
CHAPTER FIVE
CONCLUSIONS AND RECOMMENDATIONS
INTRODUCTION
This chapter discusses the findings of the study as presented in chapter four. It also presented the
conclusions arising from the study as well as the recommendations, which could improve the
Accounting problems encountered by small businesses. This chapter has the following sections.
Section one introduces conclusions arising from the study. Section two presents the
recommendations of the study. And section three recommendations for further research. The
study investigates the Accounting problems encountered by small businesses in Mogadishu.
CONCLUSIONS
The following conclusion drawn as a result of the research work carried out in the area of the
Accounting problems encountered by small businesses. The researcher is confirmed that there is
a significant importance to the accounting problems.
This study has two objectives: the first objective is to identify the Accounting problems
encountered by small businesses. The researcher founds that the Accounting problems
encountered by small businesses the average means of these problems are (3.50) which indicate
very good condition. However, the researcher initiates that the accounting problems encountered
by small businesses are a very good level. The second objective of this study is to find out the
effect of accounting problems on company performance. The researcher founds that there is a
very good situation in the effect of accounting problems on company performance.
RECOMMENDATIONS
Based on the study findings and the conclusion, the researcher derived the following
recommendations:
1. The small business managers should be prepared timely method being available soon as
much as necessary to assist management in making right decision. In order to survive in the
long run.
2. The researcher founds that there are less educated people in the local small businesses, so
the researcher recommends the local small businesses owners to build the skills of the
accountants, In order to get right information.
45
3. The researcher of this study recommend that the juniors working in local small businesses are
required a special skills, education and etc. In order to get a bright future in the long run.
4. Small Business consultants should periodically complete a needs assessment of their service
regions to ensure their program offerings meet the true needs of local constituents. In order to
maximize the effectiveness of the services offered by Small Business consultants, the
consultants of these small businesses must be aware of the most critical needs within their
area. An accurate need assessment allows adult educators to create programs aimed at their
target publics.
5. Small Business consultants should continue to stock their resource centers with appropriate
materials on strategic planning and how to start and maintain a successful business. It is
important to have materials on fundamental issues such as taxes, payroll, insurance, business
structure, financial statements, and legal and regulatory requirements.
RECOMMENDATION FOR FURTHER RESEARCH

This study focused on accounting problems encountered in small business, and their effect of
accounting problems on business performance. However, additional research is needed to gain
more knowledge about the most critical needs of these business owners. Small business
assistance programs provide individualized counseling that can assist current owners or hopeful
entrepreneurs with the development and implementation of practical solutions for their business
problems. Small business owners often need personalized attention to help them resolve their
problems. it is important to study the target audience of an educational program to uncover its
real needs. The areas for future research listed below can provide additional knowledge about the
needs of business owners and the services that should be offered by small business assistance
programs.
1. Conduct research on the effect or causes of accounting problems encountered in small

business
2. Conduct research on the problems encountered by small businesses in the mature stage of
development. The problems encountered by mature firms can then be compared with the
46
problems encountered by small businesses in the startup and operating stages to identify
any differences or similarities.
3. Conduct studies on other geographical regions and compare the findings to the types of
accounting problems encountered by the small businesses included in this sample.
4. Conduct research that examines the effectiveness of counseling provided by Small

Business consultants in resolving the problems encountered by prospective and existing
small business owners.
5. Conduct research comparing the number of owners or size of the management team and
the type of problems encountered by small businesses. The concept of team ownership is
becoming more prevalent because of the variety of skills needed operate a small business
successfully.
6. Conduct research on the types of problems encountered by small business owners that
participate in educational workshops prior to receiving individualized counseling from a
small business assistance program. These problems can be compared with the problems
encountered by business owners that do not attend educational workshops to uncover any
differences or similarities.
47
REFERENCES
A. , E. K., & O., E. E. (2011). Inventory control and management as effective and efficient tools
in achieving organisational growth in nigeria. International Journal of Economic
Development Research and Investment, Vol 2.
Abdulraheem Yahaya, & Etudaiye-Muhtar. (2012). Accounting principles of small enterprises in
ilorin. Reseach Journal of finance and accounting, 3 (2222-1697), 2.
Abrams. (1976). Accounting problems encountered in small business. Jounal of Comercial bank,
2 (5), 372-378.
Akande, & Carland. (2010). accounting skills as performence factor for small business. emerging
trends in economic and management science, 372-378.
Akande, & O, O. (2011). Accounting Skill as a Performance Factor for Small Businesses in
Nigeria. Journal of Emerging Trends in Economics and Management Sciences
(JETEMS), 374.
Akinduko, Frankwood, Soyode, & Oladejo. (2008). essentia of management and accounting.
ikenja peace of cocept.
Herbert, & Charles. (2004). Accounting broblems encountred in small businesses. Electronic
Proceedings of the Southwest Small Business Institute Association, (pp. 1-7). New
Orleans.
jones, & Ahmed. (n.d.). accounting theory.
Leonard W. Vona. (2006, May). Retrieved from
www.usdoj.gov/criminal/fraud/UNODCQuestionnaireUSGResponseFinal.pdf.
Marczyk, G., DeMatteo, D., & Festinger, D. (2005). Essentials of Research Design and
Methodology. Canada: John Wiley & Sons, Inc.
Miller, & Betty, L. (2007). foothill secureties. financial planing assosiation, 18-23.
Oso, & Onen. (2008). General guide to writng reseach proposal and report (2 ed.). Kampala,
Uganda: Makerere Univrsity printer.
Score , n. (n.d.). financial excutive research fondation. journal of accountancy, 15-19.
Vasiua, L., Warrenb , M., & Mackaya, D. (2003). Defining Fraud: Issues for Organizations from
an Information Systems Perspective. Conference on Information Systems (p. 1). Adelaide
South Australia: 7th Pacific Asia.
48
APPENDICES
APPENDIX A: BUDGET ACTUAL COST
The following budget table is the estimation made by the researcher to determine my costs of
activities.
No. ITEM AMOUNT IN DOLLAR

1 Equipment $10
2 Stationery $15
3 Printer facility $175
4 Internet facility $60
5 Research Fee $50
6 Photo copy cost $5
7 Telephone expenses $30
8 Transportation expenses $35
9 Other costs $40
Total Budget cost $420
49
APPENDIX B: TIME FRAME
In order to complete the research activities on time, the researcher will point the
following schedule, which stated on the following table.
No. ACTIVITIES DATE

1 Searching articles 10 February 2015
2 Reading articles 20 February 2015
3 Selecting topic and start building problem statement 6 March2015
4 Starting proposal 10 March 2015
5 Draft the proposal 15 March 2015
6 Reviewing the proposal 20 March 2015
7 Completing the proposal 24 March 2015
8 Submitting the proposal to the supervisor 26 March 2015
9 Developing the questionnaire 11 April 2015
10 Data collection 17 April 2015
11 Data analyses/ Findings and conclusion 22 April 2015
12 Print final draft 25 April 2015
13 Complete and Submit to the thesis 30 April 2015
50
APPENDIX C: QUESTIONNAIRE
Dear respondents,
I am conducting academic research study entitled “Accounting problems encountered in small
businesses in Mogadishu.” I request for your co-operation by helping to answer the
questionnaire as per the instructions at the beginning of each section. I promise that the data you
provide will be used only for academic purpose and the information you provide will be treated
with greatest confidentiality.
Your charitable participation is highly appreciated.
SECTION (A): Personal Informatio n:
Please provide your Personal information in the questionnaire and tick (√) where
appropriate:
1- Gender
Male female
2- Age
20-30 31-40
41-50 Over 50 years
3- Martial state
Single Married
Divorced
4- Your education level

Secondary level Diploma
Bachelor degree Master degree
5- Experience
Less than 6 months 6 months- 1 year
1 year- 2 years 2 years and above
51
SECTION (B)
OBJECTIVE ONE: Accounting Problems Encountered by Small Businesses
Questionnaire for employees and managers
Please tick (√) the box that corresponds with your company’s view.
Strongly disagree Disagree Neutral Agree Strongly agree
1 2 3 4 5
No. 1 2 3 4 5
1. Fraud is one of the attacking problems of our time. While less

dramatic than crimes of violence like murder or rape, fraud
can inflict significant damage at organizational or individual
Level.
2. Incompetent accountants are individuals who misrepresent

their background and skills to the owner of small businesses.
3. Cash flow mismanagement is cited by experienced business

owners, consultants and industry analysts as the biggest
reason for small business success.
4. Control of inventory is needed to ensure that the business has

the right goods on hand to avoid stock-outs, to prevent
spoilage/theft, and to provide proper accounting.
5. Accounting skills are the totality of skills ranging from record
keeping, attention directing, financial management and
reporting skills that are expected to promote effective
decision, performance evaluation and business reporting of
any business enterprise.
6. A lack of control over cash flow is one of the leading causes
of small-business achievement.
7. Inadequate or Nonexistent Accounting Records are problems
faced by small businesses.
52
OBJECTIVE TWO: The effect of Accounting Problems on Company Performance
Please tick (√) the box that corresponds with your company’s view.
Strongly disagree Disagree Neutral Agree Strongly agree
1 2 3 4 5
No. 1 2 3 4 5
1. Timely financial statements are important for internal as well
as external users.
2. Successful entrepreneurs often exhibit a natural ability to
realize when cash flow is critical.
3. In order to obtain sales, many small businesses will extend
credit to customers without investigating their background.
4. Lack of knowledge of the general practice and
pronouncements of the Financial Accounting Standards Board
can create both immediate and long run solutions as they
prepare to expand and develop their organizations.
5. Small businessmen and women operating in the corporate

form can create a second level of problems for accountants
and their clients.
6. Keeping records of workers to helpless in development
7. Establish a record of books of accounts on daily, weekly,
monthly and annual basis.
53

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DAARU SALAAM UNIVERSTY

ACCOUNTING PROBLEMS ENCOUNTERED IN SMALL BUSINESS IN

A research thesis submitted to the College of Economic &

 Abdirisack Ali Hassan ID NO: 5514

Abdirisack Ali Hassan

This thesis entitled Accounting Problems Encountered in Small Business in Mogadishu –

Mr. Abdikarim Sh. Mohamed

their constant support, love, encouragement, effort, knowledge and guidance to

who have always been a source of incessant motivation and encouragement to

I am greatly thankful to my colleagues and workmates; specially, Ahmed Mohamed Dahir

SBI Small Business Institute

AICPA The American Institute of Certified Public Accountants

AAA The American Accounting Association

SBA Small Business Administration

FASB Financial Accounting Standards Board

U.S. United state

SPSS The Statistical Package for Social Sciences

Table of Contents Page Number

TABLE 4.1.0 GENDER OF THE RESPONDENTS ...................................................................................................21

TABLE 4.1.1 AGE OF THE RESPONDENTS ...........................................................................................................22

TABLE 4.1.2 MARITAL STATUS OF THE RESPONDENTS ..................................................................................23

TABLE 4.1.3 THE LEVEL OF THE RESPONDENTS‟ EDUCATION .....................................................................24

TABLE 4.1.4 THE LEVEL OF THE RESPONDENTS‟ EXPERIENCE ....................................................................25

DAMAGE AT ORGANIZATIONAL OR INDIVIDUAL LEVEL ......................................................................26

TABLE 4.2.1 INCOMPETENT ACCOUNTANTS ARE INDIVIDUALS WHO MISREPRESENT THEIR

BACKGROUND AND SKILLS TO THE OWNER OF SMALL BUSINESSES ................................................27

TABLE 4.2.2 CASH FLOW MISMANAGEMENT IS CITED BY EXPERIENCED BUSINESS OWNERS,

GOODS ON HAND TO AVOID STOCK-OUTS, TO PREVENT SPOILAGE/THEFT, AND TO PROVIDE

PROPER ACCOUNTING ....................................................................................................................................29

KEEPING, ATTENTION DIRECTING, FINANCIAL MANAGEMENT AND REPORTING SKILLS THAT

ARE EXPECTED TO PROMOTE EFFECTIVE DECISION, PERFORMANCE EVALUATION AND

BUSINESS REPORTING OF ANY BUSINESS ENTERPRISE .........................................................................30

TABLE 4.2.6 INADEQUATE OR NONEXISTENT ACCOUNTING RECORDS ARE PROBLEMS FACED BY

EXTERNAL USERS ............................................................................................................................................33

TABLE 4.2.8 SUCCESSFUL ENTREPRENEURS OFTEN EXHIBIT A NATURAL ABILITY TO REALIZE

WHEN CASH FLOW IS CRITICAL ...................................................................................................................34

CUSTOMERS WITHOUT INVESTIGATING THEIR BACKGROUND ...........................................................35

TABLE 4.2.12 KEEPING RECORDS OF WORKERS TO HELPLESS IN DEVELOPMENT.................................38

TABLE 4.2.13 ESTABLISH A RECORD OF BOOKS OF ACCOUNTS ON DAILY, WEEKLY, MONTHLY

AND ANNUAL BASIS .......................................................................................................................................39

TABLE: 4.3.1 LEVEL OF ACCOUNTING PROBLEMS ENCOUNTERED BY SMALL BUSINESSES ...............40

TABLE: 4.3.2 LEVEL OF THE EFFECT OF ACCOUNTING PROBLEMS ON COMPANY PERFORMANCE.41

TABLE: 4.3.2 LEVEL OF THE EFFECT OF ACCOUNTING PROBLEMS ON COMPANY PERFORMANCE.42

FIGURE 4.1.0 GENDER OF THE RESPONDENTS ......................................................................................................................................... 21

INDIVIDUAL LEVEL .................................................................................................................................................................................. 26

DECISION, PERFORMANCE EVALUATION AND BUSINESS REPORTING OF ANY BUSINESS ENTERPRISE......................... 30

FIGURE 4.2.12 KEEPING RECORDS OF WORKERS TO HELPLESS IN DEVELOPMENT .................................................................... 38

Background of the Study

In Somalia, to the researcher‟s best awareness; there is no indication in the literature

Accounting is basically an information system that provides economic information to

Therefore this study investigates accounting problems encountered in small businesses

Purpose of the Study

Objectives of the Study

Scope of the Study

Significance of the Study

Accounting Problems Small Business

Fraud Lack of strategic