ASSESSEMENT ON EFFECT OF ACCOUNTING SKILL ON BUISNESS SUSTAINABILITY BUSINESS IN NIGER STATE.

CHAPTER ONE INTRODUCTION 1.1 Background to the Study Small scale enterprises have been adjudged to act as catalyst in the economic development of any country. Small and Medium Scale Enterprises (SMEs) have been described as possessing great potential for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large scale industries (CBN, 2021). SME can be defined based on certain criteria including, turnover, number of employees, profit, capital employed, available finance, market share and relative size within the industry. The definition can be based on either some quantitative or qualitative variables. The SME sector comprises very different types of businesses across a wide range of economic sectors. There are essentially two categories: those that are growth-oriented, and those small and micro enterprises that operate at thesubsistence level to provide employment and income mainly for their owners and a relatively small number of external employees. Apparently, developing countries like Nigeria that require sustained economic growth in their economies must pay attention to the SME sector and harness the great potential to generate employment, improved local technology, output diversification, developed indigenous entrepreneurship and forward integration with large-scale industries that can be provided by the sector. SMEs account for a large proportion of the total employment growth many countries. In such countries, SMEs produce a significant share of their increases in Gross Domestic Product (GDP), while the contributions of larger enterprises tend to remain stable (ADB, 2018). Although most of small scale businesses in Nigeria are not registered as corporate bodies but as sole proprietorship, this makes registration procedures quite simple and a bit easier than the other forms of business registration. Partly due to this phenomenon, SMEs has outnumbered all the other forms of business and could be found almost everywhere across the country. TheSmall and Medium and Large Enterprises are more commonly involved in trading, provision of services and craft production activities in Nigeria, the SMEs population comprises approximately 97% of all businesses. This sector plays a crucial role in the economy as an engine to generate economic growth and also has its contribution to the economy in other ways. Unfortunately, the SMEs in Nigeria have underperformed despite the fact that the SMEs in Nigeria constitute more than 90% of Nigerian businesses, their contribution to the nation’s GDP is below 10%. Nigeria is the most populous country in Africa and the eight in the world with a population of over 140 million people by 2006 census. With a nominal GDP of $207.11 billion and per capita income of $1,401 it has the second largest economy in Africa (Salami, 2021). In spite of all these, recent studies show that 60-70 of these enterprises fall within the first three years of establishing and this has been attributed to lack of adequate financial accounting knowledge and skills by entrepreneurs who manage the affairs of these enterprises. Abdulrasheed, Khadijat & Oyebola, (2022) argued that appropriate accounting application should be an active steering tool to run and manage a business. Accounting is the process of recording business transactions in a systmatic form so that the financial position of the business can be communicated to the users of such accounting information. Accounting is the key to business success and is also found to be the most frequent problem to why these businesses cannot operate well. Accounting has aided in the development of these enterprises in the fields of science and technology and many other diverse fields by it direct assessment on the overall financial progress in pursuing their goals. The modern trend in information communication technology (ICT) has also affected the quality of performance of these enterprises. Over the years rapid advances in electronic accounting have been made and several programme and application software development to support the enormous transactions created by e-business; electronic technology driven accounting system which have added responsibility accounting and profitability accounting and recent concept (O’Brien, 2017). For example, Microsoft Excel is a package or applicationthat has loads of calculation capabilities that help in computing total sales, profit and loss made by an organization preparation of bank and income statement etc. The graphic aspect of the Microsoft Excel packages is used in charts of different types and graph. Microsoft Excel package helps in inventory management and it is high sustainable for preparing an organizational payroll. Peachtree accounting package helpsrecipients in Management Information System (MIS). Peachtree accounting skills provides knowledge of inventory management records as well as management of system frauds. It also provides adequate journal preparation and preparation of cash flow statement. Despite the revolution on our daily lives, small scale enterprises are very slow at adapting to the great resources. They fail to include the knowledge of modern accounting packages like Microsoft Excel, Microsoft Access and Peach Tree Accounting into their daily business lives. It is on the above premise that this study investigatedaccounting skills needed for effective management of small scale enterprises in owners in Awka South Local Government Area of Anambra Stat, Nigeria. 1.2 Statement of the Problem Accounting is a very important aspect of any organization. Some Small Scale Enterprises have been observed to have accounting departments, yet they encounter ineffective management in the aspect of keeping records. Uzochi and Okonkwo (2019) outlined that the rapid technological changes in the methods of preparing, recording, analyzing, summarizing and interpreting financial transaction calls for a need for an introduction of modern accounting packages, system and skills in businesses. This is based on the fact that the wake of the millennium has witnessed dramatic changes in the manner accounting functions are been performed. The convergence of computer, telecommunication and e-commerce with business environment have brought to the force emerging ICT concepts and knowledge that were not used in Small and Medium Scale Enterprises (SMEs). Similaly Bassey and Manasseh (2021) observed that SMEs lack the accounting knowledge and skills necessary to perform accounting functions. Many SMEs lack skilled accounting personnel needed for the implementation of existing accounting rules and regulations or standard. SMEs lack access to expertise knowledge in accounting because accounting functions require not only knowledge of generally accepted accounting rules or tax regulations but also a knowledge of how to apply these rules on a given business environment but effective application of such knowledge for effective management of businesses. Research by Ezeani & Ibe, (2021) indicates that while some small business owners recognize the importance of accounting skills, they often lack the practical knowledge necessary to implement effective financial management strategies. Although existing studies have highlight lack of adequate accounting practices in small scale business, little or no attention has been paid to the extent of practice of accounting skills among small scale business owners with reference to Awka South Local Government. This gap in accounting practice highlights the need for targeted interventions, such as training programs and financial literacy initiatives, to enhance the accounting capabilities of small-scale business owners in Nigeria (Akinbode & Olaoye, 2024). Addressing this issue is critical for improving the financial health of small-scale businesses and fostering their growth. Therefore, this study aims to explore the extent of practice of accounting skills among small scale business owners in Awka South Local Government Area of Anambra State. 1.3 Objectives of of the Study The main purpose of this study is to investigate the extent of practice of accounting skills among small scale business owners in Awka South Local Government Area of Anambra State. Specifically, the sought to: i. Evaluate how well small-scale business owners understand basic accounting principles. ii. Evaluate the extent small-scale business owners apply basic accounting skills in their daily operations. iii. Examine the impact of accounting skills on the financial performance and sustainability of small-scale businesses iv. Identify the key challenges faced by small-scale business owners in implementing effective accounting practices 1.4 Research Questions The following research questions were raised which guided the conduct of this study. In order for easy and effective collection of data the following research questions were formulated to guide the study. i. To what extent do small-scale business owners understand basic accounting principles? ii. To what extent do small-scale business owners apply basic accounting skills in their daily operations.? iii. What is the impact of accounting skills on the financial performance and sustainability of small-scale businesses? iv. What are the key challenges faced by small-scale business owners in implementing effective accounting practices? 1.5 Research Hypotheses Ho: The extent at which small-scale business owners understand and apply basic accounting principles in their daily operation is low in in Awka South Local Government Area of Anambra State. Hi: The extent at which small-scale business owners understand and apply basic accounting principles in their daily operation is high in in Awka South Local Government Area of Anambra State. 1.6 Significance of the Study The study on the extent of practice of accounting skills among small-scale business owners in Nigeria holds both practical and theoretical significance. Practically, the findings can guide small business owners in enhancing their accounting practices, leading to improved financial management, better decision-making, and increased business sustainability. By identifying specific challenges and gaps in accounting skills, the study can inform the development of targeted training programs and resources tailored to the needs of small business owners. The findings of this study will be beneficial to Small and Medium Scale Enterprises in adopting pertinent accounting skills for effective management of business in the 21st century. The findings of this study will be beneficial to Small Business Entrepreneurs to adopt and adapt accounting skills for effective management of their businesses for optimum growth.It will be beneficial to business regulatory agencies in Nigeria to enforce the adoption of proper accounting skills in the management of SSEs for accountability. The findings of this study will be of benefits to accounting graduates working in account departments in Small Scale Entreprises to acquire requisite accounting skills required for effective management of businesses in the present digital age. The study will enable business owners and individuals to be informed on considerable positive benefits of adaptation and/or adoption of accounting knowledge and skills for effective management of business for optimum performance and growth. Theoretically, the study contributes to the body of knowledge on accounting practices within the context of small-scale enterprises, offering insights into the relationship between accounting proficiency and business performance. It also provides a foundation for further research on how different accounting tools and practices impact the financial health and growth of small businesses, enriching the theoretical understanding of financial management in this sector. 1.7 Scope of the Study This study empirically investigates the extent to which small-scale business owners in Awka South Local Government Area of Anambra State, Nigeria, practice accounting skills. It specifically aims to evaluate their understanding of basic accounting principles, the application of these skills in daily operations, and the impact of accounting skills on the financial performance and sustainability of their businesses. Additionally, the study seeks to identify the key challenges these business owners face in implementing effective accounting practices. By focusing on this geographical area, the study provides insights into the accounting practices of small-scale businesses in a specific Nigerian context, contributing valuable data to the broader discourse on financial management in small enterprises within similar socio-economic settings. 1.8 Limitations of the Study The primary limitation of this study is its geographical focus on Awka South Local Government Area of Anambra State, which may not fully represent the accounting practices of small-scale business owners across different regions of Nigeria. The findings may be influenced by local economic conditions, educational levels, and cultural factors unique to this area, limiting the generalizability of the results to other regions. Additionally, the study relies on self-reported data from business owners, which may be subject to biases such as overestimation or underestimation of their accounting skills and practices. Time constraints and resource limitations may also restrict the depth of data collection and analysis, potentially overlooking some nuanced aspects of accounting practices and challenges faced by these businesses. 1.9 Operational Definition of Terms The following terms are operationally defined as used in this study. 1. Accounting: it the recording, classifying and summarizing of financial transactions events in terms of money and reporting the result to management and other users of accounting information. 2. Small scale enterprises: is any business enterprise with a capital not less than N150, 000 in manufacturing and equipment alone.