Considerably, there are many authors, researchers and various scholars and study groups who has carried out research studies on the impact of accounting records on small and medium scale enterprise and also the study of operations in microfinance banks in Nigeria, for the purpose of making business owners and information users understand the impact of keeping proper accounting records on their business.

This study have been able to give the importance of keeping proper accounting records for businesses, areas that are pertinent for focus and various ways of recording transactions for changes in the present system of recordings by the small and medium scale business.

This study identifies the cashflow basics of keeping records, the definition and features of small and medium scale, their problem and prospects, the evolution of microfinance institutions in Nigeria and challenges facing them. The study therefore identified tables, percentages and the chi-square method of data analysis and hypothesis testing respectively.

It was equally identified that keeping proper records have a direct control and that there is a connection between it and the business level of performance, and also there is a relationship between keeping proper accounting records and fraud perpetration in the business.

The study specialized on one Nigeria microfinance bank, Accion Microfinance banks where expressions of opinion were made by thirty (30) staffs through questionnaires.

In conclusion, with more efforts and various inputs, the impact of accounting records on small and medium scale enterprise can be signified.


Title Page





Table of Contents


1.0     Background of the Study

  • Introduction 1
  • Statement of the Problem 6
  • Objectives of the Study 7
  • Research Questions 8
  • Research Hypothesis 9
  • Significance of the Study 9
  • Definition of Term 10


2.0     Literature Review

  • Introduction 13
  • Record Keeping 15
    • Introduction and Definition of Record Keeping
    • Definition and Features of Small and

Medium Scale Business

  • Features of Small and Medium Scale Enterprise in Nigeria
  • Problems of Small and Medium Scale Enterprise in Nigeria 20
  • Prospects of Small and Medium Enterprise in Nigeria.     22
  • Cash flow Basics of Keeping record in Small Business      24
  • Evolution of Microfinance Institutions in Nigeria       26
    • The Institutional Environment of Microfinance      28
    • Challenges facing Microfinance Banks                              30
    • Effectiveness and Contributions of Microfinance Banks      32
    • Lists of Nigeria Microfinance Banks      33
    • Accounting Transactions in Small Scale Enterprise.       35
  • Recording and Summarizing Accounting, Transactions      36
    • Preparation of Account Statement and a basic

Paper Record Keeping System.                                       39

  • Reasons to keep Good Records                50
  • What Good Record Tells 56
  • The Necessities of Paperless Accounting System 57
    • Approaches and Principles of

Paperless Accounting System                                               60

  • Improve Business Performance with

Small Business Accounting Software.                                     62

  • Record Keeping in a Component of Internet Control 67
    • The Objectives of Internal Control 72
    • The Work of The Auditor 73
  • Effects of an Improper Record Keepings

Nigeria Deposit Insurance  Corporation.                       74


3.0     Research Methodology                                                  78

  • Introduction 78
  • Research Design 78
  • Population under Study                                       79
  • Sampling Frame 79
  • Sampling Techniques 79
  • Sampling Size 80
  • Sources of Data 80
    • Primary Data 80
    • Secondary Data 81
  • Method of Data Analysis 81
    • Tables 82
    • Percentages 82
  • Method of Hypothesis Testing 82


4.0     Data Presentation and Analysis                                              84

  • Introduction 84
  • General Information Obtained

From Questionnaires Administered                               84

  • Presentation of Research Questionnaires 89
  • Hypothesis Testing 109


5.0     Summary, Conclusions and Recommendations             114

5.1     Introduction                                                                   114

5.2     Summary of Findings                                                      114

5.3     conclusions                                                                    115 5.4       Recommendations                                                                    117

Bibliography                                                                  119

Appendix                                                                       123





Keeping proper and Adequate Accounting records is the beauty of both infant and developed establishments. The records of accounting information can never be overemphasized for business aiming to be successful, and if overemphasized it means nor growth nor development would be achieved and most of the organizations aims would also be difficult to achieve. Therefore it impact should be emphasized for greater consideration of accounting information keepers and users to achieve the stated objectives of the business, prevent fraud, and to have a proper return from the business.

Accounting has always been an important components of the record keeping and control in organizations. These accounting control system, for most past are based on double entry accounting practices developed in the private sector. The role of accounting practices in public organization is expanding, however, as a consequence of the increased attention recent years to the need for greater economy, efficiency and effectiveness in the operation of government. There is growing recognition that in addition to the function of financial record keeping and external reporting, accounting can and should serve on a tool for management planning, decision making and control. God record keeping is time-consuming and can take away from the time you need to run your business.

A successful business rests on sound record keeping practices and solid cash flow. Without good records it is impossible to determine the financial condition or profitability of a business. Similarly, in order to survive, a small business must achieve a positive cashflow in the long term. This financial guide provides the basic information the owner of a small business need to establish good record keeping practices in your business and to minimize cash flow problem. Large and medium-size companies have internal accounting personnel and sophisticated records and systems to guide management. On the other hand, the owner of a small business usually relies primarily on a book-keeper and an outside accounting firm to maintain the company’s record and provide guidance. Therefore, the small business owner should be familiar with and recognize the important of proper record keeping requirements and provide guidance on cashflow planning.

Methods of recording accounting transaction vary in organization depending on the volume of transactions. In small organizations accounting transactions are recorded by hand in journals or ledger. Ledger cash books, daybook and general ledger. Journals are the primary books for recording accounting transactions in most retail organizations. Cashbook, daybook and journals are Subsidiary books or books of prime entry from which accounting transactions are recorded into the Ledger. The Ledger records accounting transactions in a given category such as personal account, impersonal accounts, real and nominal accounts. The records will based on the golding principle of “double entry”, that is, for every debit entry there must be a corresponding credit entry. The reason behind this rule is that every transaction that can be recorded in term of money involves two persons, a receiver and a giver. Hence, making entries in the ledger requires debiting the account of the receiver and crediting the account of the giver.

The cashbook is an account used to record all cash transactions in an organizations, cash receipts are debited while cash payments are credited. The journals are used to record all financial transactions that take place in an organization. Petty cash book can also be maintained to record the withdrawal of a predetermined sum from the main cashbook for use in payment of miscellaneous expenses.

In some modern organizations, accounting records are maintained by means of elaborate computer system. The balance on each journal is obtained by adding the credit and debit sides and deducting the smaller figures from the larger. These balances will be used to prepare a trial balance.

In the period after independence, many developing countries of Africa attempted to achieve industrialization through public investment in large scale business. The budgets and development plans of these countries were tailored toward investment in elephant projects with little economic viability and market prospects majority of these large firms were unable to succeed without heavy protection and subsidies. Specifically, the development of small-scale industries in Nigeria started in the middle of 1970s. Several attempt have been made to establish a viable and successful small scale industrial climate and to improve the crude method of record keeping in small and medium scale business.

In the 1800s, credit union was developed by Friedrich Wilhelm Raiffeisen and his supporters to assist the rural population to break out of their dependence on money lenders and to improve their welfare. From 1870, the unions expanded rapidly over a large sector of the Rhine province and other regions of the German states. The cooperative movement quickly spread to other countries in Europe and North America and eventually supported by the cooperative movement in developed countries and donors. In Indonesia, the Indonesian people’s Credit Banks (BPR) or the Bank perkreditan Rakyat opened in 1895. The BPR bcame the largest Microfinance system in Indonesia with close to 9,000 units.

In the early 1900s, various adaptations of these models began to appear in parts of rural Latin America, while the goal of such rural finance interventions was usually defined in terms of modernizing the agricultural sector, they usually had two specific objectives: Increased commercialization of the rural sector by mobilizing idle savings and increasing investment through credit, and reducing oppressive feudal relations that were enforced through indebtedness. Microfinance involves the provision of credit, savings, repositories and financial services to low income  earners or poor households to create or expand their economy and to improve their standard of living. According to Johnson and Rogaly (1999) very small deposits and loans are referred together on Microfinance. Also Rutherford (2000) stated that access to microfinance is very important because it enables the poor to create, own and accumulate asset and smooth consumption.

Therefore, microfinance banks transactions need an adequate record keeping for smooth operation and to attain their goals of establishment both in Nigeria and Abroad.


Most Nigeria small scale business lacks the knowledge of the impact of keeping adequate and good accounting records. Perhaps because of their thinking that they are small scales compared to the large business with larger transactions. This thinking is tremendously affecting the operations of small and medium scale enterprise in Nigeria which can easily result in the perpetration of fraud and embezzlement of fund in the small business, due to the mismanagement and crude preparation of accounting records. An assessment of numerous write-ups and policies of keeping accounting records shows some shortcomings that need urgent attention, thereby making the business owners to understand the need for proper record keeping and it impact on their business. This is what the project is set to look into and to suggest and project a lasting solution to these problems.


The broad purpose of these work is to look at the impact of accounting records in the small and medium scale business so as to enable the business owner understand and put to practice good ways of keeping accounting records thereby reducing any form of misappropriation and increasing their performance level as part of the major objectives. A rare absence of revenue generation flowing from the shortcomings of not keeping proper records would be demolished, therefore, specifically, the objectives of this research are to;


  1. Examine the basic record keeping system
  2. Identify the impact of keeping proper accounting records on the business.
  3. Examine how to improve business performance with small business accounting software.
  4. Identify necessary accounting books of records in small and medium scale enterprise.
  5. Improve the crudeways most small and medium scale firms record their transactions.


The following question shall considered pertinent for the purpose of this research;

  1. What is the effect of keeping proper and improper records on the business?
  2. To what extent do keeping accounting records influences the business in achieving it stated objectives?
  3. Can business performance truly improve with the use of computer system in keeping records?
  4. What are the types of accounting records needed?
  5. What can bring about a healthy record keeping?




In order to achieve the purpose of this research work, the following proposition must be tested empirically;

Ho:    There is no connection between keeping proper accounting records and the business level of performance.

Hi:     There is a connection between keeping proper accounting records and the business level of performance.

Ho:    There is no significant relationship between keeping proper accounting record and fraud perpetration in the business.

Hi:     There is a significant relationship between keeping proper     accounting records and fraud perpetration in the business.


The main purpose of accounting in business is to present financial information in a sufficiently systematic manner that can be understood by the users. The first step towards this goal is recording and classifying of accounting transactions.

Keeping good business records helps to demonstrate the financial position of banks and other lenders and also to prospective buyers of the business. This study helps to explore the importance of keeping adequate records so as to improve the business performance.

This study explores that good record provide the financial data that helps in operating more efficiently, thus increasing profitability.

Accurate and complete records enables the owners and the accountant, to identify all business assets, liabilities, income and expenses, which this study is trying to explain that information, when compared to appropriate industry averages, helps you pinpoint both the strong and weak phases of the business operations. Furthermore, the study helps to understand that good records are essential for the preparation of current financial statements, such as the income statement (profit and loss) and cash-flow projection.


MICROFINANCE:- A very small deposit and loans are refer together as microfinance (Johnson, 1999).

CONTROL:- This is concerned with the efficient use of scarce resources to achieve a previously determined objectives or set of objectives contained with a plan (Lucey, 2000).

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

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

SMALL SCALE:- Not large in size or extent, limited in what it does and in relation to organization.

TRANSACTION:- A piece of business that is done between people especially an act of buying and selling or service rendering.

FILING SYSTEM:- The act of putting several documents, letters together or placed in an official record for the purpose of safeguarding and evidence of transaction.

ORGANIZATION:- A group of people who form a business together in order to achieve a particular goal.

POLICY (IES): A set of interrelated and consistent plan and decision rules (premehad, 1996).




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