NOVATEUR PUBLICATIONS

JournalNX- A Multidisciplinary Peer Reviewed Journal

ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
ACCOUNTING SERVICES AND THE FINANCIAL PERFORMANCE OF SMALL
AND MEDIUM ENTERPRISES IN IKOT EKPENE METROPOLIS
Obot Akpan Udoh
Department of Accountancy, Akwa Ibom State Polytechnic, Ikot Osurua, Ikot Ekpene, Nigeria
Phone No. +234(0)8065573067

Enidiok Efiong Okon

Department of Accountancy, Akwa Ibom State Polytechnic, Ikot Osurua, Ikot Ekpene, Nigeria
Phone No. +234(0)7039426096.

ABSTRACT: INTRODUCTION:
The study examined the accounting Accounting services are very pertinent
services and the financial performance of in ascertaining the profitability, financial
small and medium enterprises in Ikot position and tax liability of business
Ekpene metropolis. In order to carry out organizations. It utilizes contemporary
this study, specified research objectives techniques, for example, monetary
were drawn from which null hypotheses explanations and bookkeeping programming
were formulated and used for the study. or by utilization of customary strategy which is
The research design for this study is survey fundamentally stewardship bookkeeping.
method design. The population of the study Bookkeeping forms are implanted in each
consisted of SMEs operators in Ikot Ekpene business, that is, each business needs
local government area. Simple random bookkeeping administrations since they profit
sampling technique was used to select 383 and it has regularly been alluded toas' the
respondents out of the population. The dialect of organizations'. Experts in Accounting
instrument used for data collection was are frequently observed as obvious makers of
questionnaire. Data from completed significant worth in associations. This is vital
questionnaires was subjected to regression for extraordinary execution. The bookkeeping
analysis. The findings showed that findings bureau of an association can gauge the
showed that the current accounting practice productivity, effectiveness and budgetary
has a significantly positive effect on SMEs position of the organization by handling the
performance. The positive correlation money related records of the organization.
indicates that the higher the soundness of They additionally help detail money related
accounting practices deplored on the techniques for the business associations as a
operations, the higher the performance of result of the information of the budgetary
the business and vice versa. This is based on drivers and they likewise look for open doors
the premise that sound accounting practice for long haul achievement (Association of
will lead the firm to account accurately for Certified Chartered Accountants, 2013).
all its incomes and expenditures as well as Be that as it may, most examinations
assets and liabilities from one period to the have been done on enormous organizations
other. and ventures and they neglect to investigate
the activities of Small and Medium Scale
Keywords: Accounting Services; Finance; Enterprises (SMEs). SMEs' level of execution
Financial Performance; SMEs and viability should be examined. It is
accepted, some of the time that the
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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
bookkeeping needs of Small and Medium Despite government institutional and policies
Enterprises are only to record purposes yet it support to enhancing the capacity of small and
is more than that. The Accounting medium scale enterprises, small and medium
administrations are foremost a direct result of scale enterprises has fallen short of
the apropos needs of the partners and the expectations (Fatai, 2015).
business. They also have an important role to play
When SMEs begin their tasks, their in the economy of our countries and even the
money related capacities are worked to world. This is a major reason why accounting
ensure that there is consistence with the information is necessary. It provides necessary
significant bookkeeping guidelines and information to monitor the development of the
standards. As the business develops, the SMEs. They are the backbone of economies in
bookkeeping capacities windup countries all around the world. SMEs are an
institutionalized and the business procedure important drive for economic development and
ends up less demanding to screen then from empowerment of local communities
that point the bookkeeping capacity starts to (Tambunan, 2014). They cut across a variety of
achieve its potential. It is likewise essential to fields such as trade, agriculture and processing,
observe the issuance of new guidelines known mining, service, among others.
as International Financial Reporting Standards SMEs usually employ bookkeepers
and it is additionally fundamental for instead of accountants which gives room for
organizations to report their money related ineffectiveness (Mutua, 2015). This is the
position as per the norms. In any case, this isn't foundational problem because bookkeepers do
the situation as the information of these not have as much knowledge as the accountant
guidelines isn't controlled by a great deal of and the basis for judging performance is
people. already marred.
This study primarily centers on the There is also the challenge if the
roles of accounting services and how it affects issuance of standards. Lately, at the
the performance of SMEs in Nigeria as it is international level, the accounting has been
shown that SMEs are very important to the submitted to a comprehensive process of
economy. convergence and reconfiguration, which aims
to eliminate the disagreements between
STATEMENT OFPROBLEM: different accounting systems (Sava, 2013).
The research problem is that the scope Most accountants do not have the knowledge
is limited. This is as a result of limited time for of it and this affects the financial reports. This
the research. Hence, accessibility to more SMEs is because without the knowledge of it, the
is not possible. The problem areas that financial reports would not be up to standard
stimulated interest in this research topic are and the objective of the issuance of IFRS is
the low performance, inefficiency and the defeated. According to International
convergence to IFRS that is associated with Accounting Standards Board (2009), small and
SMEs. These issues are discussed more medium- sized entities are characterized as not
concisely below: having open responsibility and by distributing
SMEs are crucial to the development of broadly useful money related articulations for
the market economy. SMEs are sometimes outside clients.
referred to as essential participants in the
development of local and regional areas.

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
realized that excess stock could be sold with a
OBJECTIVE OF THE STUDY: bumper harvest and this usually fetched them
Specifically, the study sought to: some money. This led to the production of
Assess the effect of accounting practices on domestic items as palm oil, clothes and other
SMEs performance in Ikot metropolis. professional jobs at which specialization are
Evaluate the mode of accounting on efficiency introduced. This local production economy
of SMEs performance in Ikot metropolis. thus have the blacksmith that produces hoes,
and cutlasses, pots from potters, the soap
Hypotheses: makers for black soaps, etc. However, the idea
The following hypotheses for the study have of retailing and wholesaling were actually
been stated in null form: prompted by the advent of colonialism and
There is no significant relationship between missionaries through the bringing into Nigeria
accounting practices and SMEs performance in finished goods from companies abroad.
Ikot metropolis Consequently, only a few uneducated
There is no significant relationship between Nigerians benefited from government gesture
mode of accounting and SMEs performance in of promoting small and medium business
Ikot metropolis enterprises, because the educated Nigerians
were busy and contented with administration,
Overview of Small and Medium Scale where they occupied sits vacated by the
Enterprises: European personnel. Remarkable increase in
Historically, small and medium scale small business enterprises emerge towards the
enterprises had its origin in the Eastern, end of the last decade of 20th Century. The
Mediterranean Siropolis in 2007. Although it is reawakening came through the enactment of
argued by authors that small and medium scale the Nigerian indigenization Decree
enterprises all over the world are divergent (government‘s empowerment to developing
array of business concerns involved in SMEs in Nigeria) which was later known as the
economic activities (from micro and rural Nigerian Enterprises. Promotion Decree
enterprises to contemporary enterprises (NEPD). This was an attempt by Federal
organization) that uses sophisticated Government to ensure that Nigerians play an
technologies. important and active role in the development
Nigeria as a country constitutes an of the country and economy.
important part of the world-economy During the second National
considering its abundant human and non- Development plan 1970-75, the Federal
human resources. In Nigeria, the history of Government gave priority attention to the
small and medium scale businesses is as old as development of small and medium scale
the empowerment of the nation itself. Prior to enterprises most especially in the rural areas.
the advent of Colonial administration, Nigeria This was in recognition of the role small and
has self employed agrarian economy in which medium scale industries as the foundation and
business that were small or medium was training grounds for the growth and
established (especially in the areas of development of entrepreneurship activities in
agricultural production). Nigeria. Between 1980- 1989, the Nigerian
However, with time; business government‘s enterprises policy focused her
operations extended to other areas such as attention mainly on local resources utilization
extractive, cottage and handcraft. The farmers through various forms of incentives provided.

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
The government policy measures were to environment. In a study conducted on
encourage technological aspects of enterprises enterprise success factors in SMEs Gauteng,
development of small and medium business in South Africa, it was concluded that a lack of
Nigeria. technical and managerial skills impedes on
business development. Research on SMEs in
Important of Small and Medium Enterprises South Africa showed inadequacy of
on Economic Development in Nigeria: management skills and training as a major
Importance of small and medium cause of SME failures. This was confirmed
enterprises (SMEs) to the economy is (Rogerson, 2015) 90% of a sample of 1000
acknowledged in numerous African countries entrepreneurs who believed that SME failure is
such as Togo, Uganda, Ghana, Cote d’voire, due to a lack of managerial skills. However,
Nigeria, Kenya, Malawi, Burkina Faso, as well taking the importance of training and skill into
as others. According to Rwigema and Karungu account, it is cautioned by Rogerson (20015)
(2009), SMEs are dominant in numbers in most that skills are not the only or even primary
economies. In First World countries like the answer to the challenges facing SME
United States of America, United Kingdom etc., development.
small enterprises play an important role in the In recent time in Nigeria the growing
economy, accounting for an estimated one rate of small businesses is characterized with
third of industrial employment and a lower high rate of unemployment and the increasing
percentage of output. In Third World countries rate of graduates from different institutions
where SMEs dominate economically active without correspondent employment
enterprises, the SMEs propensity is considered opportunities and consequently, the society is
far more important than in First World gradually getting to the stage where the
countries (Rwigema and Karungu, 2016). The average graduate is willing and ready to go into
activities of SME enterprises in Africa are of business (Ahmed, 2014). Small scale enterprise
vital importance for the promotion of economic is usually managed by the owners or relatives
growth, job creation and the mitigation of of the business. Most of the ownership
poverty. In a research conducted by Mead and structure being sole proprietorship and
Liedholm (2008) confirmed that there are partnership. The sources of fund are majorly
more SME closures than expansions. A from the owners’ savings, borrowing from
fundamental element that has a positive impact friends, relatives and banks (Ekpenyong and
on an organization’s growth is the depth of Nyong, 2012).
“human capital” or “brain power” (McGrath and In Nigeria, government also provides
King, 2006; Rogerson, 2017). The importance soft loans to the small scale businesses.
of human capital as a critical success factor was However, the definition of small scale business
also confirmed in a study conducted on African in Nigeria by the central bank does not reflect
enterprises where it was determined that the typical characteristics of Nigerian small-
successful entrepreneurs more likely have scale enterprises in terms of their capital base
education and training beyond the primary and number of employees (Ekpenyong and
school level (Rogerson, 20017). The merit of Nyong, 2012). Whereas the Central Bank of
this finding is based on the argument that Nigeria defined small-scale enterprises as
entrepreneurs with a greater level of education having an annual turnover not exceeding
and training are more able to adapt their 500,000 naira but many small businesses in
business to the ever changing business Nigeria had a capital base of less than 100,000

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
naira. This was contained in its Monetary According to Scholes, Westhead and
Policy Circular No. 22 of 1988, but a typical Burrows (2018) transfer of ownership is very
small business in Nigeria has less capital important to the continuity and success of
investment. There is, therefore, the need to small business. The inability of small business
redefine small business in Nigeria. The owners to transfer the business successfully to
originator of the business according to another person may lead to the closure of the
Adeyemi (2014) often plays the double role of business. Moreover, small businesses are
owner as well as responsibility for planning, affected by limited financing, poor
directing, coordinating the activities that lead management skills, infrastructure and
to the creation or production of business value. regulatory issues. These factors affecting small
Another major characteristic of small-scale business owners may have negative impact on
enterprises in Nigeria is the difficulty they the small business growth.
experience in raising adequate capital for their SME contributes significantly to the
businesses (Adeyemi, 2014). External sources economic growth of the country. The
are difficult to be assessed from finance houses contribution performance of the SMEs in the
and banks. Even where the banks agree to country is considered as the spinal column.
provide fund for these businesses, the According to Aremu and Lawal; (2012) SMEs
conditions or collateral for these loans are have provided growth potential and
always difficult to be met by the business contributed critical roles in the manufacturing
owners. Small enterprises with a small capital and value chains just as their multiplier effects
base tend to use the informal financial have impacted on the rest of the Nigerian
institutions. economy, a development that have enabled
According to Chukwuemeka (2006) who them to be the engine of economic progress. It
pointed out that about 80% of small is also noted that the SME sector is the main
enterprises are not thriving as a result of poor driving force behind job creation, poverty
financing and other problems associated with reduction, wealth creation, income distribution
it. Therefore, small businesses are often found and reduction in income disparities in the
in certain areas of the sector particularly due to country. SME sector also formed the vanguard
their financial ability, and human resource of the modern enterprise sector and presents
capabilities and opportunities presented by the the propelling force of economic
economy and not necessarily because of their modernization and growth in Nigeria. They are
passion or expertise (Adeyemi, 2014). Most of an important sector that needs to be
the businesses were engaged in service-related adequately factored into policy making and
activities. According to the survey carried out programme implementation in Nigeria.
by Ekpenyong, and Nyong (2012), few of the These classes of enterprises comprise
small business owners had tertiary education about 70% to 90% of the business
(16 per cent) while the majority had primary establishment in the manufacturing sector in
and secondary education (84 per cent). Many Nigeria (Eniola, Ektebang & Sakariyau, 2015).
of them had no previous experience in business Moreover, the potential of SMEs is to serve as
before embarking on their current business an engine for wealth creation, employment
activity. Many of the small businesses in generation, entrepreneurial skills
Nigeria find it difficult to survive because the development, and sustainable economic
death of the owner might lead to the death of development. SMEs is the creativity and
the business. ingenuity of entrepreneurs in the utilization of

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
the abundant non-oil, natural resources of this credit information and cost of accessing funds,
nation which will provide a sustainable Zack (2003). Harper, (2001) believes that the
platform or springboard for industrial capital shortage problem in the small firm
development and economic growth as is the sector is partly one, which stems for the
case in the industrialized and economically uneconomic deployment of available resources
developed societies (Eniola & Ektebang, 2014). by the owner-managers. This view was shared
SME in Nigeria provides over 90% of by Ihyembe, (2005) who claimed to have seen
employment opportunities available in the businessmen take loan for expansion projects
manufacturing sector and accounts for about only to turnaround to marry new wives,
70 % of aggregate employment created per acquire chieftaincy titles or buy houses abroad.
annum (Eniola, Ektebang & Sakariyau, 2015). In a study of SMEs in Asia observed that
Nigeria has the biggest economy in financing working capital needs was the most
Africa. According to the National Planning frequently mentioned problem. Binks and
Commission of Nigeria, (Siti, Norfaridatul, Ennew, (2007) expressed the view that the
Juhaini & Zaidin, 2014), the contribution funding problem of SMEs is primarily due to
performance of the SMEs is considered as the the behavior of banks and imperfection of the
country‘s backbone (Nwachukwu 2012). It is capital markets.
therefore clear that promotion of such
enterprises in developing economies like Management Problems:
Nigeria is of paramount importance since Lack of trained manpower and
(among other benefits), it brings about a great management skills also constitute a major
distribution of income and wealth, economic challenge to the survival of SMEs in Nigeria.
self dependence, entrepreneurial development, According to West and Wood (2012), “…90% of
employment and a host of other positive, all these business failures result from lack of
economic uplifting factors (Aremu & Lawal, experience and competence.” Rogers (2013),
2012). also added that inefficiency in overall business
management and poor record keeping is also a
Factors Militating against Effective major feature of most SMEs; technical
Operation of Small Medium Scale problems/competence and lack of essential
Enterprises in Nigeria: and required expertise in production,
Despite the catalytic role of SMEs in the procurement, maintenance, marketing and
economic emancipation of countries, some of finances have always led to funds
their major operational challenges in Nigeria misapplication, wrong and costly decision
Include: making.

Financial Problems: Inadequate Basic Infrastructure:

About 80% of Small and medium Government has not done enough to
enterprises are stifled because of poor create the best conducive environment for the
financing and other associated problems. The striving of SMEs, the problem of infrastructures
problem of financing SMEs is not so much the ranges from shortage of water supply,
sources of funds but its accessibility. Factors inadequate transport systems, lack of
identified inhibiting funds accessibility are the electricity to improper solid waste
stringent conditions set by financial management. Nigeria’s underdeveloped
institutions, lack of adequate collateral and physical and social infrastructures create a

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
binding constraint to SMEs growth, since; they downfall of the establishment.
heavily rely on the inefficiently provided state
infrastructures and cannot afford the cost of
developing alternatives. Multiple Taxation:
This has become a major problem
Socio-Cultural Problems: especially given the role of tax consultants and
Most Nigerian Entrepreneurs do not agents hired by local governments. They are
have the investment culture of ploughing back often crude in their operation, excessive in
profits. Bala, (2013) stressed that the attitude their assessment and destructive in their
of a typical Nigerian entrepreneur is to invest relationship with the production process. They
today and reap tomorrow. Also, the socio- tax everything in their bid to generate revenue
political ambitions of some entrepreneurs may without considering the net effect to household
lead to the diversion of valuable funds and incomes and employment.
energy from business to social waste. The
problem of bias against made in Nigeria goods Unstable policy Environment:
is significant. Most Nigerians have developed a Instability in government policies have
high propensity for the consumption of foreign caused some SMEs to collapse. One of such
goods as against their locally made substitutes. policies is that of the 1980s when government
specified that cocoa should not be exported in
Strategic Planning Problems: raw or unprocessed form after a specified
SMEs often do not carry out proper deadline. Many SMEs had to import
strategic planning in their operations. Ojiako machineries only for government to reverse
(2015) stated that one problem of SMEs is lack this policy. This negatively affected so many
of strategic planning. Sound planning is a SMEs in the cocoa industry. The present high
necessary input to a sound decision-making. mortality rate of SMEs in Nigeria is awful to
contemplate and constitute danger to the
Location/Economic Problems: entire economic system. It represents serious
Market stores are dominated by financial pressure on the nation’s economy as
absentee landlords who charge exorbitant well as a waste of valuable resources. The
rates. The ownership of market stores by business owner should always consider
politicians is crowding real small-scale challenging situations and be prepared to meet
operators out of the market. The high rents them with preplanned strategies. The survival
charged by store owners on good locations of SMEs is only possible through a systematic
have forced real small-scale operators into the analysis of the problems they are facing and
streets or at best into accessible places. Also, mapping out appropriate strategies of
domestic economic problems of deregulation overcoming them, through a proper
and removal of protection as well as the global understanding of the business environment.
financial crisis have been detrimental to SMEs. For a business to survive in unfriendly
environmental conditions it should adopt a
Poor Accounting System: strategy that utilizes its strengths to exploit
The accounting system of most SMEs opportunities while avoiding its weaknesses
lack standards hence, no proper assessment of Nwoye (2008), argued that strategic changes
their performances. This creates opportunity might take place in a firm without initial
for mismanagement and eventually leads to the formulations, such decision could be informed

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
by expansion strategy, preference to cash sales possesses but focuses on aligning the strategic
policy, innovation strategy, change in and operational objectives of the company in
production techniques, local sourcing or use of order to achieve better performance by
alternative materials, backward integration ensuring the set organisational goals and
and merger. Thus, any entrepreneur who objectives are met timely. In most unstable
wants to succeed must identify business business environment, successful businesses
opportunities, be creative, visionary, daring, have to continually adapt their competitive
risk taking, courageous and sensitive to strategy, which, among other things, means to
changes in the business environment. develop such systems of controlling and
performance evaluation that will enable faster
Performance Indicators of Small and and adequate clue to the business function to
Medium Scale Enterprise: attract more business success for the
According to Frolick, Thilini and organisation (Maskell, 2012).
Ariyachandra (2012) business performance Considering the economic situation of
entails the combination of management and the present economy in Nigeria presently,
analytical processes that allows managers of an requirements for improving methods and
organisation to achieve pre-determined goals. instruments of business performance
Business performance of organisations is all measurement have become more expressive.
about focusing on investigating all Namely, business performance measurement
organisational functions at high and low levels has been affirmed as a dominant control
of activity to ensure they are adequately activity of enterprise which identifies the key
performing as expected (Mann and Kehoe, market and structural factors of its business
2009). success (Maskell, 2012). The implication is that
Organisations in market economy affirm adequate performance measurement has to
frequent and numerous changes in almost each satisfy different information requirements as
business area, which brings radical changes in well as to reflect success in using material and
internal and external business environment non-material resources of enterprise.
and it contributes towards their poor Improving performance means redefining the
performance in their business transactions traditional methods of their measurement
(Kaplan and Norton, 2010). The environmental (Maskell, 2012). To develop and affirm
changes require a turn in business strategic approach to performance
management philosophy which is focused on measurement, which, more or less, includes
re-directing the strategies of traditional some different integral strategic performance
instruments in order to achieve better measurement (Slater, Olson and Reddy, 2012).
performance using some business performance The essence of strategic business
measurements (Slater, Olson and Reddy, 2012). performance measurement is to handle the
Business performance measurement is seen to following things: (1)evaluate value that the
have three main activities such as: selection of enterprise expects from its stakeholders and
goals, consolidation of measurement value that each group of stakeholders expect
information relevant to the organisation’s from the organisation which can be done,
achievement of these goals, and interventions (2)monitoring process efficiency, defining the
made by managers in light of this information. standards of minimal level of performance and
The business performance management looks level of target performance, (4) focusing on
beyond different divisions that the business performance drivers and the factors of current

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
profitability, (5) and suggesting measures for organization's financial relations with the
improving financial performance (Atkinson, surrounding environment (Kassem, 2004).
Waterhouse and Wells, 2009). The major Information systems can be considered as a set
concern of strategic performance measurement of interrelated elements that work together to
system is in defining the primary measures collect, retrieve, process, store, and
focused on results and the secondary measures disseminate information to support decision-
directed towards primary result drivers. making, coordination, control, analysis, and
The business managers are always observation in the organization. However, it
responsible for developing rational process can also refer to a group of individuals,
that is responsible to determine the key equipment, procedures, software,
performance measures of the company. The communications and databases working
use of system analysis provides such a rational manually, mechanically or automatically, to
process to be integrated into the performance collect, store, process, and transmit
system. Some of the notable indicators used in information to the beneficiary (Loudon &
measuring business performance are profit, Loudon, 2008).
return on investment (ROI), turnover or It is defined as a set of components
number of customers (Wood, 2006), design bound together regularly to produce useful
quality and product improvement (Laura, information and to communicate this
Shawnee and Cornelia, 2009). The measuring information to users in a timely and
of business performance could be through the appropriate manner in order to help them
business performance measurement (BPM) perform the functions assigned to them. The
system, as it is an important tool within many main components of the information system
research areas, particularly in business and are explain thus:
social science studies. This system analyses and I. Inputs: These are the vocabulary and data
investigates each quality that affects a firm’s describing events and assets that enter the
business performance, categorizing business system.
performance into two broad areas: operational II. Processing: This refers to the technical side
business performance and strategic business of the system, which is a set of calculations
performance (Mann and Kehoe 2009). Some of and logic that take place on the inputs in
the sub-variables mostly identified as order to reach the outputs.
indicators of business performance in line with III. Outputs: This represents the results that the
the study objectives were sales growth, market system is working on.
share, profitability, and working capital. IV. Controlling: This is a set of procedures
and rules designed to verify that the final
Accounting Information Systems Concept: results achieved are in line with the goals
As accounting information plays an important and plans set in advance.
role in making administrative decisions, there V. Feedback: It aims to provide a guiding tool
is a need for accounting information systems to for the activities of the system, and it works
ensure the functioning of the administrative to evaluate the results of the work of the
system. Accounting is one of the oldest system and correct targets if there are flaws
information systems known to organizations, in the system's goals.
since the accounting information is of obvious Consequently, the component of the
importance in identifying the economic and information system is also known as
financial reality of the organization and the hardware, software, remote communication,

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
database management, and other information Fadagh,
processing techniques used in a computer- 5. Completion: Completion means that
based information systems (Hilmi, 2005). information is inclusive of important
Through the previous definitions, the elements related to events and activities.
researchers stated that information systems 6. Timely: It provides timely information to
are a comprehensive set of components, decision makers for the purpose of
whether physical or human components, decision- making. To be useful, information
which contain a set of elements and must be prepared on time before the
procedures that work in a sequential and decision is made (Ahmed, 2013). The
coherent way through the operation of the periodicity of financial reports published by
system procedures from entering and the bank, which is usually three months,
activating the information, devising the will continuously provide the necessary
results, and providing them to the categories information for decision- making (Al-Ja'di &
used and beneficiaries to take decisions Al-Haj, 2010).
necessary to perform their functions in a 7. Understandable: This means to display
timely manner. information clearly and effectively.
8. Verifiable: This means to obtain the same
Characteristics of Good Accounting information by independent individuals.
Information Systems: 9. Accessible: This refers to the provision of
Good accounting information systems have information to users when they need it and
the following characteristics (Hilmi, 2005) inan appropriate manner.
1. Relevance: Relevance refers to when
information is used to reduce uncertainty, Accounting Information System and
improve decision-making, and confirm or Knowledge Management:
correct previous expectations. Accounting information system refers to
2. Reliability: This means that the a collection of data and processing
information is free from errors and bias, procedures that generates the required
and it accurately represents the events and information of the user (Hall, 2012).
activities of the entity and that the figures According to Hall (2012), the basic aim
in the accounting information systems behind accounting information system is to
reflect fairly the operations of the bank. generate accounting information to external
3. Comparability: The information that is individuals and groups like management and
measured and reported similarly in operational personnel. Other studies like
different institutions is comparable. The Zager et al. (2006) relayed that authentic
comparability feature enables users to accounting information are obtained from
identify aspects of agreement and the quality accounting information system
fundamental differences in economic while Susanto (2008) stated that the basic
phenomena, as long as these aspects are not role of the accounting information system is
concealed using similar accounting to generate qualified accounting information.
methods (KISO, 2005). Moreover, accounting information system
4. Consistency: The principle of consistency was described by Widjajanto (2001) as a
means that the enterprise applies the same collection of human and equipment
methods to the same accounting events resources set to transform data obtained into
from one accounting period to another (Al- information that is relayed to different

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JournalNX- A Multidisciplinary Peer Reviewed Journal
ISSN No: 2581 - 4230
VOLUME 7, ISSUE 9, Sep. -2021
decision makers. Also, Mujilan and Madiun knowledge management.
(2012) contended that accounting
information systems generates the change Accounting Information Systems and
either manually or through the computer. Organizational Performance:
The researcher was encouraged to conduct Majority of authors in prior literature
the present study by the high technology conducted an assessment of the influence of
performance of disciplines, particularly the KM elements on organizational performance
accounting information system that supports where some of them stressed on the challenge
global companies’ information, where the of its measurement (Vuksic et al., 2012).
situation is such that majority of software According to other studies (e.g., Chang &
are not effectively utilized for human Chuang, 2011; Mills & Smith, 2011; Hussein et
resource operations, owing to the different al., 2012) indicated that knowledge elements
knowledge levels – this holds true for both positively influenced organizational
developing and developed nations. performance while Asli et al. (2013) showed
Nevertheless, the accounting information that knowledge management practices directly
system performs with accuracy and influenced SMEs performance. Along a similar
reliability on the basis of the level of line of findings, Dalfard et al. (2013) examined
knowledge management it uses to support the influence of KM on organizational
the planning and implementation of strategic performance of 106 firms and found that KM
management. This works towards the positively influenced organizational
development of the company system and its performance of the firms. In a related study,
goals indicating that knowledge management Llorens-Montes et al. (2008) revealed that
works towards the daily management of strategic variables of knowledge including
firms. Moreover, knowledge management in knowledge slack, absorptive capacity and
firms enables it to produce long-term tacitness, had a positive mediating role on the
competitive advantages that lead to relationship between transformational
successful business in the ever-changing leadership and organizational performance.
market environment. Knowledge Moreover, McKeen et al. (2009) and Väyrynen,
management is described as the capability of H., (2014) found that KM practices positively
the firm to guide its employees to cooperate and indirectly influenced financial performance
in the generation, capture, sharing and and Richey et al. (2009), and McKeen et al.
leveraging of collective knowledge for (2009) related the KM positively affected
improved performance (Lakshman, 2007). organization outcomes like the innovation of
Other studies (Wang & Huynh, 2013) also the firm, product improvement and employee
defined it as the level to which firms adopt improvement. Meanwhile, Asli et al. (2013)
their knowledge management, which results revealed the positive and direct influence of
in varying knowledge sharing levels and KM on the organizational performance among
knowledge application levels. In the context SMEs. The review of the above discussed
of Malaysia, Sori (2009) examined studies leads to the following hypothesis;
accounting information system (AIS) in the
context of ZBMS Sdn. Bhd and the way it RESEARCH METHODOLOGY:
contributes to knowledge management. Research Design:
Meanwhile, Khodadi et al. (2014) found a The survey method was utilized for this
significant relationship between AIS and study. This approach was considered most

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VOLUME 7, ISSUE 9, Sep. -2021
appropriate because it helped the researcher to fraction
describe, examine, record, analyze and
interpret the variables that were found in the Data Collection Instrument and Validation:
study. It is also useful because of the relatively The research instrument used for the
large population from which the information study was the questionnaire. The questionnaire
was collected. Ezejulue and Ogwo (1990: 69) was used to obtain data on the independent
insist that the purpose of a survey research is and dependent variables presented in both
not the collection of data per se but the sections A and B of the questionnaire. While
discovery of meaning in the data collection, so section A measured the demographic data of
that facts and events can be better understood, the respondents such as name, gender, age,
interpreted and explained. They emphasized educational qualification and marital status,
that the terms “descriptive’ and ‘survey’ are section B measured the independent variables.
after used inter-changeable to denote a type of Likert (1932) scale was used in the study.
research explained above.
Techniques of Data Analysis:
Area of study: The data obtained were analyzed using
Ikot Ekpene metropolis was chosen as a regression analysis.
study area for this study. Ikot Ekpene LGA is
located on latitude 0532oNorth and longitude DATA PRESENTATION AND ANALYSES:
07 560East.
Data Analyses and Results:
Source of Data: Table 1: Distribution of Respondents by sex:
The data of the research are of two Sex No. of % of Respondents
Respondents
kinds; primary and secondary data. Graham
MALE 194 50.65
(2009: 141) agrees that the primary data FEMALE 183 47.78
contains a direct or original account of event or Total 383 100
phenomena given by someone who actually
observed the event or phenomena. These are
Table 1 show that one hundred ninety
relevant information obtained from the works
four (194) respondents representing 50.65%
of others. The following sources provided the
of the sample population were male while one
information which are: Textbooks, journals,
hundred and eighty three (183) respondents
magazine and unpublished articles; Research
representing 47.78% of the population were
and project reports in a related field; Manuals
female.
containing policy statement of the selected
Table 2: Age Distribution
companies. Age No. of respondents % of Percentage
20 – 25 106 27.67
Population of the Study: 26 – 30 77 20.10
The population of the study consisted of 31 – 35 56 14.62
all the registered operating businesses in Ikot 36 – 40 88 22.97
Ekepene Metroplis. 41 – Above 56 14.62
Sampling and Sample Size Total 383 100
The Sample sizes of 383 respondents Table 2 shows that hundred and six
were in the study area. The sample size was (106) respondents representing 27.67% of the
statistically determined using the sample sample were between the age bracket of 20 –

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VOLUME 7, ISSUE 9, Sep. -2021
25 years, seventy seven (77) respondents each holders of HND/BSC certificates holders, while
representing 20.10% were between the age twenty one (21) respondents representing
bracket of 26 – 30 years, fifty six of the 5.48% were MSC certificate holders and only
respondents representing 14.62% were 17% forty six (46) respondents representing
were 31 – 35 years respectively, also eighty 12.01% of the population were PHD holders.
eight (88) respondents representing 22.97% of
the sample were between the age limit of 36 – Hypotheses Testing:
40 years and fifty six (56) respondents Hypothesis One: There is no significant
representing 14.62% were within the age limit relationship between accounting practices and
of 41 and above years. SMEs performance in Ikot metropolis
Table 5: regression analysis relationship
Table 3: Marital Status Distribution between accounting practices and SMEs
Status No. of % of performance in Ikot metropolis
Respondents Respondents
Single 158 41.25 Variable F R Adj R2 P Remark
R2
Married 134 34.98 Accounting
Divorced Practice 58.632 0.529 0.280 0.275 0.000 Sig
55 14.36
Widow/Widowers 36 9.39
Total 383 100 Hypothesis one which stated that there
is no significant relationship between
Table 3 above shows that one hundred and accounting practices and SMEs performance
fifty eight (158) respondents representing in Ikot metropolis was statistically significant.
41.25% of the sample were single, one hundred The results in table 5 shows that accounting
thirty four (134) respondents representing practice has a significantly positive effect on
34.98% of the sample were married, only fifty SMEs performance as shown by the coefficient
five (55) respondents representing 14.36% of of accounting practices (0.541) and the
the sample were divorced as well as only thirty significant p-value of 0.000 which is less than
six (36) respondents representing 9.39% 0.05. Also, the magnitude of effect stands at
54.1%, that is, a 1% increase in accounting
Table 4: Educational Qualification Distribution practices availability and use will influence
Qualification respondents No. of % of the performance of SMEs by 54.1%.
Respondents Respondents
WAEC/NECO
Furthermore, the relationship between
162 42.29
OND accounting practices and SMEs performance is
101 26.37
HND/BSC positive but weak with a correlation
53 13.83
MSC 21 5.48
coefficient of 0.529, while the R2 value of 0.280
PHD 46 12.01
shows that only about 28% changes in
Total 383 100 performance of SMEs is explained by
accounting practices, while 72% explained by
Table 4 shows that one hundred and other factors. Furthermore, the entire model
sixty two (162) respondents representing is significant in explaining the challenges
42.29% of the sample were WAEC/NECO faced in accounting practices on SMEs
holders, one hundred and one (101) performance as depicted by the F-Statistic of
respondents representing 26.37% were 58.632 and with a p-value of 0.000 (<0.05).
OND/NCE certificate holders; fifty three (53) From the results therefore, we reject the null
respondents representing 13.83% were hypothesis and conclude that there is

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significant relationship between accounting CONCLUSIONS AND RECOMMENDATIONS:
practices and SMEs performance in Ikot The study contributed to the body of
metropolis. research by investigating the effect of
accounting information system on Small and
Hypothesis Two: There is no significant Medium scale Enterprises’ performance.
relationship between mode of accounting and Several authors regularly discussed accounting
SMEs performance in Ikot metropolis information system as it relates to
manufacturing and banking industries.
Table 6: Regression Analysis of relationship Findings showed that the current accounting
between mode of accounting and SMEs practice has a significantly positive effect on
performance in Ikot metropolis SMEs performance. The positive correlation
Variable F R
Adj R
2
indicates that the higher the soundness of
R2
P Remark
Mode of accounting practices deplored on the
Accounting 84.107 0.598 0.358 0.353 0.000 Sig
operations, the higher the performance of the
business and vice versa. This is based on the
Hypothesis two which state that there is premise that sound accounting practice will
no significant relationship between mode of lead the firm to account accurately for all its
accounting and SMEs performance in Ikot incomes and expenditures as well as assets and
metropolis was statistically significant. The liabilities from one period to the other. This
results in table 6 shows that mode of accounting result corroborates with the findings of Ankrah
has a significant positive effect on SMEs et al (2015) & Nwobu et al (2015);
operations as shown by the coefficient of mode The mode of accounting adopted, the
of accounting (0.660) and the significant p- accounting information system adopted and
value of 0.000 which is less than 0.05. Also, the the use of accounting information were also
magnitude of the effect stands at 66%, that is, a found to have significant positive effects on
1% increase in mode of accounting in use will SMEs performance. These positions were
influence the performance of SMEs by 66%. supported by the findings of Al Smirat (2013);
Furthermore, the relationship between mode of Hla & Teru(2015); Khaled & Abdulqawi (2015);
accounting and SMEs operations is positive but Muhindo et al (2014). However Naranjo (2004)
is mild with a correlation coefficient of 0.598, found an indirect effect of sophisticated
while the R2 value of 0.358 shows that only accounting information system on
about 35.8% changes in operations of SMEs is performance, acting through prospector
explained by their mode of accounting. strategy. Since most SMEs cannot afford to
Furthermore, the entire model is significant in deplore sophisticated accounting information
explaining the mode of accounting on SMEs system on their operations, due to high cost of
operations as depicted by the F-statistic of automation involved, there is every need for
84.107 and with a p-value of 0.000 (<0.05). facility sharing by SMEs operating within the
From the results therefore, we reject the null same locality. The study recommended that
hypothesis and conclude that there is management of SMEs should deplore sound
significant relationship between mode of accounting practices to their operations. Since
accounting and SMEs performance in Ikot sophisticated accounting systems may be out of
metropolis. reach by SMEs operators, resource sharing
approach could be adopted by SMEs operating
within the same locality as a cost-reduction

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device. information system and performance
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