ABSTRACT
The research on «A study of accounting system used in
small and medium enterprises in Rwanda» a case study of INYANGE
INDUSTRIES, has been carried out in order to know the contribution of effective
accounting system towards efficient performance of SMEs. The general objective
of this research was to examine to what extent effective or weak accounting
system affect positively or negatively the operations of SMEs in Rwanda.
In this study, purposive sampling method was adopted and the
researcher has collected both primary and secondary data to achieve the
research objectives.
Data collection was carried out using questionnaires and
interview. Data were analysed and interpreted using simple judgement method
based on editing and tabulation while processing those data.
Findings have shown that INYANGE INDUSTRIES hasn't an
effective accounting system in place to play a great role in enhancing
effective use of its resources. This is evidenced by the fact that INYANGE
INDUSTRIES does not have qualified employees to work with its accounting system
and its internal control system is not strong enough to prevent errors and
frauds and the fact that the responsibilities of designing its accounting
system are in the hands of one person who is the director general.
In addition, the respondents have confirmed that the
accounting system in INYANGE INDUSTRIES has played an important role in recent
performance and they rated this role ranging between 75% and 100%.
Finally, a conclusion was made that a sound accounting system
plays a key role in the achievement of the set objectives in SMEs, but an
effective implementation of
Accounting system is not a task of one person or one
department and effective accounting system can only be implemented when there
is a cooperation and full commitment of all employees.
CHAPTER ONE: GENERAL INTRODUCTION
1.0. BACKGROUND OF THE STUDY
In order to generate and present accounting information
effectively, every organization needs an accounting system. The systems depend
on the nature and the size of the organization concerned.
In this study, we will make emphasis on the accounting system
applicable in small and medium enterprises and how its effective use and misuse
affect differently the performance of those enterprises.
SMEs present the same features in the developing countries.
They are those like; sole proprietors, partnerships, cooperatives, small and
medium public enterprises that due to their low capital investments, their
activities are limited and their accounting systems are weak. They comprise a
high rate of enterprises operating in Rwanda. Reported by Rwanda development
bank.
The definition of SMEs generally varies from country to
another depending on the economic and socio-political context of the country.
it may also depend on the objectives to be achieved in the sector. They cover
non farm economic activities mainly manufacturing, mining, commerce, services
and agro-businesses. The commonly measure used to define them is based on the
number of employees, total investment, and total sales turnover in the year. In
Rwanda the definition given by Rwanda development bank is as follows:
The small enterprises are those whose net capital investment
falls between 0.5 and 15 million, annual sales turnover between 0.3 and 12
million and from 3 to 30 employees.
The medium enterprises are those whose net capital investment
falls between 15 and 75 million, annual sales turnover between 12 and 50
million and from 30 to 100 employees.
The accounting system refers to the set of procedures, and
principals that are responsible for the collection and processing of data to
produce information useful to decision makers in planning and controlling of
business activities. The system deals primary with financial information.
According to JILL HUSSEY and ROGER HUSSEY (1999) Cost and
Management accounting, all efficiently managed organizations need to keep some
form of accounting system. For big organizations like limited companies, there
are legal requirements that must be adhered. For small and medium businesses,
it is important to keep some form of accounting records for taxation and
decision making purposes.
The role of accounting is concerned with classifying and
recording transactions in a monetary term. Accounting is thus mainly concerned
with classifying, recording, interpreting and reporting to external and
internal users of accounting data that used to evaluate the performance of any
business.
The business organizations to have better development, an
effective accounting system is very critical, hence the topic of the
researcher. Effective accounting system should have appropriate measure of
control, standard implementation methods, qualified accounting personnel,
updated information technology control and should comply with General Accepted
Accounting Principles.
This assists in one way or another to achieve the over all
objectives of the organization. The management and control of SMEs is done by
the people around the environment.
The business organization to be more successful and
accountable for their day-to-day activities, the application of effective
accounting system should be considered in a highly position.
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