Memoire Online - Accounting systems in small and medium enterprises

The first chapter: Includes the introduction of the project in order to have a clear understanding of what was researched about. It gives also the objectives, significance of the study, scope and limitations of the study.

The second chapter: Concerned the existing literature about the research topic to make the research more objective oriented. The researcher visited the libraries, read relevant text books, and made research on internet.

The third chapter: Gives and explains the methodology used to collect data and sampling techniques. The researcher used questionnaires and observation method to collect primary data and literature review for the secondary data.

The fourth chapter: This referred on the analysis and interpretation of the collected data to put them into meaning full information about the research topic in a view of getting to interpret it basing on real facts.

3.7. LIMITATIONS FOR THE STUDY

( The time provided for the study was not enough for the researcher to collect all the information necessary.

( The financial means for the study was insufficient to provide all requirements as the prices for every thing in the market was increasing day to day.

( The respondents had heavy work and do not provide the information on time. Some also
did not understand the objective and the importance of the study and think otherwise.

( Some might not give true information for their own reasons. Accounting records are kept secretly in many organizations and therefore the problem of not having access to important data for effective research.

This chapter deals with the presentation, analysis and interpretation of data. it gives details on various responses provided by different respondents and the personal observation of the investigator. The findings are in line with the research objectives mentioned earliest in the first chapter. Data was analyzed using qualitative and quantitative techniques. The researcher used quantitative techniques to calculate numerical and emotional aspects of the respondents.

Answers	Number of respondents	Percentages
Yes	20	100%
No	-	-
Total	20	100%

The above table indicates that 100% of the respondents said that the accounting system exists in their organization (Inyange industries). This number of respondents also said that the accounting system is computerized and the study revealed that the sage 100 accounting software is used to record transactions into the system.

The fact that the accounting system of Inyange is computerized indicates some how the effectiveness of the system. The computerized accounting system avoids errors and misstatement while recording and processing accounting transactions and information. But the researcher revealed that the system is not updated and there are no technicians and skilled persons to install and use the system effectively.

Answers	Number of respondents	Percentages
Effectiveness	5	25%
Efficiency	4	20%
Easy manipulation	4	20%
Cheapness	2	10%
Quick report preparation	5	25%
Others	-	-
Total	20	100%

The above table shows that the company has main considerations while choosing the accounting software to adopt within its accounting system. As shown in the above table, out of 20 respondents 5 said that the main consideration is effectiveness; 4 said that the main consideration is efficiency; 5 said that the main consideration is quick report preparation; 4 said that the main consideration is easy manipulation; and the 2 remaining said that it is cheapness.

The study revealed that accounting software is only used when the company's accounting system is computerized. This is important because it improves the effectiveness of the accounting system in the company in that it helps the company to achieve its set objectives. Another fact is that it allows the users of accounting system to execute many transactions in the short period of time at a minimum cost. It also allows users of accounting information to get information on time and make necessary decisions.

Answers	Number of respondents	Percentages
Number of transactions	3
Nature of the business	8
Size of the business	9
Others	-	-
Total	20	100%

The table above shows the responses from respondents on the basic point the company considers during the designing of an accounting system. Out of 20 respondents, 3 said that the basic point to consider is the number of transactions; 8 said that the designing of an accounting system is based on the nature of the business and 9 said it is based on the size of the business. As shown in the chapter 2 of this study every accounting system of any organization must depend on two main things said nature and size of the business.

Answers	Number of respondents	Percentages
Double entry	20	100%
Single entry	-	-
Total	20	100%

According to the study the company (inyange) uses a double entry accounting method to record its financial transactions. 100% of the respondents who had been given questionnaires said that the double entry method of accounting is used by the company while recording its financial transactions. This method of accounting gives operational support for the accounting equation framework that is the total economic resources of the business (its assets) must always be equal to the sources of funds (liabilities and equity) which were used to acquire those resources.

Answers	Number of respondents	Percentages
Professional level (ACCA, IACPA, etc	-	-
PHD	-	-
Post graduate	-	-
Undergraduate	20	100%
Diploma	-	-
Secondary education	-	-
Others	-	-
Total	20	100%

The table above shows the education level of the chief accountant of Inyange industries. A 100% of the respondents said that the chief accountant of Inyange is an undergraduate level in education. As the requirements of IAS (international accounting standards), a chief accountant should be a professional accountant from professional certified accountants like; ACCA, IACPA, etc or at least with a postgraduate level from a recognized institution or university.

Answers	Number of respondents	Percentages
Director of administration and finance	4	20%
chief accountant	-	-
General director	16	80%
Accounting experts	-	-
Others	-	-
Total	20	100%

The table above shows the person responsible of designing an accounting system of Inyange industries. Out of 20 respondents, 16 said that the general director of the company is the one responsible for the designing of its accounting system; 4 said that the director of administration and finance has the responsibility of designing the company's accounting system. This indicates that 80% of respondents agreed that the designer of the accounting system is the general director.

The study revealed that the general director of Inyange industries is the owner of the same and he is responsible of the management, the designing of the accounting system. this means that there is separation of duties in the organization and the principle of separate entity which state that the business should be separate to its owner has been violated. The researcher revealed that Inyange industries are managed like a family holding property and this affected negatively its growth and development.

Following the rules governing companies the responsibility of designing accounting system should be in the hands of the DAF or chief accountant who has enough skills in accounting matters and who work with accounting information the most of time and due the these reasons who is familial with accounting problems.

Another fact of ineffective accounting system is that because the responsibility of designing the accounting system is in the hands of one person, there is no variety of ideas from different skilled people about the designing of the system. An effective accounting system might be designed by more than one person to be able to take into consideration all aspects of the accounting transactions and an external expert consultant had to be contacted and gives his contribution if necessary.

Answers	Number of respondents	Percentages
Cash basis	5	25%
Accrual basis	15	75%
Total	20	100%

The table above shows the basis of accounting used by inyange industries in its day to day opera ratios. 75% of the respondents said that inyange uses accrual basis of accounting in its day to day operations and 25% of the respondents said that inyange uses cash basis of accounting in its day to day operations. This means that the company uses both the two basis of accounting.

The study revealed that the cash basis of accounting is not recognized by the general accepted accounting principles. Only the accrual basis of accounting is recognized and recommended by the general accepted accounting principles to be used by any business organization.

This accrual basis recommended states that only revenue s are recognized when the sales are made rather than when cash is collected and the expenditures are recognized only when things are used or serves are consumed rather than when cash is paid for. This basis is very important that it enables to present a meaningful picture of profit earned and loss suffered and the financial position of the business.

Answers	Number of respondents	Percentages
0-25%	-	-
25-50%	4	20%
50-75%	10	50%
More than 75%	6	30%
Total	20	100%

The table above shows the use of source documents in Inyange to verify the accuracy for each recorded transaction. out of 20 respondents, 4 said that the source documents is used at the rate of 25 to 50% and 10 said that it is used at the rate of 50 to 75% and 6 said that it is used at the rate which is more than 75%.

The study revealed Inyange uses source documents to verify the occurrence of each financial
transaction recorded in the system. This helps the person responsible for recording
transactions in the system to minimize the number of errors and correct them easily when

occurred. The fact that each transaction is supported by a source document controlled by the auditor provides hope that the accounting information obtained is accurate and reliable.

Such information one of the indicators of effective accounting system and it is used by many different people in decision making process.

Answers	Number of respondents	Percentages
Yes	20	100%
No	-	-
Total	20	100%

The table above indicates the compliance of accounting system used in Inyange with the General accepted accounting principles. The 100% of the respondents agreed that the accounting system of inyange complies with the general accepted accounting principles. The researcher revealed that even if the respondents said that the compliance with GAAP is 100%, there are some principles which were found violated like separate entity concept, materiality concept, accrual concept, etc.

The requirements state that the business organization should consider all accounting principles without any exception because of their importance in the development and growth of the company and well running of operations. GAAP being rules and regulations of action or conduct adopted by accountants universally while recording accounting transactions, they should be considerably needed and followed by any company during the time of recording its financial transactions into the accounting system.

Answers	Number of respondents	Percentages
0 to 25%	2	10%
25 to 50%	15	75%
50 to 75%	3	15%
More than 75%	-	-
Total	20	100%

This table shows the level of compliance of accounting system with the General accepted accounting principles. Out of 20 respondents, 2 respondents said that the level of compliance is at the rate of 0 to 25%; 15 said that it is at the rate of 25 to 50% and 3 said that it is at the level of 50 to 75%.

The study revealed that the level of compliance with general accepted accounting principles is not sufficient as the required level is at 100%. The fact that the accounting system of inyange does not comply with general accounting principles 100%, the company does not operate properly and then its growth is very slow. And its set objectives are not achieved as intended.

Answers	Number of respondents	percentages
0 to 25%	-	-
25 to 50%	15	80%
50 to 75%	5	20%
More than 75%	-	-
Total	20	100%

The table above shows the level of effectiveness of the accounting system of Inyange. Out of 20 respondents, 15 said that the effectiveness level of inyange's accounting system is at the rate of 25 to 50% and 5 respondents said that it is at the rate of 50 to 75%.

The study revealed that as 80% of the respondents agreed that the level of effectiveness is at the rate of 25 to 50%, this level is not sufficient to allow the to perform its operations effectively and efficiently. Inyange should improve the level of effectiveness for its accounting system.

Answers	Number of respondents	Percentages
Yes	20	100%
No
Total	20	100%

The table above provides responses concerning the training of accounting staff of the Inyange from the different respondents. 100% of all the respondents said that the accounting staffs of Inyange get training to develop their accounting skills and enhance their performance in business operations. This indicates that they do not get enough training to develop their and acquire new accounting knowledge and skills so that they can be able to perform their tasks as intended and achieve the set company's objectives.

Answers	Number of respondents	Percentages
Compliance with the GAAP	-	-
Adaptability to changes in accounting system	-	-
Maximization of profit with accounting system	5	20%
General accounting knowledge	15	80%
Others	-	-
Total	20	100%

The table above represents the subjects on which inyange's accounting staffs are trained. 20% of the respondents said that the inyange's accounting staffs are trained on the maximization of profit with the accounting system and 80% of the respondents said that they are trained on the general accounting knowledge. During the period of training the management of the company should ensure that the training covers all the subjects necessary to improve knowledge and skills of its accounting staffs, so that they can be able to adapt to changes in accounting matters following in technologies and in business applications.

Answers	Number of respondents	Percentages
Yes	8	40%
No	12	60%
Total	20	100%

The table above shows responses from different respondents about the best doing of the company (inyange) to improve its accounting system. Out of 20 respondents, 8 said that the company does the best to improve its accounting system and 12 said that the company does nothing to improve its accounting system. From the data, the researcher revealed that Inyange does not take care of its accounting system and due to that it can not improve its growth and development.

The study revealed that for any company to succeed in achieving its set objectives, it should make more emphasis on its accounting system and do all possible to improve that accounting system. This helps the company to improve its success as the accounting system of any organization deals all aspects in the business organization. If the company's accounting system is not improved, it is easy for that company to run out of business operations.

Answers	Number of respondents	Percentages
Yes	4	20%
No	16	80%
Total	20	100%

The table above shows if the company prepares budget for the well or effective designing of its accounting system. Out of 20 respondents; 4 respondents said that their company prepares budget for the well designing of its accounting system and 16 respondents said that the company does not prepare budget for effective designing of its accounting system. With other methods used by the researcher, the study revealed that no budget prepared for that. For a company to be able to design effective accounting system, it should have a budget of expenses reserved for the well designing of that accounting system. Otherwise, a company can not design its accounting system perfectly.

Answers	Number of respondent5s	Percentages
Yes	20	100%
No	-	-
Total	20	100%

The table above indicates whether the company (Inyange) has an internal control system to prevent the occurrence of material errors and frauds. A 100% of the respondents said that there an internal control system in the company to guarantee the effectiveness of the management and prevent errors and frauds. The researcher with other methods used in his research like interview and personal observation, he discovered that the internal control system of Inyange industries is weak and can not prevent errors and frauds as intended.

The fact that the internal control system of the company is not strong enough to be able to prevent errors and frauds and safeguard the company's assets may cause an ineffective accounting system and the mismanagement of the funds of the firm and lead to running out of business for the firm. A strong internal control system prevents errors and frauds during the firm's business operations and protects its assets and resources from being misused.

Answers	Number of respondents	Percentages
Yes	20	100%
No	-	-
Total	20-	100%

The table above shows preparation of financial statements. A 100% of the respondents agreed that Inyange industries prepare the financial statements to report financial information to the users and assess the company's financial position.

The study revealed that the company prepares its reports annually in the form of; trading, profit and loss account, trial balance, balance sheet, cash flow statement and fund flow statement to be used by the users of accounting information in the process of making different accurate decisions.

The fact that accounting information is used or relied on by many different people, the ineffective accounting system will affect not only the operations of the company using it, but also the operations of users of accounting information who had relied on the information provided by that ineffective accounting system while making their decisions.

Answers	Number of respondents	Percentages
Yes	20	100%
No	-	-
Total	20	100%

The table above shows whether the company (inyange) the books of accounts. 100% of the respondents said that the company (inyange) prepares books of accounts where all its financial transactions are recorded and summarized in order to enable the preparation of different report at the end of the accounting period.

The study revealed that the company prepares the books of accounts like journals including purchase journal, sales journal, cash journal, general journal, purchase returns journal and sales returns journal; ledger where summarized all the transactions recorded in the different journals; cash book including petty cash book and three column cash book; the trial balance and the bank reconciliation statement.

The study also revealed that the bank reconciliation statement is prepared annually and this is a long period because the errors may be with a big number and become difficulty at the time of correcting them. The advised period for the preparation of the bank reconciliation is at least using a weekly basis in order to be able to correct occurred errors earlier.

Table19. Accounting standard followed when preparing financial statements and books of accounts

Answers	Number of respondents	Percentages
International standard	20	100%
Regional standard	-	-
None	-	-
Total	20	100%

The table above shows the accounting standard followed by the firm while preparing the books of accounts and financial statements. A 100% of the respondents said that their company follows the international accounting standard in the preparation of books of accounts and financial statements.

The fact that the firm uses the international accounting standard while preparing its books of accounts and financial statements indicates that its accounting system can be improved and become effective to provide meaningful information to the users. Accounting information is relied on by many different users of financial data like employees, managers, owners, stakeholders and other interested parties.

General analysis of the organization's strengths, weaknesses, opportunities and threats (SWOT analysis)

Accounting systems in small and medium enterprises

3.6. ORGANIZATION OF THE STUDY

3.7. LIMITATIONS FOR THE STUDY