There have been the recent calls for additional research in order to enhance the understanding of the adoption of accounting techniques (ATs) in small and medium sized enterprises (SMEs). This, allied to an increasing importance of SMEs around the world especially in developing countries, is the motivation for this research. This research explores the uptake of a broad range of ATs in Nigerian SMEs; identifies the roles of ATs in the management of SMEs; determines factors that affect the extent of use of ATs in SMEs and lastly examines the relationship between the use of ATs and organizational performance of SMEs. A postal questionnaire was conducted to 1,000 Nigerian SMEs in manufacturing sector which elicited 160 useable responses.

The results show that the majority of respondents have used the five accounting areas identified. Use of the costing system, budgeting system and performance evaluation system are significantly higher than for the decision support system and strategic accounting, which indicates that the uptake of traditional ATs is greater than for sophisticated ATs. The results indicate that medium sized firms make greater use of all ATs as opposed to small sized enterprises. The most significant differences relate to the use of decision support system and strategic accounting. The increased uptake of sophisticated ATs by larger firms is in line with size being a contingent variable explaining the use of such practices.

This study enriches the existing body of knowledge of accounting by providing information as to the use of ATs in SMEs in Nigeria. The findings can be specifically informative for policy makers intent on developing accounting skills among Nigerian SMEs. This research will provide valuable insights into the nature of ATs in SMEs in a developing country and will promote interest among Nigerian researchers as well as researchers of other countries to make the SME sector a focus of interest in accounting research.




1.1      Background of the Study

The business environment has become intensively dynamic and increasingly unpredictable in recent decades and, correspondingly, managing company has become more demanding. Cost Accounting is a task of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. The SMEs sector has been recognized worldwide for its role in economic advancement through ways various like; wealth generation, employment creation, and poverty reduction (Kithae, Gakure, & Munyao, 2012). Small and medium scale enterprises are a fundamental part of the economic fabric in most developing countries, and they play a very important role in furthering growth, innovation and prosperity (Dalberg, 2011).

Small and Medium Enterprises are critical to the development of any economy has they possess great potentials for employment generation, improvement of local technology, output diversification, development of indigenous entrepreneurship and forward integration with large scale industries.

Cost accounting is a task of collecting, analyzing, summarizing and evaluating various alternative courses of action. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.

In Nigeria there has been gross under-development of SMEs sub-sector and this has undeNined its contribution to economic growth and development. The key issue affecting the SMEs can be group into four: unfriendly business environment, poor funding, low management skill and lack of access to technology (FSS 2020 SME Sector Report, 2007). Small and medium enterprises (SMEs) play an important role in the development of a nation’s economy. The reasons for this are the fact that SMEs provide benefits such as job creations, knowledge spillover, economic multipliers, innovations driver and cluster development in an economy (Chinaemerem & Anthony, 2012). Given the importance of SMEs in an economy, it becomes quite plausible to look at factors affecting their financial performance which is a major determinant of their survival and growth.

An accounting system is an orderly, efficient scheme for providing accurate financial information and controls. Regulatory requirements and internal administration policies are key considerations in the design of an effective accounting system. Thus accounting systems show the books, records, voucher, and files and related supporting data resulting from the application of the accounting process. It involves the design of documents and transactions flow through an organization. The uniqueness of small and medium scale businesses call for careful consideration in the design of accounting systems.Small and medium scale enterprises are a vast majority of businesses found in variety of primary and inteNediate production of the economy. These establishments have tremendous impact on the state and well being of the nation in employment generation, as sources of national outputs and revenues, providing feedstock for large corporations They may lack the sophistication to apply the detailed accounting processes, yet the value of accounting systems to these businesses is quite profound.


1.2   Statement of the Problem

Most of the existing research literature on accounting in Port Harcourt SMEs tends to be more biased toward the aN of cost accounting techniques in performance of SMEs, more so only remote exists in regard of the adoption of cost accounting techniques by SMEs in Port Harcourt [(Wairegi, 2011),(Makau, Wawire, & Ofafa, 2013), (Waweru, 2012), (Mugambi, 2010) (Aduda, Mogutu, & Githinji, 2012) , lack of technical skills are as much obstacles to developing a small business as is the inability to access credit (Mbogo, 2011). In Nigeria, SMEs cover the entire range of economic activity within all sectors and share a number of common problems that hinder them from effective performance in Port Harcourt, include low market access to credit, poor information flow, discriminatory legislation, poor access to land, weak linkages among different sectors, weak operating capabilities in terms of skills, lack of knowledge and attitudes, lack of infrastructural facilities among others.

Another problems of SMEs failure is poor management ability which includes accounting problem-solving.Small and medium enterprise experiences difficulties in raising equity capital from the finance houses or individuals. Even when the finance house agrees to provide equity capital, the conditions are always dreadful. All these result to inadequate capital available to the sector and thus lead to poor financing.

Another problems facing SMES is Lack of competent management which is the consequence of inability of owners to employ the services of experts; Use of obsolete equipment and methods of production because of owner’s inability to access new technology; Excessive competition which resulted from sales which is a consequence of poor finance to cope with increased competition in the industry; The high cost of available raw materials affects the prices of good food. This only has adverse effect on the turnover of the enterprise but also on the profitability; The availability of infrastructural facilities is grossly inadequate in the areas of access roads, electricity, water supply, etc. and Multiplicity of policies and regulatory measures such as removal of fuel subsidy, taxes, several charges on loans.

The place of sound accounting and internal control systems in any business, irrespective of its scale, cannot be overemphasized. A vast majority of small-scale businesses cannot afford the complexity of a detailed accounting system even if they would have. Hence, the existence of single entries in their books and in some cases incomplete records (Wood, 1979; Onaolapo, et al., 2011). Audits of small and medium scale enterprises have proven to be among the most worrisome for professional accountants because of the inadequacy of the internal controls. This study thus sought to assess the determining factors and the adoption levels of modern accounting techniques by SMEs in Port Harcourt.


1.3 Research objectives

Based on the issues and problems discussed above, this study identifies four main objectives

  1. To investigate the extent to which ATs are employed by Nigerian SMEs.
  2. To identify the roles played by ATs in Nigerian SMEs ‘management.
  3. To determine the factors that affect the extent of use of ATs among Nigerian


  1. To seek to demonstrate a positive relationship between AT use and the performance of SMEs.


1.4 Research questions

These objectives can be expressed in the following research questions:

  1. What is the extent of the use of ATs by Nigerian SMEs?
  2. What are the roles of accounting in Nigerian SMEs ‘management?
  3. What factors affect the extent of the use of ATs by Nigerian SMEs?
  4. Is there a positive relationship between the use of ATs and the performance of Nigerian SMEs?


 1.5 Hypotheses 

Research questions 3 and 4 can be expressed in terms of the following two general hypotheses for empirical testing:

H1: There are significant and positive relationships between selected contingent factors and the use of ATs.

H2: There is a significant and positive relationship between the use of ATs and organizational performance. 


1.6   Significance of study

The effect of Cost Accounting Techniques and performance Small and Medium Enterprise development has been an area of intermse research both in practice and academia. This work is to prove helpful to existing and potential entrepreneur of SMEs since this study lends assistance in strategic effect of sources of finance in the performance of a business in order to plan ahead. The research work could also serve as a source of future reference to future researchers who may find it helpful in carrying out a research work of similar nature or related topic.

This empirical investigation of SMEs is therefore a significant contribution to existing literature. FurtheNore, the study would provide evidence on the extent to which Rivers state Small and Medium Enterprise are accounting accommodating in readiness for gaining strategic competitive advantages in their businesses.

The study would also provide uniqueness of small and medium scale businesses call for careful consideration in the design of accounting systems. Small and medium scale enterprises are a vast majority of businesses found in variety of primary and inteNediate production of the economy.


1.7   Scope of the Study

The general scope of this study covers Cost Accounting Techniques and performance Small and Medium Enterprise. The geographical scope is Rivers State of NigeriaThe study will be limited to selected SMEs in Port Harcourt.


1.8    Definition of Terms

Accounting: The bookkeeping methods involved in making a financial record of business transactions and in the preparation of statements concerning the assets, liabilities, and operating results of a business.

SME:small and medium enterprises) are businesses whose personnel numbers fall below certain limits.

Cost accounting: Is ‘the process of accounting for cost from the point at which expenditure is incurred or committed to establishment of its ultimate relationship with cost centres and cost units.

Technique: a way of doing something by using special knowledge or skill

Accounting records are all of the documentation and books involved in the preparation of financial statements or records relevant to audits and financial reviews.

Financial performance: Measuring the results of a firm’s policies and operations in monetaryterms.



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