THE IMPACT OF ACCOUNTING SKILLS APPLICATION ON ENTREPRENEURSHIP DEVELOPMENT

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THE IMPACT OF ACCOUNTING SKILLS APPLICATION ON ENTREPRENEURSHIP DEVELOPMENT

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

Entrepreneurship started to gain ground in Nigeria as a result of the prevalence of unemployment of our youths after leaving the school. Many of our youths who could not embark on higher education after secondary school could not be absorbed into paid employment by both the public and private sectors. Similarly, most graduates from the universities and Polytechnics, after their one year compulsory National Youth Services start searching for unavailable jobs. It is obvious that the government cannot employ all the graduate job seekers and the only way to tackle this problem is for individuals to seek alternative means by being self-reliance and be an employer of labour rather than be a job seeker through entrepreneurship.

Entrepreneurship is a constant search for changes and reacting against it by exploiting it as an opportunity (Hezarjaribi, 2005). Sustainable entrepreneurship on its part is defined as the process of discovery, development and exploitation of the economic opportunities that exists in the future market (Tietenborg, 2010). An entrepreneur is a person who has new ideas which by those ideas introduces established process of new business and acceptance of risk and production of new services to his/her society (Ahmadporedariani, 2003).

Business enterprises can be classified in various ways using different parameters. Some of the known parameters used in classifying businesses include: their sizes, their nature and modes of operation, their location and area of coverage, their asset base, as well as their capital base. These attributes have resulted in businesses being classified as small, medium and large scale. The Small and Medium scale Enterprise (SMEs) make up a vital part of our business systems today and employs more people than the government and large enterprises. In Nigeria, the small and medium enterprises provide the most important vehicle for both the government and large scale enterprises to thrive. The SMEs are more commonly involved in trading, provision of services and craft production activities. The SMEs in Nigeria contribute significantly to the national economy and growth by the volume of employment they provide to the citizenry and by the amount of tax revenue it remits to the national treasuries.

However, there is most often the issue of how much tax liability to be paid by these SMEs. The tax authorities often reject the returns and accounts prepared by these SMEs and label them as incorrect because it is believed that the SMEs lack the capacity, the skills and proficiency to prepare accounts and returns to meet the requirements of the tax authorities. There is therefore the need to evaluate the accounting skills needed for sustainable performance and development of the SMEs in Nigeria especially in Edo State which is assumed to have a good number of SMEs in the country due to her numerous mineral deposits. Edo State is situated in the South-South part of Nigeria with a population of over six million people and with over One hundred and fifty (150) SMEs. It therefore means that anything that affects the SMEs in the state will certainly register a significant impact on the Nigeria economy.

Akande (2011) posits that for any Small and Medium scale Enterprises (SMEs) to be successful, owners of businesses must possess appropriate skills and abilities to run the business. To succeed in today’s competitive market as an entrepreneur, one needs a broad array of entrepreneurial skills. Akande (2011) also argued that entrepreneurial skills are those qualities or attributes required for an entrepreneur to start and successfully manage a business in a competitive environment. One of these entrepreneurial skills is the accounting skills. It is therefore very important for entrepreneurs in Nigeria to develop accounting skills for proper management of their businesses in order not to be out of business and also contribute meaningfully to the growth and development of the nation’s economy.

From the forgoing analysis, it becomes clear that business owners need to poses basic accounting skills necessary to start, develop fiancé and market their businesses. By accounting education, entrepreneurs will acquire the basic skills of accounting. This implies that the inability to install a proper accounting system would disallow business monitoring reporting and performance evaluation that are required for business survival. Accounting skills has significant impact on entrepreneur’s performance and efforts socially, economically and environmentally.Findings have shown that accounting education plays an important and significant role in sustainable entrepreneurship. However, many entrepreneurs have failed in the past probably for ignoring this important measurement apparatus known as accounting.

1.2 Statement of the Problem

The purpose of every business entity is to maximize profit as well as increase firm’s share price. However, this would not be attainable if appropriate steps and measures are not in place in achieving this in business. For any organization to function effectively (Small and Medium Scale Enterprises), it requires strong leadership and accurate decisionmaking. Unfortunately, many of our entrepreneurs fail to succeed because of lack or absence of accounting skills. Theproblem of the study is that entrepreneurs who are deficient in these skills cannot do well in business, hence, sustainable performance and economic development would not be achieved.

In Edo State, most of the jobs, especially those in non-urban areas are provided by small and medium scale enterprises. However, SMEs in Edo State struggle to gain access to fundamental accounting skills that they need in a timely manner for improved productivity, profitability, customer satisfaction and improved cycle time. It is for this and other reasons adduced above that this paper which centers on the fundamental accounting skills needed by small and medium scale enterprises in Edo state for sustainable performance and economic development is specifically undertaken.This is the knowledge gap this study seeks to fill.

1.3 Objectives of the Study

The broad objective of the study is to appraise the accounting skills needed by entrepreneurs of small and medium enterprises for sustainable performance and economic development in a developing nation using Edo State of Nigeria as a focal point. The specific objectives are:

i. To ascertain the fundamental accounting skills needed by entrepreneurs of

SMEs; ii. To determine the benefits accruable to the firms who acquire these skills.

1.4 Research Questions

This research work is therefore interested in finding answers to the following questions:

i. To what extent is accounting skills needed by entrepreneurs of SMEs for sustainable performance?

ii. What is the extent of benefits accruable to firms who acquire accounting skills for sustainable performance and development?

1.5 Research Hypotheses

In order to answer the research questions and achieve the objectives of this study, the following hypotheses are hereby stated in the null form:-

i. H0: Possession of proper accounting skills by entrepreneurs will not significantly improve their performance.

ii. H0: There is no significantbenefit accruable to firms who acquire accounting skills for sustainable performance and development.

1.6 Significance of the Study

This study will be useful to the management of SMEs and the government for the purpose of taking informed decision and ascertainment of tax liability respectively. Management is interested in financial accounting skills for the purpose of planning, controlling and profitability. Without requisite accounting skills by entrepreneurs, the accounting information need provided by managers of these SMEs will be misleading, hence, decision taking would be based on wrong estimations. Acquisition of skills by management of SMEs would enable them prepare their accounts to acceptable standard in line with the requirements of the law and as well file their tax returns accordingly. These management functions of SMEs are geared towards decision making. Such decisions include organization survival and profitability, market penetration and product leadership. Management is interested in accounting information for purposes of performance evaluation, budgeting and forecasting. There is therefore the need for entrepreneurs to be acquitted with accounting skills if management must make sustainable decisions for the growth of the business.

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