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THE IMPORTANCE OF ACCOUNTING RECORDS IN PROFIT MAKING ORGANIZATION (A CASE STUDY OF ESCO SUPERMARKET, WARRI, DELTA STATE)
The important of accounting record in profit making organization was undertaken in order to ascertain the impact of bookkeeping on profit performance on small scale business in Nigeria. It is noted that proper accounting records is essential for the success of any organization. Some companies perform well because of good accounting management, others barely survive because of in-efficiency and misdirected operations. Proper accounting records enables the sole traders, partnership or any business organization to know how much they uses , how much they make and what their present financial position at any given period. Hence, accounting records is said to be the act of recording peculiarity or business transaction in a regular and systematic manner.
1.1 Background of the Study
In turbulent time, an organisation has to be managed properly in order to withstand the changes in the environment and to protect itself from unexpected events such as business failure and eventual winding up. In every profit seeking organisation, financial management is very necessary for proper accounting record and investment decision. Therefore, the success or failure of the enterprise solely depends on the financial management. Most enterprises have had some outstanding success while others have been dismal failures.
An organization in this context is more than a group. It is something more than a casual human assemblage such as a social part or a class of accounting students.
According to Drucker, an organization is defined as a concrete social process with more definable boundaries through which interaction must take place and by striving towards goals requiring mutual effort”. Organisation can also be defined as a system of coordinate activities by two or more participant in order to actualize common goals.
The need for account record in our economy becomes obvious in Nigeria during the Nigeria enterprises promotion decree of 2003, when the problem of inadequate manpower to replace the foreigners became evident. This therefore called for training of more accountants from our universities and other higher institutions, such as polytechnic and colleges of education. Needs for organisation to keep financial accounting record is to know how much profit they make from trade and what their financial position is at a giving time.
Hence, Wanogho (2006), define accounting as a process of recording classifying, selecting, measuring, interpreting and communicating all financial data of an organisation to enable users make assessment and decision.
1.2 Statement of the Problem
The importance of accounting in profit making organisation is of a significant nature. But some business organisation has been faced with some problems which resulted to their winding up. Some of these problems are viz:
- Lack of systematic records for financial transaction.
- No record for the value of asset and liabilities record.
- Lack of recording and assessment of profit or loss made at given time.
- Lack of recording the value of expenses.
- No provision for financial record used for comparative purpose.
- Lack of position and improvement in the efficient running of a business over a period.
- Lack of distribution of funds (i.e. loan and other resources).
1.3 Objectives of the Study
This research will help many business concerns on how to run a profit making them understand the importance of accounting in the following ways:
- According enables business organisation to keep their record so that the business man will know the profit made or losses incurred in a given period.
- Help to know the financial position of a business at any determined period.
- To know how much tax is to pay after the declaration of profit.
- Reduce cases of fraud associated with improper record keeping by management.
1.4 Research Questions
The questions asked in this study are viz.
- Are the recording of financial transaction important in profit making organisation?
- Will the lack of recording of value asset and liabilities any effect in profit making organisation?
- Are the assessment of profit or loss important in profit making organisation?
- Are the lacks of recording of the values of expenses any affect on profit making organisation?
- Are the record of provision for depreciation important in profit making organisation.
1.5 Significance of the Study
The significance of this study is to highlight the visible importance of accounting record in profit making organisation. This research will be of a great aid to government and private organisation (both large and small scale business) in enlightening them on the importance of accounting and recording the day to day activities or informed in profit making organisation.
1.6 Scope of study
The research work of this nature is a lengthy one and the research, though intend to conduct an extensive survey, nevertheless the study shall be restricted under Esco Supermarket, Warri, Delta State.
Moreover, in carrying out the research, certain category of people which include accountants, managers, and sales representative in these selected few are best suited for this research.
1.7 Limitation of the Study
The limitations encounter in the course of this study includes:
- Time constraint
- Resources of the researcher disposal
- Availability of relevant data of information
- Existence of other limiting factors no readily envisaged.
1.8 Definition of Terms
- Accounting: This is the process of recording classifying, selecting, measuring, interpreting and communicating financial data of an organisation to enable users make assessment and decision. T is a disciple which comprises a set theories and concept for processing financial data into information.
- Book keeping: This is the actual systematic recording of daily transaction in the appropriate book called book keeping.
- Profit: Profit is reward which becomes due to the owners of a business as a result of a successful period of trading.
- Accounting Equation: This is a method of calculating for asset and liabilities of a business. The fundamental formula is
Asset – Liability = Capital
- Asset: Asset can be defined as the properties of a business e.g van, equipment, inventory, cash etc.
- Capital: This is the proprietor’s fund or net worth of business that is owner’s equity.
- Liabilities: This is an amount owned by the enterprise to outsiders or customers.
- Double Entry System of Accounting: It is a principle which stated that all transactions have two effect, the receiver of benefit and the giver of benefit.
- Accountant: An accountant is a person who has undergone a formal or professional training in the process of accounting and also who belongs to at least one of the recognized professional body of accountants of Nigeria either the ICAN or ANAN.
- Balance Sheet: Balance sheet is a statement that show the presentation of the summary of assets and liabilities in a well arranged form so that financial position may be clearly ascertained.
- Organisation: Organisation can be defined as a system or coordinate activities by two or more participants in order to achieve common goal.