The Effect of Bookkeeping on the Performance of Small and Medium Size Enterprises in Buea

Monday, November 28, 2022

The Effect of Bookkeeping on the Performance of Small and Medium Size Enterprises in Buea

Department: Accounting

No of Pages: 67

Project Code: ACC2

References: Yes

Cost: 5,000XAF Cameroonian

 : $15 for International students

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This study was based on the relationship between bookkeeping and the performance of Small and Medium Sized Enterprises, case study of the Buea Municipality.


Since the advent of formalized bookkeeping practices in the 18th centuries and earlier, its practice has seen to offer businesses around the globe with prospects of growth and scalability, its adoption and usage by some SMEs (Small medium size enterprises) operators is slow and ineffective.


The study made use of the descriptive and exploratory research designs and was conducted with the administration of 85 questionnaires to randomly selected SME operators. Data obtained was analyzed with the use of tables, frequencies, percentages and descriptive statistics.


The study reported a significant relationship between bookkeeping and the performance of SMEs. The main recommendations of the study were for regulatory and economic supervisory bodies to create incentives, trainings, and policies to equip and encourage SMEs operators to adopt and use proper bookkeeping systems in their businesses.


We ended up by recommending further researchers to do research in other towns, as Buea is not representative of Cameroon.



1.1 Background of the Study

Bookkeeping began because people needed to record business transactions, know if they were being financially successful, and know how much they owned and how much they owed (Wood & Sangster, 2005). It is known to have existed in one form or another since at least 3,500 BC (records exist which indicate its use at that time in Mesopotamia).


There is also considerable evidence of bookkeeping being practiced in ancient times in Egypt, China, Greece, and Rome. In England, the ‘Pipe Roll’, the oldest surviving bookkeeping record in the English language, contains an annual description of rents, fines and taxes due to the King of England, from 1130 to 1830.


 However, it was only when Paciolo wrote about it in 1494, (Wood & Sangster, 2005) that accounting began to be standardized and recognized as a process or procedure.


No standard system for maintaining accounting records had been developed before this because the circumstances of the day did not make it practicable for anyone to do so – there was little point, for example, of anyone devising a formal system of accounting if the people who would be required to ‘do’ accounting did not know how to read or write.

One accounting scholar (A. C. Littleton), suggested that there were seven key ingredients required before a formal system could be developed. This existed when Paciolo wrote the treatise (Wood & Sangster, 2005).And this ingredient is as follows;


Private property. The power to change ownership exists and there was a need to record the transaction. Capital Wealth is productively employed such that, transactions are sufficiently important to make their recording worthwhile and cost-effective, Commerce.


The exchange of goods on a widespread level, the volume of transactions needs to be sufficiently high to motivate someone to devise a formal organized system that could be applied universally to record transactions, Credit.


The present use of future goods, cash transactions where money is exchanged for goods, do not require that any details be recorded of who the customer or supplier was. The existence of a system of buying and selling on credit (i.e. paying later for goods and services) led to the need for a formal organized system that could be applied universally to record credit transactions.


Writing. A mechanism for making a permanent record in a common language, writing had clearly been around for a long time prior to Pacioli but it was, nevertheless, an essential element required before accounting could be formalized.

 Money. The need to be a common denominator for exchanges, so long as barter was used rather than payment with currency, there was no need for a bookkeeping system based upon transactions undertaken using a uniform set of monetary values. Arithmetic.


As with writing, this has clearly been in existence far longer than accounting. Nevertheless, it is clearly the case that without an ability to perform simple arithmetic, there were no possibilities that a formal organized system of accounting could be devised.


When accounting information were being recorded in the Middle Ages, it sometimes simply took the form of a collection of invoices (which each show the details of a transaction) and receipts (which each confirm that a payment has been made) which were given to an accountant to calculate the profit or loss of the business up to some point in time.


This practice persists to this day in many small businesses. The accountant of the middle ages would be someone who had learnt how to convert the financial transaction data (that is, the data recorded on invoices and receipts, etc.) into accounting information.


Quite often, it would be the owner of the business who performed all the accounting tasks. Otherwise, an employee would be given the job of maintaining the accounting records. As businesses grew in size so it became less common for the owner to personally maintain the accounting records and more usual for someone to be employed as an account clerk.

Then, as companies began to dominate the business environment, managers became separated from owners – the owners of companies (shareholders) often have no involvement in the day-to-day running of the business. This led to a need for some monitoring of the managers. Auditing of the financial records by accountants became the norm and this, effectively established the accounting profession.


The first national body of accountants, The Institute of Chartered Accountants of Scotland, was formed in Scotland in 1854 and other national bodies began to emerge gradually throughout the world, with the English Institute of Chartered Accountants being formed in 1880 and the first US national accounting body being formed in 1887.


1.2 Statement of the Problem

The importance of proper record keeping in any business setting cannot be over emphasized. From the very large corporations, to the very small-scale dealers even in the informal sector. SME owners and managers seem not to give the proper attention to proper record keeping that it deserves.


It becomes difficult for these enterprises to obtain finance, prepare and declare tax returns, track accurate performance, plan for growth and scalability. Studies on SMEs have disclosed that about 60% of small businesses fail within the first three years due to management inefficiencies brought about by poor record keeping. Further studies indicate that a significant element in the failure of many businesses is due to inefficient or absence of book keeping (Chelimo & Sopia, 2012).


 Many new business owners in the SME sector are daunted by the mere idea of bookkeeping and accounting. But in reality, both are pretty simple. To note, bookkeeping and accounting share two basic goals: to keep track of income and expenses, which improves chances of making a profit, and to collect the financial information necessary for filing various tax returns.


There is no requirement that records be kept in any particular way. As long as records accurately reflect the business’s income and expenses, there is a requirement, however, that some businesses use a certain method of crediting their accounts: the cash method or accrual method.


Depending on the size of the business and amount of sales, one can create their own ledgers and reports, or rely on accounting (Abdul-Rahamon & Adegare, 2014) (Williams et al 1999).


Doing business in Cameroon reported on Thursday 31, OCTOBER 2012 in an article on ‘New Financing Windows for Cameroonian SMES, that according to new release from the African Guarantee Fund (AGF) FOR SMEs, inaccessibility of finance is a major obstacle to small business set up, growth and development, with only 20% of SMEs receiving a credit line from a financial institution in relation to a $100 million partnership project with GAICAM (Go Africa Initiative Cameroon) to equip and empower SMEs in Cameroon.


What is problematic about this is the mere fact that most Cameroonian business men and women in this category will operate their businesses without any proper record keeping and will only start adopting hasty strategies to develop assumed and fabricated financial records in order to benefit from such financial incentives.


According to Green et al (2002), financial providers are unlikely to give funds to an enterprise which they do not perceive to be sound. Nieuwenhuizen and Koon (2003) stated that the financing criteria for SMEs depend on the credit worthiness of the applicant, where Bookkeeping is something these financial providers find worth considering.


The problem faced in the Buea municipality also focuses on the fact that so many Small and Medium Size Enterprises do not do record keeping or do not maintain a proper bookkeeping system. Therefore, this research posts the following questions as seen below


1.3 Objective of the study

 1.3.1 Main objectives

  • The main objective of the study is to assess the relationship between proper bookkeeping and the performance of small and medium sized enterprises.

1.3.2. Specific objectives

  • To determine the bookkeeping systems used by Small and medium size enterprises in Buea.
  • To determine the main challenges SMEs in Buea face in consistently practicing proper bookkeeping.

 Check out: Accounting Project Topics with Materials