The Relevance Of Book Keeping On The Performance Of SMEs In The Buea Municipality

Monday, November 28, 2022

The Relevance Of Book Keeping On The Performance Of SMEs In The Buea Municipality

Department: Accounting

No of Pages: 71

Project Code: ACC6

References: Yes

Cost: 5,000XAF Cameroonian

 : $15 for International students

Get this Project


Knowledge and skills in bookkeeping is one major factor that impacts positively on sustainability and growth of SMEs, failure to record financial transactions (bookkeeping) leads to collapsing of the business within few months of its establishment.


This study seeks to examine the relevance of book keeping on SMEs in the Buea Municipality, the study adopted survey research design with a total sample size of 50 SMEs in the Buea municipality, a stratified random sampling technique was used for study.


Primary data was collected for the study using a 50 questionnaire as method of data collection. Also data was analyze using SPSS version 21 found, data was equally presented in tables and chart.


The result of the finding revealed SMEs operator lack book keeping knowledge, high cost of hiring a qualified book keeping, educational training should be done by the operators of small businesses, furthermore, it was discovered that book keeping has a significant effect on performance of SMEs in the Buea municipality.


The study conclude that it was concluded that SMEs operator lack knowledge in book keeping. The study also recommended that that SMEs operator lack book keeping knowledge, high cost of hiring a qualified book keeping, educational training should be done by the operators of small businesses.




1.1 Background to the Study

Cameroon sanguinity to achieve her optimum goal of reaching vision 2035 of becoming an emerging nation is the limit. With this, small and medium-sized enterprises are key in reaching that destination since it contributes to the economy as well as allows a path to the decline of unemployment. 


Small and medium-sized entities (SMEs) play important roles in the economic growth of a nation. There has been a growing concern for supporting the operations of Small and Medium-Scale Enterprises (SMEs) among governments (Amoako, 2012).


Given their contribution to national growth and economic development, it is believed that small and medium-scale enterprises (SMEs) are the backbone of many economies across the globe (Alhassan et Muazu, 2014; Okoli, 2011) growth and sustainable development of every nation, (Moore et al., 2008).


There is no universally accepted definition of Small and Medium Enterprises (SMEs). This is due to the fact there are a large number of micro, small and medium enterprises which differ in their sector of operation, activities and in the environment where they develop.


Most definitions of Small and Medium Enterprises (SME) include ranges of assets or turnover per year and the number of employees. Usually, the definition follows one or more of the following approaches: Criterion approach 6, Institutional approach 7 and Typological approach 8 (Mmeti,2020).


The success or failure of SMEs is contingent on their financial viability and one of the most common problems facing such firms is their ability to secure sufficient cash flow and working capital to remain profitable.


It was noted as one of the top problems facing SMEs as long ago as the Bolton Report in the early 1970s (Bolton, 1971). This has been a recurring theme in the small business literature since that

time (Kennedy, Tennent and Gibson, 2006).



Poor finance management has been posted as the main cause of failure on the MSEs (Longeneter et al 2006). Bowen (2009) observes that there is a strong relationship between business performance and the level of training in the business management especially in business finance record keeping.


Business management entails keeping proper records of the business transactions. Knowledge and skills in bookkeeping is especially one major factor that impacts positively on sustainability and growth of SMEs.


Failure to record business financial transactions (bookkeeping) leads to collapsing of the business within few months of its establishment (Muchira, 2007). In essence, recordkeeping is one thing an entrepreneur cannot afford to ignore.


Research has shown that in any business, recordkeeping is the first step of the accounting process, which also includes classifying, reporting and analyzing the business financial data. It involves organizing and tracking receipts, cancelled checks and other records generated by financial transactions.


Bookkeepers chronologically record all transactions: cash disbursements, cash receipts, sales and purchases, and others in a journal and post the journal entries to a general ledger of accounts, which is essential for preparation of monthly financial statements.


This is imperative for a profitable business. Further, research has in the past shown that in business management, proper keeping of records of all business transactions is vital for the success of the business (Muchira, 2007).


In addition, Butler (2009) asserts that without accurate and complete records of business transactions the business is doomed to fail at its onset. According to Muchira (2007) businesses are different, there are many specific types of detailed records that may need to be kept.


Some examples of records one should keep include: cash book petty cash book, order notes and invoices, copy sales invoices, details of any other business income received, details of any private money brought into the business, till rolls or other form of electronic record of sales,

details of any other income, any cash taken out of the till to pay small business expenses, bills and invoices for purchases and expenses, a record of stock on hand at the end of the year and all bank and building society statements, pass books, cheque stubs and paying-in slips which include details of business transactions.


According to Mmeti (2020) Cameroon, the official definition of SME is based on the first two approaches identified earlier, the criterion and institution approach. Thus, in the country, there are four main definitions of SME. These definitions are given by the investment law, FOGAPE BEAC and the economic and social concern.


According to the National Institute of Statistics (NIS) of Cameroon (2009 and 2017), over 95 percent of Cameroonian enterprises are small businesses. 70 percent of job creation in Cameroon and over 90 percent of Cameroon's national economic fabric are of the responsibility of small businesses which contribute more than 34% of the Gross Domestic Product (GDP).


To promote and support this category of businesses, the government of Cameroon created the Ministry of Small and Medium Size Enterprises and enacted the law N° 2010/001 of April 13, 2010 as modified by the law N° 2015/010 of the 16th of July 2015 on the promotion of Small and Medium- size Enterprises (SMEs).


This testifies the importance of these firms for the Cameroonian economy. The essential roles of SMEs can best be sustained through the implementation of fundamental financial and accounting practices (Schwenk & Schrader, 1993).


However, it has been reported that many SMEs failed to keep adequate accounting records to generate the much needed accounting information that owner-managers and other users require for their decision making purposes which led to major problems (Howard, 2009; Madurapperuma, Thilakerathne, & Manawadu, 2016).


Larson & Clute, (1997) further reported of weak internal accounting systems of some SMEs which resulted in poor planning, weak expense control, low collection of accounts receivable, poor financial condition, and inadequate information for decision making purposes.


1.2 Statement Problem

Little is known about the relevance of book keeping practices in SMEs, the importance of book keeping among SMEs and the challenges SMEs face in preparation of accounting records. Earlier studies have suggested that book keeping is at the heart of any external interaction with the SMEs be it access to finance or eligibility for assistance.


That is, credit worthiness and growth potentials are all embedded in bookkeeping records of enterprises. It is theoretically plausible to expect some positive effects of proper book keeping and enterprise performances such as profitability and growth.


Book keeping frightens some business owners, keeping record of income and expenditure helps an owner of business to keep proper track of financial transactions (Olufemi& Oladimeji,2019). Dawuda and Azeko, (2015) noted that poor book keeping or non-availability of financial records have consequences of mismanagement of resources and poor cash management.


These have led to the collapse of many SMEs. Application of accounting records seriously influences the achievement of a firm’s objectives (Olufemi& Oladimeji,2019). Some business owners in are still not aware of the importance and benefits of proper book keeping (Abayomi & Adegoke, (2016).


In Cameroon, some SMEs are forced to prepare their financial records because they want to obtain tax clearance certificate, without which they cannot bid for government contracts. Also, some SMEs prepare their accounts because they want to obtain bank loans. Poor book keeping makes it difficult to distinguish between business transactions and personal transactions of SME owners (Van Aardt et al. 2008; Rankhamise, 2010).


Many business owners and managers use the assets of SMEs for their personal benefits. According to Aremu and Adeyemi (2011), studies have shown that it is difficult for SMEs to access loans from financial institutions because of lack of proper financial records as a requirement (Amoako, 2013).


Except for statutory requirements, SMEs rarely consider sound book keeping, yet the poor and ineffective book keeping has led to the collapse of some of the SMEs, failure of SMEs to keep proper records are one of the reasons for their failure.


The complex nature of the processes involved in the double entry bookkeeping system is one of the important challenges facing this method of keeping books. The owner of a business who does not have any background in accounting, the double entry system can seem to him like learning a whole new language.


Terminology such as "debits" and "credits" replace simple words like "subtract" and "add," causing perplexity. Determining at what instance to debit an account and what corresponding account to credit can be difficult, and can throw the novice bookkeeper for a loop (Desa, Tanden, & Practising Law Institute, 2014).


1.3 Research Objectives

1.3.1 General research objective

  • To investigate the relevance of book keeping on SMEs in the Buea municipality.


1.3.2 Specific Research objectives

  1. To examine the effect of financial statement on the performance of SMEs in the Buea municipality
  2. To find out the challenges faced by the SMEs entrepreneurs in recordkeeping.
  3. To investigate the effect of income statement on the performance of SMEs in the Buea municipality.
  4. To find the relationship between tax declaration and the performance of SMEs in the Buea municipality. 

 Check out: Accounting Project Topics with Materials