AN ASSESSMENT OF ACCOUNTING SERVICES AND FINANCIAL

PERFORMANCE OF SMALL AND MEDIUM SCALE ENTERPRISES

IN OYO STATE, NIGERIA.

Olayemi Abidemi OLAORE

ACT/2017/0108

A RESEARCH PROJECT SUBMITTED TO THE DEPARTMENT OF

ACCOUNTING, FACULTY OF MANAGEMENT SCIENCES,
OSUN STATE UNIVERSITY,
OSOGBO, NIGERIA.

IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF

BACHELOR OF SCIENCE (B.Sc.) HONOURS DEGREE IN ACCOUNTING.

OCTOBER, 2021

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 CERTIFICATION

This is to certify that this research project was carried out by OLAORE, Olayemi
Abidemi (Matric No: ACT/2017/0108) under my supervision in partial fulfillment of the
requirements of the award of Bachelor of Science (B.Sc.) Honours Degree in Accounting,
Faculty of Management Sciences, Osun State University, Osogbo, Nigeria.

__________________________ __________________________
MR. E.F. OLUWAKAYODE Date
(Project Supervisor)

__________________________ __________________________
DR. J.K. OLOWOOKEERE Date
(Ag. Head of Department)

__________________________ __________________________
PROF. F. OLURANKINSE Date
(External Examiner)

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 DEDICATION
This project work is dedicated to Almighty God, the most merciful and the benevolent and
to my parents in the persons of Mr. Abideen Olawale Olaore and Mrs. Rafiat Omotayo
Olaore. May God continue to lead you in life.

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 ACKNOWLEDGEMENTS
First and foremost, I want to thank Almighty God for giving me the wisdom, knowledge
and understanding to carry out this project successfully completing it to the satisfaction of
the Department of Accounting, Faculty of Management Sciences, Osun State University,
Osogbo, Okuku Campus. Special thanks to my wonderful parents Mr. Abideen Olawale
Olaore and Mrs. Rafiat Omotayo Olaore for their unconditional love, prayers, support and
advice towards my academic career. I pray for grace enough to enjoy their labour in sound
health.

I am also using this medium to say a big thanks to my assiduous supervisor Mr. E.F.
Oluwakayode for his contributions and words of encouragement towards the completion of
this research work. I pray for God to continue to lead him in life. Special thanks also go to
the Head of Department Dr. J.K. Olowookeere and other Lecturers in the Department who
include; Dr. A. Z. Adeyemi, Dr. A.O. Adebayo, Mr. A.A. Aderemi, Mr. A.O. Akinola, Dr.
A. Olagunju, Dr. (Mrs.) T.M. Oladejo, Mr. P.S. Daramola and all other members of
teaching staff in the Department who impact knowledge to me for this last few years. May
God continue to bless you abundantly in all your endeavours and may you continue to
grow in knowledge, wisdom and understanding.

I will also like to acknowledge some my colleagues; Hikmat, Kikelomo, Mercy, Hannah
Sekinah, Akinwunmi, Aminah and Aisha for their support, love and care at all time and
also my uncles Brother Saleem and Brother Abiola, my siblings Shukurat and Abiodun
and cousins Rodiat and Anifat for their love, care and support. May God Almighty bless
you all (Ameen).

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 TABLE OF CONTENTS

Title Page i

Certification ii

Dedication iii

Acknowledgements iv

Table of Contents v

List of Tables viii

Abstract x

CHAPTER ONE: INTRODUCTION

1.1 Background to the Study 1

1.2 Statement of the Problem 3

1.3 Objectives of the Study 4

1.4 Research Questions 5

1.5 Research Hypotheses 5

1.6 Significance of the Study 5

1.7 Scope of the Study 6

1.8 Operational Definition of Terms 6

CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.1 Conceptual Framework 8

2.1.1 Concept of Accounting 8

2.1.2 Concept of Accounting Services 9

2.1.2.1 Types of Accounting Services 11

2.1.2.2 Outsourcing of Accounting Services 13

2.1.2.3 Advantages of Accounting Services 14

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2.1.2.4 Disadvantages of Accounting Services 15

2.1.3 Internal Control Systems 16

2.1.4 Concept of Financial Performance 17

2.1.4.1 Financial Performance Analysis 17

2.1.4.2 Area of Financial Performance Analysis 17

2.1.4.3 Financial Statements 18

2.1.4.4 Balance Sheet and the Income Statement 19

2.1.4.5 Financial Reporting 19

2.1.5 Concept of Small and Medium Scale Enterprises (SMEs) 20

2.1.5.1 Deciding Factors of SMEs Success 22

2.1.5.2 Classification of SMEs 24

2.1.5.3 The Importance of SMEs Performance 24

2.1.5.4 Challenges Facing SMEs 25

2.1.5.5 Solution to the Challenges Facing SMEs 26

2.2 Theoretical Framework 27

2.2.1 Agency Theory 27

2.2.2 Pecking Order Theory 27

2.2.3 Modern Portfolio Theory (MPT) 28

2.2.4 Trade off Theory 28

2.2.5 Resource-Based Theory (RBT) 29

2.3 Empirical Review 29

CHAPTER THREE: METHODOLOGY

3.1 Research Design 31

3.2 Population of the Study 31

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3.3 Sample Size and Sampling Techniques 31

3.3.1 Sample Size 31

3.3.2 Sampling Techniques 32

3.4 Research Instrument 32

3.5 Administration of the Instrument 32

3.6 Method of Data Collection and Analysis 33

3.6.1 Method of Data Collection 33

3.6.2 Method of Data Analysis 33

3.7 Model Specification 33

CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSIONS

4.1 Descriptive Analysis of the Respondents 34

4.2 Test of Hypotheses 43

4.3 Discussions of Findings 46

CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS

5.1 Summary 48

5.2 Conclusions 48

5.3 Recommendations 49

5.4 Limitation of the Study 49

5.5 Suggestions for Further Studies 49

REFERENCES

APPENDIX

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 LIST OF TABLES

Table 4.1 Gender of respondents 34

Table 4.2 Age of respondents 34

Table 4.3 Marital status of respondents 34

Table 4.4 Academic qualifications of respondents 35

Table 4.5 Monthly turnover of business of respondents 35

Table 4.6 Years of working experience of respondents 35

Table 4.7 Advisory services relating to the start-up of a new business including
business plans and obtaining start-up finance in SMEs should be
enhanced. 36

Table 4.8 Accounting services provide the users of accounting data with
financial reports periodically and regularly. 36

Table 4.9 Accounting services provide the management with necessary and
appropriate information facilitating the decision-making process. 37

Table 4.10 Audit or independent review of financial statement is necessary. 37

Table 4.11 Staffs are not allowed to grant overdraft facilities to one singular
customer. 37

Table 4.12 Tax planning and tax advisory services is needed. 38

Table 4.13 Production and delivery speed is relevant. 38

Table 4.14 General profitability of the SMEs is important. 38

Table 4.15 Organisation should have an accounting and financial management

system. 39

Table 4.16 Management uses operational objectives as a basis for allocating the
resources needed to attain desired operational and financial
performance. 39

Table 4.17 It is impossible for one staff to have access to all valuable
information without consent from the senior staff. 39

Table 4.18 Management should closely monitors implementation of internal

control systems in SMEs. 40

Table 4.19 Organisation must have an objective, independent and active audit
committee. 40

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Table 4.20 Controls should be in place to check on incurring expenditure in
excess of allocated funds. 40

Table 4.21 Appropriate measures should be taken to correct malfeasance in

operation of our Accounting and Finance Management System in
SMEs. 41

Table 4.22 Outsourcing increases internal staff and resources attention

in management practices. 41

Table 4.23 Company must have adequate capacity to react appropriately and
expeditiously to change in financial performance. 42

Table 4.24 As a result of outsourcing, its enable the management to concentrate

on the core activities of the business. 42

Table 4.25 Achievement of significant reduction in overheads and fixed

cost through outsourcing is relevant. 42

Table 4.26 Visions and missions in outsourcing of Accounting services are

relevant. 43

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 ABSTRACT
This study examined the assessment of Accounting services and financial performance of
small and medium scale enterprises in Oyo State, Nigeria. The objectives of the study
were: to determine the relationship between Accounting services and financial
performance of SMEs, to assess the relationship between the use of internal control
systems and the financial performance of SMEs and to ascertain whether there is
significant relationship between outsourcing of Accounting services and financial
performance of SMEs. Three research questions were generated and answered during the
course of carrying out the research. Survey research design was used so as to build the
influence of assessment of Accounting services and financial performance of small and
medium scale enterprises. Random sampling was used to select the sample size for the
study in the study area. One Hundred and Fifty questionnaires were selected to represent
the interest of the total population of the SMEs in the study area and One Hundred and
Forty questionnaires were returned. The research was carried out using primary data with
the aid of structured questionnaire. Data was analyzed using regression analysis with aid
of Statistical Package for Social Sciences (SPSS). The findings show that the first
hypothesis reveals with significant level of 5% has R 2 value of .087 and this shows a
positive relationship on financial performance of small and medium scale enterprises. The
second Hypothesis shows that, R2 value = (0.221). This shows that relationship thus exist
between variables.. Furthermore, the tests show that all the variables used in carrying out
this research work were stationed at 5 percent level of significance. It was therefore
recommended that management and government should provide supports and strategies
for major problems faced by the SMEs for better management and accountability.
Management should also provide adequate Accounting services to the SMEs for efficient
work activities.

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