THE INDISPENSABILITY OF ACCOUNTING SYSTEM IN THE CONTROL OF PUBLIC EXPENDITURE

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY: Accounting is the language of business that can tell with reasonable accuracy the degree of success an organization has achieved in approaching its financial goal of profit. Accounting system can be defined as records, procedures and equipment that routinely deal with the events affecting the financial performance and position of the organization, (Horngren and Foster, 1975). The accounting system entails repetitive voluminous transaction which generally falls into cash disbursement, cash receipts, purchases and sales, services including employee payroll. The purpose of accounting system is to provide an orderly method of gathering and organizing information about the various business transaction so that it may be used as an aid to management in operating the business (cope land and Dascher, 1978). Small scale enterprises have been defined in various ways according to the capital of the enterprises, size, the number of people employed by the enterprises, the ownership and management of the enterprises and sale volume. Small scale enterprise according to Omorodion (1987) are very important to nations. They are catalysts for industrialization. This is because they provide raw materials for medium and large scale enterprise. They also provide employment opportunities for large segments of the population. For the small scale enterprise to efficiently play the mentioned roles they should be an orderly method for gathering and organizing information about the various business transaction. This can only be done by the use adequate accounting system.

Basically, they are two types of accounting system commonly in use, namely, single entry and double entry system. These could be operated manually or computerized (Baumback, 1983).

The single entry accounting system according to Osuala (1995) is the easiest accounting system to operate. The system recorded the flow of income and expenses through the business on daily summary of cash receipts, a monthly summary of cash disbursement. In single entry book-keeping there might be single aspects of certain transactions and no record at all of some. Generally, there are rough records of cash received and paid and of sundry debtors and creditors. Transactions are exchange of values. For every value received, there is an equal value parted with. It is obvious therefore, that a transaction has a double effect. Receiving of value and giving out value. This method is known as double entry book. Keeping method, double entry book keeping according to Passion (1989) does not mean recording twice but instead, it means that every entry recording twice but instead, it means that every entry or recording of transaction has two parts, a left side and a right side. The left side in the accountant’s language is a debit and the right side, a credit when applied to a transaction. The value received is a debit and the value parted with a credit. Whereas considerable amount of studies have been conducted on financial and management of small enterprises. Osuala (1993) reported that generally many of these enterprises recorded their transaction randomly without adherence to any established systems of accounting, hence, there is deficiently in keeping tract of the cash flow in the enterprises. Mitchel et al (2000) argued that accounting information could help the small scale enterprises manage short term problems in such areas as costing, expenditure and cash flow by providing information to support monitoring and control knowledge cash flow according to Pandy (1991) is very important because cash flows are inseperable parts of the business operation of all firms. Paren and Grant (2000) noted that decision making processes in small scale enterprises are more sophisticated than anticipated but they lacked effective accounting information and control system to support their decision. Furthermore, the international federation of Accountants (2006) reported that there is evidence to suggest that small firms are aware of the importance of accounting information. Inspite of this awareness most proprietors of small enterprises in Nigeria most times are not too keen to use standard accounting system to run the day to day activities of their enterprises. (Ofonagoro, 1983), the high rate of failure of small scale enterprises in developing countries like Nigeria, has generally been traced to poor management and accounting system employed by these enterprises. The purpose for these study, therefore was to identify the accounting system in use in small scale enterprise in Enugu, South East Nigeria with a view to determine adequacy of such system(s) and recommend remedies needed for enhancement of accounting information system in optimization of the operation of these enterprises.

​​​​​​​STATEMENT OF PROBLEM

Obviously, every privates and public entries in Nigeria has their accounting department and there are increase cases of financial mismanagement in virtually all the public and private organization in Nigeria. The problem of this study lies on how the manages of these enterprises are able to recognizes the role of accounting in their enterprises so that these cases of improper accountability will be minimized or if possible its total eradication in our society.

​​​​​​​PURPOSE OF STUDY

This study aims at investigating the indispensability of accounting system in the control of public expenditure. The purpose of this study include among others:

• To determine the extent to which accounting records has controlled the effect of expenditures in public enterprises.

• To find out factor that affects the accounting department preventing them from carryout their function as expected.

• To determine government policies which promote accountability in public enterprises in Nigeria.

SIGNIFICANCE OF THE STUDY

In this study, the researchers have set out to examine the role of accounting in the public sector in this country. Nigeria with the aid of highlighting the inherent problem encountered in the account department of most organizations. It is expected that this work will be of interest to the owners of business enterprises, the government, students and the general public.

To shareholders, owners of enterprise, interested persons and the government, this study is expected to en kindle their interest the more and they will take note of various recommendations mentioned here and help steer the management team towards forming a study organizations to present an accurate financial information of their firm.

This study will also help to serve as literature to individual or corporate bodies into want to carry on further research on the role of accounting in the public sector in Nigeria.

​​​​​​​RESEARCH QUESTIONS

1. What extent does accounting records has control in affecting the expenditure of public enterprise?

2. What are the factors that affect accounting department of most organization which makes them not to function effectively as expected?

3. What are these governments polices which promote accountability in Nigeria public enterprises?

RESEARCH HYPOTHESES

This research hypothesis is to know the findings or result of this research;

1. H0 - Good accounting records budgeting has no control effect on expenditure of public enterprises.

2. H1- Good accounting records budgeting has control effect on expenditure of public enterprises.

3. H0- Corruption do not affects the quality of service rendered by accountants in public enterprises.

4. H1- Corruption affects the quality of service rendered by accountants in public enterprises.

5. H0- Government accounting policies do not aid in promoting accountability in Nigeria public Enterprise

6. H1- Government accounting policies aid in promoting accountability in Nigeria Public Enterprises.

1.6 SCOPE AND LIMITATION OF THE STUDY

Scope of the study shows extent of coverage done in the study. The research topic suggests a study on the role of accounting in the public enterprises in Nigeria. The focus of the study is on Federal radio corporation of Nigeria (FRCN) Enugu State. I take this to be a fair representative of Nigerian Public Enterprise that is either avoidable or hard to come by. There are factors as constraints that normally follow this research work, some of them are;

1. TIME: This which was a major problem was adequately not managed by the researcher. There is not enough time for the research to get the project time, get it approved and within a short time we will be talking about our exams assignment and quiz.

2. LACK OF MATERALS: The un co-operative of most people working in the library other offices where the research needed to get materials posed great problem to the research. Some of the staff do not feel safe letting have access to some materials while other will change you more than double the cost of Photostat before one can get what he wants.

3. FINANCE: Before now our project use to be a joint project of a group of four-ten people but now it has to be on individual student. So finance hinder the projects in one way or the other. Esther by transportation to where to get the materials or where to obtain the necessary information.

1.8 DEFINITION OF TERMS

MANAGEMENT: Its function, it is centered on the running and controlling of the organization, the way the directors perform their function to attain a successful operation.

ACCOUNTING: In this context, an accountants records, classify and summaries all public expenditure in the Federal radio corporation of Nigeria in a significant manner and in terms of monetary events and transaction which are in part at least financial character and to interpreter the result thereof.

FINANCIAL STATEMENT: An accountant makes an accounting report issued by a business to describe its financial affairs and results of the operations.