CHAPTER ONE

INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Accounting is as old as exchange process (whether barter or monetary) that
gradually developed with civilization. The earliest written records includes the
scriptures contained references to what is now called accounting.
Accounting evolved in response to the economic need of the society. Prior to 15 th
century, accounting had no well-defined pattern except that it developed an answer
to governing and trading needs of the era. The first known treatment of the subject
1494 two years after the discovery of America. An Italian monk and mathematician
Father Luca Pacioli described an approach developed by Italian merchants to
account for their activities as owners and managers of business ventures. Pacioli laid
the foundation of the basis accounting model that is used to this day. An economic
activity progressed from the feudal system to agriculture and then to the industrial
revolution accounting continues to adopt to the need of the society. Business units
become more complex and broader in scope accounting evolved in respond to the
increased planning control responsibilities of the management. As government grew
in in size and become more centralized, accounting was developed to meet the
increased accountabilities.
In 17th and 18th centuries, the industrial revolution in England provided the impetus
on the accumulation of data about cost of manufacture of each product. In the later
half of the 19th century, English accountant small in number but large in competence,
appeared on American scene. By 1900, the lead in
1

accounting development

provided earlier by the English, began to shift to America since the turn of this
centuries, spear headed by the accounting profession in the united states of America,
accounting has experienced a dynamic growth.
Since 1900, accounting has attained the statute of such profession as law, medicine,
engineering and e.t.c as with all recognized profession, accounting is subject to
licensing observers a cord of professional competence, is dedicated to service the
public requires a high level of academic study and rest on common body of
knowledge. After meeting a specific academic requirement that is by passing the
examination conducted, the accountant may be licensed to be certified public
accountant. This was first established in 1896. The requirement of being a member
of certified public accountant (CPA) varies from state to state.
As with physicians, engineers, e.t.c accountant employed by business, government
entities e.t.c accounting employed in these activities often take and pass professional
examination to become a Certified Management Accounting (CMA).
Accounting is concern primarily with information to people who would use it to
improve the level of their decision process. Accounting serves many group of users
because the need of these groups generally differ significantly. Generally there are
three groups that generate and use accounting information.
First, there is a groups users which includes the owners who are not engage in
management of the enterprises (usually stockholders), lenders (known as creditors),
employers, customers and suppliers. These persons especially the owners and
creditors have a significant need for accounting information regarding the sole
2

traders and others have a legal right to receive the information the second group is
composed of the providers of information. These are the accountants. Account report
by companies is either required by laws or encourage by the user`s general
preference for investing in or loaning to companies that provides more information.
This preference arises because the information permits a better assessment of an
investment potential risk and returns. Accordingly the amount and content of
information can affects several important aspect of a firm, include its ability to
raised fund, the value of its owners holdings, and the security of the manager`s
positions.
In this regard, General Accepted Accounting Principles (GAAP) was introduced. A
major purpose of GAAP is to avoid the reflection of these biases in the accounting
statements. The in formation of a set of principles provided at least some assurance
that biases in the accounting statement is minimal.
The third group are auditors who assist in enforcing compliances with GAAP. Also
certified public accountant (CPA) may be engaged by reporting company on a
strictly voluntary basis in other to be considered by an influential investors or
creditors, in order to meet the requirement of a contractual management in
accordance with statutes or regulations that apply to the firm because of its securities
are traded.
Auditors responsibilities are to examined the company`s accounting statement and
their underlying evidence with general accepted accounting principles (GAAP). The

results of the examination are expressed in the auditor`s opinion, accompanying the
statement.
1.2 STATEMENT OF RESEARCH PROBLEM
Importance of according and accounting information to the well-being of any
organization, trade or any form of business entity with whatever form of ownership
structure cannot be emphasized, because it is through accounting information that
performance and measured and translated.
However, most sole traders have relegated such an proper accounting records are
not kept and were such records are kept, the entries are either nit complete, recorded
in the wrong way and there is poor compliance to laid down policies and procedures
such as the generally accepted accounting principle (GAAP). It is against this
backdrop that this research work is canned out.
1.3 OBJECTIVES OF THE STUDY
This research work was carried out with the main objectives of determining the level
of compliance by sole traders in Damaturu in keeping the relevant accounting
records. And the specific objective are:a. Determining that the business have been keeping relevant accounting records.
b. Determining that the business owners have the requisite accounting skills.
c. Determining the level of compliance to the generally accepted accounting preparing
accounting records.
d. To determine the negative effect of incomplete and single entries to the well-being of
sole traders.
1.4 RESEARCH QUESTION
4

This research work shall be guided by the following research questions:

a.
b.
c.
d.

Does business have been keeping relevant accounting records?

Does business owners have the requisite accounting skills?
Does records kept are in accordance to GAAP.
Does the incomplete and single entries makes ascertain profit or loss at hand task.
1.5 RESEARCH HYPOTHESIS
The following hypothesis were formulated by the researcher in order to arrive at a
dependable conclusion:Ho: The records kept are not in accordance to GAAP?
Hi: The records kept are in accordance to GAAP?
1.6 SIGNIFICANCE OF THE STUDY
The study will be of importance to various stake holders such as the sole trader in
determining the relevant of accounting entries to the well-being of his business, the
tax officials by reducing the time and effort they will spend on educating the tax
payer the government at large by improving the financial return of the sole trader
which in turn affect the Gross Domestic Product (GDP) in a positive way and the
researcher also as the research work is in partial fulfillment of the requirement for
the award of national diploma (ND) in accounting . at the end the study will add to
the existing store of knowledge which will be beneficial to future researchers.
1.7 SCOPE AND LIMITATION OF THE STUDY
In parlance of the objectives of the study, attendant will be focused on the
importance of accounting records to sole graders with a particular emphasis to sole
5

traders within Damaturu metropolis which will serve as our case study in order to
evince at a well-found conclusion.
However in the course of the study contain constraint are envisaged which tends to
limit the researcher in the course of the research work.
Among which are:1. Time constraint as the researcher had to undertake the research work dong-side other
educational engagements.
2. Financial constraint as the researcher had limited resources at her disposal which in
turn mitigated the effort to reach certain garters.
3. Attitude of the large sole traders which source of them where not friendly enough
and cooperative enough in disclosing certain information.
1.8

DEFINITION OF TERMS

Accounting: is defined by the American institute of certified public accountant as

the art of recording, classifying and summarizing in a significant manner and in
terms of money transaction and events which are in part at least of an financial
character and interpreting the result thereof. It is a discipline which comprises of a
set of theorist and concepts for processing financial data into information.
Book - keeping: is the recording of financial transaction of a business in a
methodical manner and according to set rules of all events which affects the
financial state of an organization, so that information on any point in relation to them
may be quickly obtained, i.e it is the actual record making stage of accounting.

Accountancy: is the summarization of the time to time information contained in the

records, its presentation in a significant manner to interested parties and its
interpretation as an aid to decision making.
Sole Trader: is the simplest form of business organization. There are no legal
requirements you simply set up and get on with trading. Any income or profit that
you earn is yours and yours alone and you pay income tax on that income.
Records: an item of information put into a temporary or permanent physical
medium. It is also any instance of a physical medium on which information was put
for the purpose of preserving it and making it available for future reference.
Importance: a quality or condition of being important or worthy of note, and its a
significance or prominence, personal status or standing.
Business: This is the act of buying and selling of goods and services for the
satisfaction of human wants, and a business is a specific commercial enterprise or
establishment.

CHAPTER TWO
LITERATURE REVIEW
2.1

INTRODUCTION

This chapter focuses on review of the existing literature the researcher will focus on
reviewing the concept of Accounting, the sole accounting, Causes of sole traders
failure, Books of accounts, Users of accounting information and Importance of
accounting records to sole traders
2.2 THE CONCEPT OF ACCOUNTING
Accounting is not an end itself, it is a useful tool. It is a language for communication
of financial facts about an enterprises or activity to those who have interest in
interpreting and using those facts. It is a means of analyzing and controlling business
operation and of planning future actions, in order to be useful, it must be adopted for
the particular needs of different users of accounting records. Those users could be
Business Owners, Managers, Creditors, Government Agencies and Employees,
White wood (2002).
According to Dandogo, (1996), accounting defined as the process of identifying,
measuring and communicating economic information to permit informed judgment
and decisions by users of the information.
This emphasizes the fact that accounting is a language of business and like all other
languages, it has its own vocabulary, method of expression, terminologies and
convention because of these, it has its own difficulties of interpretation and
8

understanding. Since it is the language which covers all spheres of social life, it is
important that everyone should be familiar with it.
White wood (2002), defined accounting as a language of business which is used to
describe the transaction enter it by all kinds of transactions.
Accounting can now be seen as the summarizations of manners and terms of money,
transactions and events which are, in parts at least of financial characters interpreting
the results thereof.
2.3 THE SOLE ACCOUNTING
According to Nickel etal (2002). The small business administration (SBA) defines a
small business as one that is independently owned and operated, is not dominant in
its field of operation, and meets certain standards of size in terms of employees or
annual receipt. A sole trader business is considered small only in relation to other
business in its industry. A wholesaler may sell up to & 22 million and still be
considered a small business by the SBA.
2.3.1 THE IMPORTANCE OF SOLE TRADERS
Nickels etal (2002), state that, since 75 percent of the nations new jobs are in small
businesses, there is a very good chance that you will either work in a small business
someday or start now. A quarter of the small businesses list lack of qualified
workers as one of their greatest obstacles to growth.
Providing employment opportunities, small firms believe they are offer other
advantages that larger companies do not. Owners of small business report that their
9

biggest advantages over big businesses are their more personal customer service and
their ability to respond quickly to opportunities.
In view of Nickels etal (2002), said that bigger is not always better. Picture as hole in
the ground, if you fill with big boulders there are many empty spaces between them.
If you fill it with sand there is no spaces between grains. Thats how it is in business.
Big business doesnt serve all the needs of the market. There is plenty of room for
sale trader to make a profit filling those niches.
2.3.2

SITUATION FOR SOLE TRADERS SUCCESS

Nickleetal (2002), sole traders are more likely to succeed when:

1 The customer require a lot of personal attention, as in a beauty parlor
2 The product is not easily made by mass production techniques (e.g custom tailored
clothes or custom auto body work)
3 Sales are not large enough to appeal to a large firm (e.g a novelty shop).
4 The neighborhood is not attractive because of crime or poverty. This provides a
unique opportunity for small grocery stores and laundries.
5 A large business sells a franchise operation to local buyers. (dont forget franchising
as an excellent way to enter world of small business)
6 The owners pay attention to new competitors.
7 The business is in a growth industry (e.g computer services or Web design)
2.4

CAUSES OF SOLE TRADERS FAILURE

According to Nickels etal (2002), Sole traders are more likely to fail when.
1
2
3
4
5

Plunging in without first testing the waters on a small scale.

Under pricing or over pricing goods or services
Underestimating how much time it will take to build a market
Starting with too little capital
Starting with too much capital and being careless in its use.
10

6 Going into business with little or no experience and without first learning something
about the business
7 Borrowing money without planning just how and when to pay it back
8 Attempting to do too much business with too little capital
9 Not allowing for setbacks and unexpected expenses
10 Buying too much on credit.
11 Failure to keep complete, accurate records, so that the owners drift into trouble
without realizing it.
In conclusion, when you decide to start your own business, you must think carefully
about what kind of business you want. You are not likely to find everything you
want in one business, easy entry, security and reward. Choose those characteristics
that matter the most to you accept the absence of the others, plan and then go for it.
2.5 BOOKS OF ACCOUNTS
According to Damagum (1999) noted that the books of account are those documents
used to capture transactions at the initial stage.
In view of wood (2002) state that books of account are the books in which we first
record transaction. We have a separate book for each kind of transaction. The books
of accounts are books in which financial transaction of enterprises are recorded.
There are two main principal books of accounts:
1 Journal ,
2 Ledger
2.5.1 The Journal
According to Kazeem, (1999), the journal is a book of original entries or prime
entries in which transactions are recorded in a chronological order (i.e the day to day
11

recording of transaction arranged according to when something happened). Journal

can equally be referred to as a daily record into which transactions are entered and
classified as Dr. and Cr. Before they are posted to the ledger.
The following items are the uses of journal: 1
2
3
4
5

Opening entries: these are entries needed to open the books

Closing entries
Correction of errors
Purchasing of fixed assets on credit
Sales of fixed asset on credit
2.5.2 Subsidiary Books
In view of Igben (2004), transactions are not posted from the source of documents
directly to the ledger. They are normally recorded first in subsidiary books before
they are posted therefore to the ledger. Subsidiary books can be defined as the book
into which transactions are recorded on a daily basis from the source documents and
from which transfers are made at suitable intervals to the relevant account.
2.5.3 Purchases Day Book or Purchases Journal
According to Ikechukwu (2010), observed that the purchases day book in which
details of all credit purchase are entered. The same factors which necessitate the use
of sales day book for credit sales also make it necessary to use purchase day book
for credit purchases. The credit purchases are listed in the purchase day book as they
occur the suppliers personal accounts being credited. The debit entry to purchases
account is delayed until the end of the period.

12

In view of Ikechukwu (2010), the ledger can be defined as the book that contains the
accounts for the transaction of a business organization. It is written up periodically
and is the ultimate destination of all entries recorded in the subsidiary books. The
ledger is the principal books in which accounts are kept. The ledger is ruled in to
several columns, the date column is for the year, amount and date on which
transaction occurred, folio column indicate the page in which the other half of the
double entry have recorded. The particulars side of the page, while credit entries are
made on the right hand side. The two are distinguished by the letters Dr and Cr.
Classification of ledger accounts
According to Kazeem (1999), there are two main of ledger accounts, they include:
1 Personal accounts and
2 Impersonal accounts
1. PERSONAL ACCOUNTS: this is an account of transaction which individuals,
business or organization receives. Debtors and creditors are some examples. The
capital account is a special kind of personal account. It is an account in which the
value of the proprietor investment in the business is recorded. It is therefore the
proprietors or owners personal account.
2. IMPERSONAL ACCOUNTS: impersonal accounts are divided into real and
nominal accounts:
a) Real Accounts: this records transactions relating to properties and material
objects or tangible assets such as land and buildings, cash, motor vehicle, etc

13

b) Nominal Accounts: this deals with the record of transactions which are intangible
in nature. They include: income, expenses, losses, wages and salaries, general
expenses, rents and rates e.t.c
Division of the ledger
The ledger is divided into seven parts in order to minimize the problem of
maintaining a single ledger which is recorded by one clerk. This is because the work
be too much for one person to handle effectively.
According to Kazeem (1999) secondly, the book might become too unwieldy to
permit the extraction of information in time, if and when the need arises.
The usual divisions of the ledger are as follows:
SALES LEDGER: This contains a separate account for each individual to whom
goods have been sold to, or for whom services have been performed on credit. It also
contains the personal accounts of debtors to debtors to business.
PURCHASE LEDGER: This is called bought ledger or creditors ledger. it contains
the personal accounts of creditors.
GENERAL LEDGER: This is a ledger in which most real and nominal accounts
are kept for example, the discount allowed and discount received accounts in the
illustration would normally be kept in the general ledger as would many other
accounts.

14

PRIVATE LEDGER: This is a ledge which is for confidential and security reasonis
kept by either the proprietor or the accountant outside the reach of the office staff.
Examples are capital, drawing and profit and loss accounts.
THE TRAIL BALANCE: kazeem (1999) explain that, the trail balance of any firm
is the summary of what actually has been posted into the various accounts after all
the accounts in the ledger are balanced.
The trail balance is been prepared after all the are recorded to get arithmetical
account of the firm hence it is after the trail balance that a trading, profits, loss
account and a balance sheet is being prepared.
Under normal situation, Hence each transaction in the entry system of accounting is
always expected that the grade, totals of the debit column most agree with the grade
total of the credit column, if its so, it is believed on the surface that posting in the
ledgers are correct but at times there are some mistakes or errors which cannot be
disclosed by the trail balance.
1. Errors of principle: these errors occur when there is a wrong classification of
accounts in the ledger, the wrong account being credited or debited; hence it cannot
be reviewed in the trail balance.
2. Errors of commission: under errors of commission, the entry is been made in wrong
account.
3. Errors of original entry: this occurs when the source document amount is wrongly
taken

15

4. Errors of omission: here, there is a complete omission of the source documents

either by misplacement or the document is being filed together with the suppliers
file or customer.
5. Errors of compensation: this occurs when a mistake made on the credit side of the
account in the ledger.
A suspense account is an account that is in holding accounting information which
cannot be traced at a particular time depending on when such information will be
identified and posted.
2.6

USERS OF ACCOUNTING INFORMATION

A way of use of accounting information exists of a business enterprise. These needs

dictate the fundamental objectives of accounting and the mode of reporting
information. Mal. Dandago K.I. (1996)
The users of financial statement will acquire some basic information to facilitate the
information of opinion about an enterprises performance and other decision making
process.
Wolk (2001) observed that in the true blood reports list the following as groups
recognized as having reasonable right to accounting information and whose info
ration needs should be recognized:
a) The equity investor group: these include, existing and potential shareholders and
holders of convertible securities options or warrants. These require information to
assist them in realizing share trading decisions; whether or not to subscribe to new
shares issues and in reaching voting decision at the general meeting.
16

b) The loan creditor group: these include; existing and potential holders of debentures
and loan stock, and providers of short term secured and unsecured loans and finance.
Their statutory information requirement are published reports, cash, interest payment
assets value (forecast) and short term position of the firm (liquidity) e.g Banks and
trade creditors.
c) The employee group: these are financial analysts, journalists, economists,
statisticians, researchers, trade unions, stock brokers and other providers of advisory
services, existing, potential, and past employees as well as labor unions. These
require information regarding dividend policy trends and growth in profit to the
enterprises.
d) The business contact group: these include: trade creditors and suppliers, business
rivals and those interested in merger, amalgamation, and take over. These groups
require information on solvency, liquidity profitability, credit worthiness, cash flow
for-cast, dividend policy, earning per share and for-cast of realizable assets and
market prices of shares.
2.7

IMPORTANCE OF ACCOUNTING RECORDS TO SOLE TRADERS

According to toolkit media group business (2007) if you are going to run a
Successful business accurate and timely, accounting records are needed. The
following are the reasons why a sole trader requires good accounting records:
1. It helps in monitoring the success or failure of your business. Its hard to know how
your business is doing without a clear financial picture. Am I making money? Are
sales increasing? Are expenditures increasing faster than sales? Which expenses are

17

too high based on my level of sales? Does some expenditures appear to be out of
control?
2. Accounting records provide information you need to make decision: evaluating the
financial consequences should be part of every business decision you make. Without
accurate records and financial information, it may be hard for you to know the
financial impact of a given course of action. Will it pay to hire another salesperson?
Is this particular product line profitable?
3. It help in obtaining bank financing: a banker will usually want to see financial
statement: a balance sheet, income statement, and cash flow budget for the most
current and prior years as well as your projected statement showing the impact of the
requested loan. A banker may even want to see some of your book keeping
procedures and documents to verify whether you run your business in a sound
professional manner.
4. It helps in obtaining other sources of capital: if your business has reached the point
where you need to take in a partner will want to become intimately familiar with
your financial picture. If you need capital and are thinking in an outside investor,
you will need to produce a lot of financial information. Even your suppliers and
other creditors may ask to see certain financial records such information may be
produced by your outside accountant, but it is based on you day to day book
keeping
5. Budgeting: all businesses should be use budget for planning purposes. A budge will
help keeping your business on track by forecasting your cash needs and helping you
control expenditures. In addition, if you are seeking bank financial or other sources
of capital, a banker or prospective investor will probably want to see your budget as

18

evidence that your business is well planned and stale. You most have solid financial
information to prepare a meaningful budge.

CHAPTER THREE
RESEARCH METHODOLOGY
INTRODUCTION
This chapter is dealing with the methodology, how data would be collected. The
researcher intended to both primary sources and secondary sources of data
collection. In primary sources the researcher uses questionnaires methods while
secondary method the researcher uses relevant journals, textbooks, magazines,
internet and the rest. A survey method will be use in distribution of the
questionnaire.

19

3.1

RESEARCH DESIGN
The researcher employed both

primary and secondary method of data

collection. The primary data collection ere through distribution of questionnaires

while in secondary source of data collection, the researcher used newspapers,
organization, news bulletins and annual diaries to analysed data.
3.2

POPULATION OF THE STUDY

Writing on survey studies, Walter and Burnhil (1990) referred that thrsearch must
be clear on the population to be surveyed and the nature of the units composing that
population. The population of the study therefore is only metropolis Damaturu.

3.3

SAMPLING TECHNIQUE

A sample size of fifty respondents who are sole traders in Damaturu metropolis
where drawn using judgmental sampling techniques.
Judgmental sampling techniques is considered most appropriate is only those who
have knowledge on sole trading in damaturu local government metropolis were
considered.
3.4

METHOD OF DATA COLLECTION

The major and principle instrument used for the collection of data in this study
primary and secondary sources.
20

The primary data are obtained through the use of questionnaire and observation The
close ended questionnaire is the type in each the respondent have a limited choice,
i.e there are two or more alternative from which they could only one from and open
ended questionnaire gives the respondent the freedom answer to the questions as
he/she deems fit. There is no restriction placed but there is the change for expression
of opinion by the respondents.
Secondary data include text book, journal, Magazines, internet and other
documentary materials e.t.c
3.5 INSTRUMENT FOR DATA COLLECTION
Distribution of questionnaire:- these are data collection through issuing out
questionnaire to ascertain adequate information. Prepared questions were
administered to the respondents and answers collected were at the end, collected
into the information needed for the analysis of this research work.
3.7 METHOD OF DATA ANALYSIS
Analysis of data result when any further calculative deduction are made on the
row data either by addition of percentage derivation or through the used of
statistical analytical methods. According suleman (1997), was quoted by
Euborokhai (2003) statistically data analysis achieved the purpose of reducing
quantity of data to manageable and understandable forms as well as aiding
decision making from hypothesis. For this purpose, both descriptive and
inferential statistic are used.
The chi-square (X2) model was adopted in test of hypothesis based on data
gathered because it will help to determine the probability that observe a means of
establishing the significant of the difference between them.
Chi square model is donated by:

21

X2 =

( FoFe) 2
Fe

Where: summation
Fo = observed frequencies
Fe = expected frequencies
Degree of freedom is given by:Df = R-c
R= Number of rows
C = Number of columns
Source: Rohlf and sokal (1995)
A calculated X2 test statistic is compared to critical value of chi-square with a
given level of significances and degree of freedom. If the test is less or equal to
critical value of chi-square we expect the null hypothesis and if the test is greater
than critical value, the null hypothesis will be rejected

22

CHAPTERFOUR
DATA PRESENTATION AND ANALYSIS
INTRODUCTION
This chapter deals with the presentation of the relevant information obtained from
the field work through the administration of questionnaire. The presentation and
analysis of the data will enable. The researcher to have good findings.
4.1

DATA PRESENTATION

Data presentation has to do with the tabulation of sample and the presentation of the
result in a narrative form, with the simple percentage of respondent. The
questionnaire will be presented and analyzed one after, the other and conclusion
drawn thereafter, the questionnaire administration were Twenty (20) and all were
answered and returned therefore, the researcher has decide to analyzed the questions.
Table 4.1.1 THE TOTAL QUESTIONNAIRE ADMINISTERED
QUESTIONNAIRE
Returned
Not Returned
TOTAL
Sources Field Survey 2016.

RESPONDEN
T
20
0
20

23

PERCENTAGE
100%
0
100%

The table above shows that the total number of questionnaire administration to the
respondents were twenty (20) representing (100%) and the total not returned is zero
(0). It is on this number retuned that present action and analysis will be based.
Table 4.1.2 the business have been keeping relevant accounting records.

VARIABLE
Strongly Agreed
Agreed
Undecided
Strongly disagreed
Disagreed
TOTAL
Sources: Field Survey 2016

RESPONSE
9
7
0
2
2
20

PERCENTAGE
45%
35%
0%
10%
10%
100%

The table above shows that 9 respondents representing 45% strongly agreed that
they have been keeping record of their transaction, 7 respondent representing 35%
agreed, 0 respondent representing 0% are undecided, 2 respondent representing 10%
strongly disagreed and 2 respondent representing 10% disagree that the business
have been keeping relevant accounting records. Which implies that the business
have been keeping relevant accounting records.
Table 4.1.3: The business owners have the requisite accounting skills.
Variable
Strongly Agreed
Agreed
Undecided
Strongly disagreed
Disagreed

RESPONSE
10
7
0
2
1
24

PERCENTAGE
50%
35%
0%
10%
5%

TOTAL
Sources: Field Survey 2016

20

100%

The table above shows that 10 respondents representing 50% strongly agreed that
the business owners have the requisite accounting skills, 7 respondent representing
35% agreed, 0 respondent representing 0% are undecided, 2 respondent representing
10% strongly disagreed and 1 respondent representing 5% disagree that the business
owners have the requisite accounting skills. Which implies that the business owners
have the requisite accounting skills.
Table 4.1.4: The records kept are in accordance to GAAP
Variable
RESPONSE
Strongly Agreed
8
Agreed
9
Undecided
0
Strongly disagreed
2
Disagreed
1
TOTAL
20
Sources: Field Survey 2016

PERCENTAGE
40%
45%
0%
10%
5%
100%

The table above shows that 8 respondents representing 40% strongly agreed that the
records kept are in accordance to GAAP, 10 respondent representing 45 % agreed, 0
respondent representing 0% are undecided, 2 respondent representing 10% strongly
disagreed and 1 respondent representing 5% disagree that the records kept by the
business owners are in accordance to GAAP.
Table 4.1.5: the records kept help in ensuring effectiveness of financial controls.
VARIABLE
Strongly Agreed

RESPONSE
4
25

PERCENTAGE
20%

Agreed
Undecided
Strongly disagreed
Disagreed
TOTAL
Sources: Field Survey 2016

12
0
2
2
20

60%
0%
10%
10%
100%

The table above shows that 4 respondents representing 20% strongly agreed that the
records kept help in ensuring effectiveness of financial controls, 12 respondent
representing 60% agreed, 0 respondent representing 0% are undecided, 2 respondent
representing 10% strongly disagreed and 2 respondent representing 10% disagreed
that the records kept by the business help in ensuring effectiveness of financial
controls..
Table 4.1.6: the business from time to time consult accounting firms for professional
help.
Variable
RESPONSE
Strongly Agreed
8
Agreed
7
Undecided
0
Strongly disagreed
3
Disagreed
2
TOTAL
20
Sources: Field Survey 2016

PERCENTAGE
40%
35%
0%
15%
10%
100%

The above table indicate that 8 respondents representing 40% strongly agreed that
the business from time to time consult accounting firms for professional help 7
respondent representing 35% agreed, 0 respondent representing 0% are undecided, 3
respondent representing 15% strongly disagreed and 2 respondent representing 10%
disagreed that the business from time to time consult accounting firms for
26

professional help. Which implies that the business from time to time consult
accounting firms for professional help.
Table 4.1.7: The records keep are protected from unauthorized use.
Variable
RESPONSE
Strongly Agreed
7
Agreed
8
Undecided
0
Strongly disagreed
2
Disagreed
3
TOTAL
20
Sources: Field Survey 2016

PERCENTAGE
35%
40%
0%
10%
15%
100%

The above table indicate that 7 respondents representing 35% strongly agreed that
the records kept are protected from unauthorized use, 8 respondent representing 40%
agreed, 0 respondent representing 0% are undecided, 2 respondent representing 10%
strongly disagreed and 3 respondent representing 15% disagreed that the records
keep are protected from unauthorized use. Which implies that the business kept
records that are protected from unauthorized use.
Table 4.1.8: the records kept help in determining profitability.
Variable
RESPONSE
Strongly Agreed
9
Agreed
5
Undecided
0
Strongly disagreed
4
Disagreed
2
TOTAL
20
Sources: Field Survey 2016

27

PERCENTAGE
45%
25%
0%
20%
10%
100%

The above table indicate that 9 respondents representing 45% strongly agreed that
the records kept help in determining profitability, 5 respondent representing 25%
agreed, 0 respondent representing 0% are undecided, 4 respondent representing 20%
strongly disagreed and 2 respondent representing 10% disagreed that the records
kept help in determining profitability. Which implies that the business kept records
that help in profit determination.
Table 4.1.9: the records kept help in determining tax liability
Variable
RESPONSE
Strongly Agreed
8
Agreed
7
Undecided
0
Strongly disagreed
3
Disagreed
2
TOTAL
20
Sources: Field Survey 2016

PERCENTAGE
40%
35%
0%
15%
10%
100%

The above table indicate that 8 respondents representing 40% strongly agreed that
the records kept help in determining tax liability, 7 respondent representing 35%
agreed, 0 respondent representing 0% are undecided, 3 respondent representing 15%
strongly disagreed and 2 respondent representing 10% disagreed that the records
kept help in determining tax liability. Which implies that the business kept records
that help in determination of tax liability.
Table 4.1.10: the records help in indicating when the operating cost is high.
Variable
Strongly Agreed
Agreed

RESPONSE
12
5
28

PERCENTAGE
60%
25%

Undecided
Strongly disagreed
Disagreed
TOTAL
Sources: Field Survey 2016

0
2
1
20

0%
10%
5%
100%

The above table indicate that 12 respondents representing 60% strongly agreed that
the records help in indicating when the operating cost is high, 5 respondent
representing 25% agreed, 0 respondent representing 0% are undecided, 2 respondent
representing 10% strongly disagreed and 1 respondent representing 5% disagreed
that the records help in indicating when the operating cost is high. Which implies
that the record kept by the business help to indicate the high operating cost.
Table 4.1.11: incomplete and single entries makes ascertain profit or loss at hand
task.
Variable
RESPONSE
Strongly Agreed
8
Agreed
8
Undecided
0
Strongly disagreed
3
Disagreed
1
TOTAL
20
Sources: Field Survey 2016

PERCENTAGE
40%
40%
0%
15%
5%
100%

The above table indicate that 8 respondents representing 40% strongly agreed that
incomplete and single entries makes ascertain profit or loss at hand task, 8
respondent representing 40% agreed, 0 respondent representing 0% are undecided, 3
respondent representing 15% strongly disagreed and 1 respondent representing 5%
disagreed that incomplete and single entries makes ascertain profit or loss at hand
29

task. Which implies that high number of respondent strongly agreed that incomplete
and single entries makes ascertain profit or loss at hand task.
Table 4.1.12 The information provided by the accounting helps the business in
taking timely and accurate decisions.
Variable
RESPONSE
Strongly Agreed
6
Agreed
11
Undecided
0
Strongly disagreed
1
Disagreed
2
TOTAL
20
Sources: Field Survey 2016

PERCENTAGE
30%
55%
0%
5%
10%
100%

The above table indicate that 6 respondents representing 30% strongly agreed that
the information provided by the accounting helps the business in taking timely and
accurate decisions, 11 respondent representing 55% agreed, 2 respondent
representing 10% are undecided, 1 respondent representing 5% strongly disagreed
and 2 respondent representing 10% disagreed that the information provided by the
accounting helps the business in taking timely and accurate decisions. Which implies
that accounting provide information that helps the business in taking timely and
accurate decisions.
Table 4.1.13: the accounting records help the business conduct quasi-audits.
Variable
Strongly Agreed
Agreed
Undecided
Strongly disagreed

RESPONSE
11
5
0
3
30

PERCENTAGE
55%
25%
0%
15%

Disagreed
TOTAL
Sources: Field Survey 2016

1
20

10%
100%

The above table indicate that 11 respondents representing 55% strongly agreed that
the accounting records help the business conduct quasi-audits, 5 respondent
representing 25% agreed, 0 respondent representing 0% are undecided, 3 respondent
representing 15% are strongly disagreed and 1 respondent representing 5% disagreed
that the accounting records help the business conduct quasi-audits. Which implies
that the accounting records help the business in conducting quasi-audits
4.2 TEST OF HYPOTHESES
In this hypothesis, the chi-square test is going to be used in testing the hypothesis.
Based on the research work, the researcher selected questions on table q2, q3 and q4
respectively. It was found that one hypotheses are formulated from chapter one i.e.
Ho and Hi therefore, it is important to decide which one is to be accepted or rejected.
The hypotheses formulated are thus:
The test is carried out of 5% level of significance.
Ho: The records kept are not in accordance to GAAP?
Hi: The records kept are in accordance to GAAP?

X2 =

( FoFe) 2
Fe

Where: summation
Fo = observed frequencies
Fe = expected frequencies

31

OBSERVED FREQUENCY TABLE

Question

Q3 Q4 Q

Q6 Q7 Q8 Q

Q1

2
9

5
4

9
8

0
12

12
0

7
0

8
0

5
0

7
0

2
20

2
20

3
20

2
20

Strongly
10 8
Agreed
Agreed
7
7
10
Undecide 0
0
0
d
Strongly
2
2
2
disagreed
Disagreed 2
1
1
Total
20 20 20
Source: personal tables.

Q11 Q1

Q1

Total

2
6

3
11

99

5
0

8
0

11
0

5
0

92
0

29

2
20

1
20

1
20

2
20

2
20

20
240

COMPUTATION OF EXPECTED
The following formula was used to obtained expected frequency (fe)
Total Column x Total Row
Grand Total
Where:
TR = Total Row
TC = Total Column
GT = Grand Total
Ei (1) =

99 x 20
240

=
=

1980 = 8.3
240

Ei (2) =

92 x 20
240

=
=

1840 = 7.7
240

Eii (3) =

29 x 20
240

=
=

580
240

= 2

Eii (4) =

20 x 20
240

=
=

400
240

= 2

32

CHI-SQUARE TABLE
Question

Fo

Fe

Fo Fe

(Fo Fe)2

Strongly
Agreed
Agreed
Strongly
disagreed
Disagreed
Total

99

8.3

90.7

8226.49

(Fo Fe)2
Fe
991.1

92
29

7.7
2

84.3
27

7089.64
729

920.7
364.5

20

18

324
Compute
value

162
2438.3

COMPUTATION OF CHI-SQUARE
Degree of freedom (DOF) = (R-1) (C-1)
Where:R = Row
C = Column
1 = Constant
R=5
C = 12
Chi-square level of significant = 0.05 Degree of freedom
(R -1) (C -1)
(5-1) (12-1)
4X11
= 44
The level of significance is 5% or 0.05 and the confidence interval is 56% now the
DOF is 44 going through chi-square table under 5 with 0.05 confidence interval is
71.8556
33

Therefore critical value as obtained from chi-square table is 71.8556 While the
computed test is 2438.3
REJECTION,

ACCEPTANCE,

DECISION

OR

CRITERIA

AND

CONCLUSION
The cut-off point in chi-square (X 2) table is 71.8556 and the computed value is
2438.3 is greater than the critical value (71.8556) from the table we reject the null
hypotheses Ho the records kept are not in accordance to GAAP and Hi the records
kept are in accordance to GAAP?
CONCLUSION
Since the computed value is greater than the critical test value (i.e 2438.3 >
71.8556) we therefore conclude that, the assessing the importance of accounting
records to some selected sole traders in Damaturu metropolitans
4.3 DISCUSSION OF RESULT
The researcher based the finding on the analysis made on the field work. On the
assessment of the important of accounting records in sole traders. From the field
work. The researcher find out that:
1. Some of the business or sole traders have been keeping relevant accounting records.
2. Some of the business or sole traders owners have the requisite accounting skills.
3. Some of the level of compliance to the generally accepted accounting preparing
accounting records.
4. Some of the sole traders are managing to keep their records of their transaction.
5. Majority of the sole traders are not keeping their record at all, even those who are
managing to keep their record, there are incomplete.

34

6. Majority of the sole trader not have record for the expenses they made and this will
them to be confused on how they spend their money.
7. The majority of the sole traders determine the tax to pay to the local government by
assumption rather than calculate per accounting records kept.
8. As a result of not keeping records in the past, some sole traders were able to recall
the profit they realized in the past five years through were estimation.

CHAPTER FIVE
SUMMARY CONCLUSION AND RECOMMENDATION
5.1 SUMMARY
35

The assessing the importance of accounting records, was the study carried out by the
researcher in this research exercise.

Some selected sole traders in Damaturu

metropolitans formed the focus of this study. The researcher study in consideration
of its objectives had made some useful findings from the data collected
through personal interviews, questionnaire administration and library research
and also from the hypothesis formulated and tested.
Based on the outcome of the investigation, a summary of the findings made are as
follows:
1. Majority of the sole traders are not keeping their records are at all, even those who
are managing to keep records their records are incomplete.
2. Some of the sole traders rated keeping of records as nothing special or important.
3. Some sole traders fail to keep their daily earning and expenses as a result; they
calculate their profit and loss on assumption
4. Majority of the sole does not have records for expenses they made and this will
make them to be confused on how they spend their money.
5. Majority of the sole traders determine the tax paid to local government by
assumption as a result of not keep records or keeping incomplete records, this lead to
the authority charging higher tax on their estimated income that should be if they
calculated accurate profit from accounting records they has kept.
5.2 CONCLUSION
Keeping of accounting records base on the researcher assessment is very important.
However, the assessment of the researcher shows that most of the sole traders in
Damaturu metropolis do not keep and those who keep the records do not have a
complete records.

36

5.3RECOMMENDATIONS
From the findings of this study the following recommendations are therefore
made to enhance the importance of accounting records to some selected sole
traders, nevertheless it was observed that the various problems hindering the records
keeping by the sole traders in Damaturu metropolis,
The following recommendations are made to profit to the problems.
1. The sole traders should not manage to keep records of their transaction.
2. The sole traders are to endeavor keep a standard and complete and records.
3. Keeping records is to be treated special and very important for the purpose of future
planning.
4. The manager of the organization should keep records of their earning and stop the
assumption of profit or loss.
5. The manager should recalling the profit in the past years, stop making a mere
estimate.
6. Records of expenses is to be kept by the sole traders in order to avoid getting
confuse on how you spend your money.
REFERENCES
Chiapetta, B. K. show and wild, J.(2009). Principles of Financial Accounting 19th
edition, New York:Mc Graw-Hill Irwin.
Caruthers, B. S. & Espeland W.N. (1991).Accounting for Rationality: Double
Entry Book Keeping and the Rhetoric of Economic Rationality, The
University of Chicago Press. The American Journal of Sociology Vol. 97 No.
1
Davidson, S. and Roman L.W (1993) Handbook of Modern Accounting.
Third Edition, Mc Graw-Hill Book Company, New York.
Ikechukwu C. (2010).Success Key Point, Book Keeping and Accounts, Onitosha,
37

Hybrid publisher Limited.

Izedonmi .P.F and C.S. Ola (2001) Intermediate Accounting.2nd Edition.
BoficConsulting Group. Benin
Kantudu A.S. (2007) Accounting Reporting and Audit Lecture Note. BU,

Kano.

Kazeem and long (1999), Essential Financial Accounting, First Edition

Tonad

Publishers Ltd, Lagos.

Lgben C. Robert (2004), Financial Accounting Made Simple, fist Edition E1Tode Ventures Ltd, Lagos.
Muchira, B. W. (2012). Record Keeping and Growth of Micro and Small
Enterprises, A Case Study Municipally in Kenya Masters of Business
Administration of Kenyatta University.
Nelson M., & Onias, M. (2011). accounting practices of SMEs in Zimbabwe: An
investigative study of record keeping for performance measurement (A
case study of Bindura). Journal of Accounting and Taxation Vol. 3(8), pp. 171181, December 2011.Available online at
http://www.academicjournals.org/JAT.
Nickels etal (2002) Understanding Business Sixth Edition Published by
MeGraw- Hill/lrwinhttp:///ww.mhhe.com.ubbe
Okwena, D.K. (2011).An Assessment of Proper Book Keeping Practices on the
Financial Performance Perspectives from SMEs in Kisii Municipality,
MBA Student, Egerton University.
Onaolapo, A. A.(2014).-The Analysis of the Impact of Accounting Records Keeping
on the Performance of Small Scale Enterprises, International Journal of
Academic Research in Business and Social Sciences vol.4
Onaolopo A. &Adegbite T.A. (2014).The Analysis of the Impact of Accounting
Records Keeping on the Performance of the Small Scale Enterprises,
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vol, 4 No. 1
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Watts, R. & Zimmerman, J.(1978). Towards a Positive Theory of the Determination

of Accounting Standards, the Accounting Review .Vol. 53, pp 112 134
Watts, R.(1995). Development in Positive Accounting Theory in Jones at al pp 297
353
William J.R. (2003) Financial Accounting Eleventh Edition McGaw- Hill/Irwin
guide/sbg. www.mamaserarch.com (2007), http://www.wolkit.com/samll biz
Wood F. and Sangstee (2002), Business Accounting, Ninth Edition pitman
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Wood, F. (1979) Business Accounting I Third Ed. Essex: EIBS and Longman pg 25
Yoshika, T, & Mitchell, F. (1995). Japanese Management Accounting,
Management Accounting Research, 67, pp 20-29

Department of Accounting The federal

Polytechnic, Damaturu, P.M.B 1006,
Yobe State.
25th September, 2007-09-25
Dear Respondents
I am a final year student of the department of Accountancy and Finance, the federal
polytechnic Damaturu. Undertaking a research work on the importance of
accounting records a sole traders.
39

The Damaturu metropolis has been chosen as my case study.

I assure you that any information so provides will be treated strictly
as confidential and used solely kindly provide the information required in the
attached questionnaire as kindly as possible.
Thanks for your co-operation.
Yours faithfully,
Victoria Alede.

QUESTIONNAIRE
PERSONAL DATA
AGE:

20-30

30-40 (

SEC:

made

Female (

NARITAL STATUS: Single

Married (

40 and above (

YEAR OF ESTABLISHMENT ..
1. Have you been keeping records of you transactions
a. Yes (
)
40

b. No (
)
2. What kind of records do you keep
a. Records about sales (
)
b. Records about goods purchases (
)
c. Records about debtors (
)
3. Why do you chose to keep the record above?
a. Help do you know the total sales ( )
b. Help to know the total purchase (
)
c. Help me to know those I owe and how much I owe them ( )
4. Those your business made profit or loss in the past one years?
a. Profit (
)
b. Loss (
)
5. How did you calculate your profit or loss
a. By assumption ( )
b. By preparing account using the record I kept
6. Do you have records for expense?
a. Yes ( )
b. No ( )
7. If on why
a. Because it is not necessary
b. Because I can remember off hand
8. Doe the local government required any tax from you?
a. Yes ( )
b. No ( )
9. How do you know the tax paid to them?
a. Through the profit made as per account ( )
b. By assumption( )
10. Can you recall the profit you made in the past five (5) years?
a. Yes (
)
b. No ( )
11.If yes, Can you give an estimate?
a. 2002, 1000- 2000 ( )
b. 2003, 2000- 3000 ( )
c. 2004, 3000-4000 ( )
d. 2005, 4000-5000 ( )
e. 2006, 5000-6000 ( )
f. If difference estimate .
12.Book keeping serves as a tool for control and as aid to planning
a. Yes (
)
b. No ( )

41