CHAPTER ONE

1.0     INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Histories of various developed countries have shown that industrial revolution had been the main cause for their economic survival. Their great financial strength have come principally through the acquisition of industrial and technological power.

Without exception, all big industrial organization be they multi – national or indigenous, started in a small outfits. Small scale industrial set – ups abound, but most of them are buying and selling outfits. Considering the economic situation in the country, the entrepreneurs in the state, now more than ever need to branch out into some other areas outside buying and selling.

The Nigerian economy in the last two decades has passed through various stages. From the oil boom era of the seventies to the period of wasteful spending and painlessness of the early eighties and the present economic down turn.

One must appreciate the fact that the survival of the sole proprietor in the Nigerian economy today would depend of his initiative, drive and quick adaptation to the environment.

A greater percentage of the people are engaged in Agriculture while others are engaged in trading as well as traditional and industrial activities such as pot moulding, basket and mat weaving, hair dressing. Others are block moulding, Farm, poultry, soap making, food processing e.t.c. Most of those activities are small scale establishments and sole proprietorship and partnership oriented.

A good number of people have shown their concern over the development of Udi local government area and Enugu state in general. People like Engr. Roy Umenyi who had carried a study of this nature, discovered a lot of bottle – necks in the development of the local government in question. Such studies also revealed that answers to poor development of the area could be found largely on the insufficient investment in industrial activities. This has struck the mind of the project writer to carry out a research into the problems militating against the establishment and development of small scale industries in Udi local government area.

1.2     STATEMENT OF PROBLEM

Industrialization has been identified as a basic tool for rural development. Thus, this study title “Accounting and management problems of small scale industries in Enugu State (a case study of small scale industries in Udi local government area, attempts to determine why: 

-        There are only few small scale industries in Udi local government area.

-                     The few industries existing are not prospering

-                     There is a high rate of infant mortality of small scale industries in the area.

-                     What scares the investors from making investment in small scale industries in the area under review.

1.3     PURPOSE OF STUDY

The main purpose of this study are:-

i)                   To find out why there are only few small scale industries in Udi local government area.

ii)                To determine the major problems confronting small scale industrialists in Enugu state and Udi local government area in particular.

iii)              To determine the extent to which poor financial records has hindered the multiplication and prosperity of small scale industries in the area.

iv)              To determine the extent to which poor finance has hindered the multiplication and prosperity of small scale industries in the area

v)            To find out what roles the government and the financial institution should play towards alleviating the sufferings of small scale industrialists in Udi local government area.

4.1     IMPORTANCE OF THE STUDY

It is felt that this study would be of immense benefits to a number of individuals and firms in the following ways:

i.                   This study is going to provide its numerous readers a clear insight into the problems militating against the establishment and development of small scale industries in Enugu state especially in the rural areas.

ii.                 It would equally provide a basis for further studies into other aspects of problems of industrialization in the country.

iii.              Finally it is also viewed that this study would be of significance to the planning authorities since it would provide them with the necessary information needed in articulation of economic activities.

1.5     SCOPE AND DELIMITATION OF THE STUDY

This study titled “Accounting and management problems of small scale industries in Enugu state” (a case study of small – scale industries in Udi local government area). Would have been extended to cover the whole of Enugu state and beyond and also to cover all aspects of problems of business establishment but in view of the huge financial requirement involved coupled with the short period within which the study would be completed, the project writer is compelled to limit the scope of the study to only the accounting and management problems of small scale industries in Udi local government area of Enugu state.

1.6     WORKING HYPOTHESIS

having reviewed the theories and opinions of different authors and business giants, the project writer wishes to formulate the following working hypothesis:

i.                   Poor financial records in the major cause of infant morality of small scale industries in Udi local government area.

ii.                 Lack of Trust (Co-operations among small scale industrialists is the chief cause of fewer number of small scale industries in Udi local government area.

1.7     DEFINITION OF TERMS

At this juncture, the project writer deems it necessary to define and explain some of the cause of this study.

ACCOUNTING:- “Accounting may be defined as a process by which data relating to the economic activities of an organization are recorded, measured and communicated to interested parties for analysis and interpretation”.

From the definition we discover that accounting is made up of three major branches.

-                     Financial Accounting

-                     Cost Accounting and

-                     Management accounting

COST ACCOUNTING: - Is said to be “that part of management accounting which establishes budgets and standard costs and actual cost of operation, processes, department or product and the analysis of variances, profitability or social use of funds.

FINANCIAL ACCOUNTING:- Can be said to be the process of classifying and recording of actual transaction of an entity in monetary terms in accordance with established concept, principles, accounting standard and legal requirement and presents as accurate a view as possible of the effect of those transaction over the period and at the year end.

MANAGEMENT ACCOUNTING:- In the terminology of management and financial accounting published by (LCMA), management Accounting is said to be “the application of professional knowledge and skill in the preparation and presentation of accounting information in such a way as to assist management in the formulation of policies and in the planning and control of the operations of the undertaker”. (ICMA).

AGRO- BASED /PROCESSING INDUSTRIES:- This covers such industries like rice milling industry, cassava processing, palm oil processing industries and poultry industry. This category of industries engage themselves either in the production or processing of Agricultural products.

MANUFACTURING INDUSTRIES:- These are those industries engaged in manufacturing activities through the input of raw materials, technical as well as human resources to produce finished product(s) which are often referred to as their industries, foods industries, block molding industries etc.

SMALL SCALE INDUSTRY:- The definition of small scale enterprises varies form time to time and according to institutions. For instance, the Central Bank of Nigeria’s (CBN) Monetary policy circular No. 22 of 1988 defined small – scale enterprises (excluding general commerce) as enterprises in which total investment (including land and working capital) did not exceed N500,000 and or the annual turnover did not exceed N5 million.

The national Economic reconstruction fund (NERFUND) puts the ceiling for small – scale industries at N10 million. Section 376(2) of the companies and Allied Matters Decree of 2008 defines a “small company” as one with:

a)                 Annual turnover not more than the N2 million;

(B)    Net assets value not more than N1 million.

However, for the purpose of this research, it is pertinent to classify industries under the following headings;

SERVICE INDUSTRIES:- These are industries that engage in rendering services of various types to people such services industries include: tailoring industries, motor and motorcycle repairing, Hair dressing saloons, petrol filling station, Hotels