ACCOUNTING SYSTEM IN COMMUNITY BANKING

(A CASE STUDY OF OGUI URBAN COMMUNITY BANK NIGERIA LIMITED)

By

AGUBUO BLESSING .O.

Presented To

Department of Accounting

ABSTRACT

Within the frame work of this project topic "Accounting system in community banking" the researcher has attempted to explain the importance of Accounting system as ways of helping management to improve operations in the community banking sector.

However, recent researcher have shown that one of the main causes of indigenous business failure in this country is due to the failure to maintain proper Accounting records. There fore, at the end of this project research work, an attempt was made to give solutions to this problem so as to increase the status of our community banks.

In achieving the objectives of this study, various investigation instruments such as questionnaire personal interview and chi-square statistical test were implemented in the collection of data for the study and the result from them were used for the summary of findings.

In furthermore of the research objectives, recommendation were made which when implemented, the researcher hopes that it will be of great help to the regulatory authorities. The recommendations were based on research findings and should not be noted to be exhaustive.

In conclusion, the researcher believes that the pre-determined objective of the study has been achieved.

CHAPTER ONE

10 INTRODUCTION

Accountancy embraces the installation of book-keeping and accounting systems, the writing up of account and the preparations of every kind of financial statement from the simplest receipts and payments of small club to the published accounts of large public companies It is one of the main work of the accountant in practice to provide client both large and small with necessary advice as to the most appropriate accounting system to in tall what will provide management with up-to date information

According is always said to be the language of business Every organization including bank registered under the Nigerian company law, having statutory responsibility f profit and loss account together with statement of the assets and liabilities at the end of its accounting period, to its members shareholders, the public and other users including the government Accounting system means the system of recording financial transactions in an organization It could also be referred as an internal control system in an organization depending on the nature of business undertaken by the organization This is because financial transactions are qualified in monetary terms and this requires proper recording of receipts and payment of funds It is worthy to note here that any default in the accounting system of an organization could lead to business failure

In addition, banks by virtue of nature of its services dealing with money are expected to maintain an-up-to-date record of its transactions with or on behalf of its customers

However, in community banking, this responsibility can be effectively discharged if there is an adequate system of account put in place for recording day to day transactions of the bank Besides, accounting is not only concerned with recording of transactions but also with the use to which the records are put, their analysis and interpretations for use in making decisions not only for the management usefulness but also to the members and would be investors, government agencies etc

Recent researchers have shown that one of the main causes of indigenous business failure in the country is due to the failure to maintain proper accounting records Therefore, these purposes can only be achieved in the light of good design and application of sound accounting system Thus, the scope of this research work is to make appraisal of relevance and adequacy of accounting system in community banking using "Ogui Urban community bank Nigeria ltd as a cases study

11 STATEMENT OF THE PROBLEMS

Accounting being a profession referred to as service activity and accounting as often termed to be the language of business, therefore the importance of accounting system in any organization cannot be overemphasized The objectives of providing accounting information for decision making cannot be achieve if there is no adequate accounting system in place In the course of this research work, the following problems will be considered:

i The effects of inadequate accounting system in banking operation

ii Unavailability of timely accounting data

iii The falsification of account in the banking sector

iv Nonchalant attitude of the management towards the information provided by the accounting system

v Poor decision-making

vi Poor accounting record

vii Poor audit problem

12 OBJECTIVE OF THE STUDY

The study will aim to accomplish the following objectives:

i To determine the impact of accounting system in community banking

ii To determine whether the strategies used by community bank in their accounting system have been very efficient and effective

iii To evaluate the factors that will limit the efficacy of community banks in their efficient application of accounting system in their banking operations or activities

iv To assess the role9s) of accounting system in proving the activities of community bank

v To assess whether they have efficient and effective machinery to implement her planned programmes

vi To find out whether accounting system will provide timely accounting data for management decision making

vii To find out whether it will facilitate banking activities

viii To make recommendations on how to enhance the efficiency and effectiveness of accounting system in community banking

13 SIGNIFICANCE OF THE STUDY

As it is a known fact that accounting system plays very important role in the life of a business organization, it is termed the determinant factor which determines whether business would fail or survive depending on the manner in which the particular organization records its financial transactions Therefore, the significance of this project research work is to provide:

i Management with the importance of accounting information towards ensuring profitability and efficiency in business management

ii The relevance of accounting system in community banking

iii Evaluation of the role(s) played by management in ensuring adequate accounting system in banking operation

14 STATEMENT OF HYPOTHESIS

The following hypothesis forms the basis or the framework for carrying out this research study

Ho: Accounting systems have no impact in community banking

Hi: Accounting systems have impact in community banking

Ho: The strategies used by community banks in her accounting system have not been very efficient and effective

H2: The strategies used by community banks in her accounting system have been very efficient and effective

Ho: Ogui Urban community bank have no efficient machinery to implement her planned programmes for efficient accounting system

Ho: Ogui Urban community bank have efficient machinery to implement her planned programmes for efficient accounting system

15 SCOPE OF THE STUDY

The study will be limited to "Ogui Urban community bank Nig Ltd here in Enugu" The research cannot cover the entire population of the bank hence, a sample will be drawn from selected department in the bank

16 LIMITATION OF THE STUDY

The major factors limiting the extent of this research work are time available for the conduct of the research and inadequate financial resources and those encountered in the course of data collection

17 DEFINITION OF TERMS

i Deferred tax: This is defined to include taxes due on income which is not taxable within 12 months of the current year as a result of differences between the tax profits and the reported profit

ii Deposits: This means all deposit liabilities of banks including other accounts and placements by other banks, current and time deposits

iii Dividend: This is referred to the total dividend paid to either the ordinary shareholders or the preference shareholders

iv Earnings per share: This computed as profit after taxation less preference dividend by the number or ordinary and founders shares outstanding To enhance comparability, all shares are assumed to have a per value of one Naira

v General Reserves: This includes allover reserves like profit and loss balances exchange revaluation reserves and other reserves

vi Interest margin: This is the net of interest income received and paid

vii Investment: This includes investment in all calls money, fixed deposit, negotiable certificates of deposits with other banks, bankers acceptances, quoted and unquoted investments

viii Loans and advances: All loans and advances given to customers, the advances net of provision is used

ix Lateral Acquisition: This is the investigating in other types of business apart from banking

x Bills of Exchange: This simply means an unconditional order writing address by one person to another signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to, or to the order of a specified person or to the bearer

xi Cheque: A Cheque may be defined as a bill of exchange drawn on a banker payable on demands

xii Drawee: This is the bank on whom the cheque is drawn

xiii Payee: This is the beneficiary of an order cheque or the bearer of a cheque

xiv Open cheque: An open cheque is one that can be cashed over the canter

xv Cross cheque: A crossed cheque is one that cannot be cashed over the canter, it has to be paid into an account

xvi Profit after taxation: This is profit before taxation Less taxation charged

xvii Capital Reserves: This includes all reserves that is no longer available for distribution as cash dividends like loan, stock redemption accounts, deposit for shares and appropriation for bonus issues

xviii Contra Assets and liabilities: These are contingent liabilities arising in the normal cause of business These commitments may be acceptances, guarantees and other such obligations on behalf of customers The bank will normally have a corresponding contingent asset due from the customers

xix Fixed Asset: This includes asset purchased for lease to customer where they are classified as fixed assets

xx Share capital: This includes all issued share capital distinguishing between ordinary and preference shares

xxi Shareholders fund: this is the total of share capital statutory capital and general reserves

xxii Profit before taxation: This represents gross earnings, less all expenses, including loan, less provision but before taxation

xxiii Net Asset per share: This is the total shareholders, fund, less preference shares, divided by the number of ordinary share