ACCOUNTING SYSTEM IN COMMUNITY BANKING

CHAPTER ONE
1.0 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.

1.1 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

1.2 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 roles) 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.

1.3 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.

1.4 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.

1.5 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.

1.6 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.

1.7 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. Contract 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.

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