Abstract

This study was about the effect of cost accounting on the performance of small and medium-sized enterprises in Cameroon. The objectives were to access the effect of material cost on the performance of SMEs in Cameroon, to determine the effect of labour cost on the performance of small and medium-sized enterprises in Cameroon, to access the effect of overhead cost on the performance of small and medium-sized in Cameroon and to access the effect of expenses cost on the performance of small and medium-sized enterprises in Cameroon.

The methods of data collection were primary, primary data which are information gotten directly from the field through the administration of the questionnaire. Data was obtained using questionnaires of sample size 30. The methods of analysis were descriptive analysis and multiple regression techniques.

Our regression analysis provided results for the statistical tests to validate the results presented. The R-square statistics showed that 55.45percent of the variation in the performance of SMSEs in Cameroon is explained by cost accounting variables.

This, therefore, means that about 44.55percent are explained by other factors not captured in the estimation framework specified. In terms of the overall goodness of fit of the model, presented by the F-statistics, the results showed that the fit of the model is statistically significant at 1, 5, and 10 percent level of significance.

Thus, the results presented above are reliable. It was recommended that there should be closer cooperation or insourcing of cost accounting. Follow the developed Excel spreadsheet. With closer cooperation between the case company and the external tax consultant or insourcing of cost accounting, a correct cost allocation can be ensured. As sales revenues increase, the sales revenues of e-commerce have to be assigned to the individual products and not only to its product group.

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

The business environment in Cameroon has become intensively dynamic and unpredictable in recent decades and correspondingly managing companies has become so demanding. The SMEs sector has been recognized worldwide for its role the economic advancement through various ways like employment creation, wealth generation, and poverty reduction (kitae, Gakure, & Munyao) (2012).

In the current global economy, SMEs are progressively been regarded as powerful engines for economic empowerment and development for most economies in the world (Islam, Khan, Obaidullah, Alam) (2011). Muraguri (2010) argues that SMEs have been known to contribute greatly to economic growth in both developed and developing countries.

Amoako (2013) points out that accounting users in SMEs is on the increase and the quality of accounting information utilize within the SMEs has a positive relationship with an entity’s performance as well as survival. For a business to successfully manage its finances, and effective cost accounting is of vital requirement. Therefore, a poor accounting system or the absence of a cost accounting system may be the reason for a company’s lack of success and profits.

Cost accounting is therefore the process of collecting, analyzing, summarizing, and evaluating various alternatives courses of action. Its goal is to advise the management on the most appropriate course of action based on cost efficiency and capability. Cost accounting also referred to as management accounting, is used by managers to collect data in an effort to improve performance.

All businesses whether service, manufacturing, trading requires cost accounting to track their activities. The limitation of financial accounting has made managers realize the importance of cost accounting.

The general role of cost accounting can be seen in the following ways;

cost accounting helps the period of trade depression and trade competition- in periods of trade depression, the organization cannot afford to have losses that passed unchecked. The management must know the area where economies may be sought, waste eliminated and efficiency increased. The organization has to wage a war not only for it survival but also continue growth. The management should know the actual cost for their products before embarking on any scheme of price fixation cost accounting helps in making Estimates-Adequate costing records provide a reliable basis for making estimates and quoting tenders.

Cost accounting eliminates wastages – as it is possible to know the cost of a product at every stage, it becomes possible to check the forms of waste, such as time and expenses, etc, are in the of machine equipment and material.

Cost accounting makes comparison possible –proper maintenance of costing records provides various costing data for comparisons which in turn helps the management in the future line of action.

Cost accounting provides data for periodical profit and loss accounts- adequate costing records provide the management with such data as many as necessary for the preparation of profit and loss accounts and balance sheet as such intervals as may be desired by the management.

Cost accounting helps in determining and enhancing efficiency-losses due to wastage of materials idle time of workers, poor supervision, etc. will be disclosed if the various operations involved in the process of production are studied carefully Efficiency can be measured, cost-controlled, and various steps can be taken to increase efficiency

Cost accounting helps in inventory control –cost accounting furnishes control which management requires in respect of stock of material, work-in-progress, and finish well.

Investors, banks, and other lending money institutions have a stake in the success of the business concern and are, therefore benefited immensely by the installation of an efficient system of costing. They can base the judgment about the profitability and future prospects of the enterprise on the cost records.

Employees have a vital interest in their employer’s enterprise in which they are employed. They are benefited in a number of ways by the installations of an efficient system of costing. They are benefited through continues employment and higher remuneration by the way of incentives, bonus plans, etc. the key issues affecting the SMEs can be grouped into four, that’s an unfriendly business environment, poor funding, low management skill,s and lack of access to technology.

Given the importance of SMEs in an economy; it becomes quite plausible to look at factors affecting or hindering their performance which is a major determinant of their survival and growth. For SMEs businesses to experience growth, cost accounting must be put in place and used appropriately. All businesses, in general, are more focused on the final result (profit or loss) rather than focusing on the element of cost which is well monitored and controlled will increase the probability of the business calling for careful consideration in the design of accounting systems. They may lack the sophistication to apply the detailed accounting processes yet the value of accounting systems to these businesses is quite profound.

1.2 Statement Of The Problem

The private sector which in the past in Cameroon was not so important is now being recognized as an engine to economic growth in the country. In most developing countries the private sector is mainly represented by the small and medium-sized enterprises (SMEs) and this is also the case in Cameroon.

Thus in Cameroon SMEs stimulate and alleviate poverty. It is widespread knowledge that SMEs are an effective instrument for employment creation, income generation, and economic growth, even in the developed countries like the USA and Europe; SMEs significantly and highly contributed to the GDP.

Despite the effort of the government in order to improve the SMEs in Cameroon, the country still has a rigid business environment that hinders the growth of local small enterprises and entry opportunity for foreign investors. According to Maduekwe (2015), SMEs are perceived to be failing partly due to the lack of ineffective use of management accounting practices such as budget, performance management tools, and pricing tools.

Ahmad (2012) argues that one of the reasons for business failure is poor management ability which includes accounting problem-solving. The growth of large businesses with skillful professional accountants that can manage and coordinate the resource of the entity courses the researcher to know how cost accounting can be of great importance in the growth of small and medium-size enterprises.

In Cameroon, SMEs cover the entire range of economic activity within all sector and share a number of common problems that hinders them from effective performance as a result of low market access to credit, poor information flow, discrimination legislation, poor access to land, weak linkages among different sectors, weak operating capabilities in terms of skills, lack of knowledge and attitudes, lack of infrastructural facilities among others.

Another problems of SMEs failure is poor management ability which includes accounting problem-solving. The availability of infrastructural facilities is grossly inadequate in the area of access roads, electricity, water supply, etc. and multiplicity of policies and regulatory measures such as removal of fuel subsidy, taxes, several charges on loans.

1.3 Main Question

What is the effect of cost accounting on the performance of small and medium-sized enterprises in Cameroon?

1.3.1 Specific questions

1. What is the effect of material cost on the performance of SMEs in Cameroon?
2. What is the effect of labour cost on the performance of SMEs in Cameroon?
3. What is the effect of overhead cost on the performance of SMEs in Cameroon?
4. What is the effect of expenses cost on the performance of SMEs in Cameroon?