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Abstract
This study identified the costing methods practiced by the informal sector of the Nigerian
economy. It was conducted in the northern Industrial Zone of Nigeria, the study utilized a
sample of 570 respondents to a questionnaire and interview conducted and drawn from a
targeted population whom are artisans operating in the informal sector of the Nigerian
economy; most of them are clustered in Kano, Labia and Maiduguri the capitals of Kano,
Nasarawa and Borno States respectively. The respondents are sequentially located in North
West, North Central and North East Geo-political zones of Nigeria. The sample selection was
judgmentally made, and the data collected were analyzed using descriptive statistics such as
frequency tables and simple percentage. The findings of the study revealed that majority of the
artisans do not maintain cost accounting records and those who do are in form of incomplete
records. Cost accounting methods practiced do not reflect clear cut peculiarity of industries;
majority of artisans do not store materials, and the few that do, are not observing proper
material storage systems. It is, therefore, recommended that proprietors in the informal sector
should receive training in basic cost accounting techniques. Local professional accounting
bodies such as ANAN and ICAN should assist and offer free training to the informal sector
operators by way of social responsibility. State Ministries for Commerce and Industries and
Federal Ministry for Industries should organize workshops for artisans on cost management and
the arts of keeping basic books of account.
Key Words: Informal sector, costing method, material stocking and labour source.
Introduction
Accounting is a key function of any business big or small. Good accounting practices are
necessary to maintain an accurate set of books which in turn are necessary for taking business
decisions, raising capital or bank loans and, of course, knowing how much the business is
making.
Page 1 of 18
Cost is the value exchanged for goods or services. Cost accounting, on the other hand, is
the process of identifying, analyzing, computing and reporting costs to management, (ICAN,
2009). It plays a vital role in the survival of all types of businesses, big or small. The
determination of profit or capital maintenance depends mainly on the ability of the organization
to identify and control its costs effectively. Cost accounting therefore provides the necessary
knowledge and information required to enable the business owners to match their costs against
their revenue. Without this knowledge, therefore, there is the likelihood that the capital can be
substantially eroded, which can lead to a collapse of an enterprise.
The informal sector of the Nigerian economy, and indeed Africa at large, is the highest
employer of labour or highest provider of employment. In Nigeria, SMEs are all around us, the
fact that only little amount of money is required to start SMEs make it the most popular type of
business. The informal sector, informal economy, or grey economy is the part of an economy that
is neither taxed, nor monitored by any form of government. Unlike the formal economy,
activities of the informal economy are not all included in the gross national product (GNP) and
gross domestic product (GDP) of a country. It is a sector which encompasses all jobs which are
not recognized as normal income sources, and on which taxes are not paid. The term is
sometimes used to refer to only illegal activity, such as an individual who earns wages but does
not claim them on his or her income taxes, or a cruel situation where people are forced
to work without pay. However, the informal sector could also be interpreted to
include legal activities, such as jobs that are performed in exchange for something other
than money.
In spite of the laudable contribution of the informal sector to the economic growth and
development of any nation in the world, unfortunately, majority of the small scale enterprises die
at infancy. Several SMEs in Nigeria fail in a little time after they are started; most fail due to
poor financial management, particularly working capital management. Most importantly stock
management strategy left much to be desired, (Ovia, 2001 cited in Sunday, 2011). All these
premature deaths of small businesses are substantially attributed to poor accounting record
keeping, especially cost accounting records.
The ability of an organization to capture its costs accurately will assist immensely in
planning and decision making. Obara and Ukpai, (2014) opined that the principal objective of
cost accounting is to provide detailed information for planning, control and decision- making.
However, the practice of cost accounting in the informal sector is characterized by general
criticism that they are inefficient and ineffective. There appears to be a mismatch between a
choice of a costing method and the problems to be addressed. Besides the information provided
by the costing system tend to be doubtful and inaccurate for the purpose intended, (Obara and
Ukpa, 2014). It is because of the inability to accurately capture cost elements and the inability to
use appropriate costing methods that the small businesses are not able to know whether the
business is making profit or loss. This can easily lead to premature death or failure of the
enterprise.
Page 2 of 18
In as much as the proprietors in the informal sector do not have basic accounting
knowledge to enable them record their costs correctly; they cannot as well afford to engage the
services of competent accountants, either on full time or through outsourcing bases.
For decades, cost accounting researchers like Hamdallah, (2014) and aobara, (2014)
conducted studies to identify the costing methods practiced by informal sectors of the economy.
This study, therefore, is contributing to the existing literature by conducting similar study in the
Northern Nigeria as none has been done there. It is against this background, therefore, that this
study seeks to identify and assess the cost accounting methods practiced by the informal sector
of the Nigerian Economy with emphasis in the Northern Nigeria. The specific objectives,
however, are to:
(i)
identify the costing methods practiced in the informal sector.
(ii)
find out whether stock of material are maintained in the informal sector.
(iii)
find out the reasons of not maintaining adequate stock.
(iv)
find out the sources of labour in the informal sector.
Literature Review
Druker, (2003) defined cost as what customers pay to obtain certain goods and services,
and to drive full utility from them. It is therefore the value sacrificed for the value received.
According to Belkaoui (2004), Cost represents the exchange of price of, or the monetary
consideration given for the acquisition of goods or services. If the consideration comprises nonmonetary assets, the exchange price, in this case, is the equivalent of the assets or services given
up. Cost can also be seen as the expenditure on goods and services required to carry out the
operations of an organization. There are many ways of defining cost; the major ones being
average cost, historical cost, replacement cost, first-in-first-out cost, last in first out cost,
marginal cost, and opportunity cost, (Owen and Jonathan, 2005).
Cots accounting, on the other hand, is that part of management accounting which
establishes budgets and standard cost and actual costs of operations, process, departments or
product and the analysis of variances, profitability or social use of funds (Owler and Brown,
1984). Cost Accounting is the techniques used in collecting, processing and presenting financial
and quantitative data within an organization to ascertain the cost of the cost centre, the cost units,
and the various operations.
The fact that cost accounting is about cost identification, analysis, computation and reporting
should be enough to show how important that branch of accounting is to propel management of
big or small organization; manufacturing, distribution or service organizations; and public-sector
or private sector organizations as they all need information related to cost of products, services,
operations, function or projects, both budgeted and actual. They are derived to suit the method by
which goods are manufactured or services are provided. Cost accounting is now regarded as a
division of management accounting which also incorporates the techniques of planning, decision
making and control,(Owen and Jonathan, 2005).
Page 3 of 18
(c)
in inventory for varying purposes. Drury (2004) observed that investment in stock represents
major assets of most industrial and commercial organizations, and it is essential that stock be
managed efficiently so that such investments do not become unnecessarily large. The purpose of
holding stock is basically based on three reasons; the transaction motives, the precautionary
motive and speculative motive. Transactionary motive occurs whenever there is a need to hold
stocks to meet production and sales requirements, and it is not possible to meet these
requirements instantaneously. A firm might also decide to hold additional amount of stocks to
cover the possibility that it may have underestimated its future production and sales requirements
or the supply of raw materials may be unreliable because of uncertain events affecting the supply
of materials. This presents precautionary motives, which applies only when future demand is
uncertain. When it is expected that future input prices may change, a firm might maintain higher
or lower stock levels to speculate on the expected increase or decrease in future prices. Stocks
might therefore be held for speculative motives.
As for Adeniyi (2008), the reasons for holding stock
(i)To meet regular demand
(ii)To ensure smooth production run.
(iii)To even out seasonal variation in demand
(iv)To act as a buffer when demand is higher than anticipated
(v)To take the benefit of unanticipated scarcity in the production e.g. when there is
unanticipated breakdown in the production facility, which may affect the supply.
(vi)To meet the technical requirements of a production system e.g. storage of cassava for some
days for fermentation in garri processing industry
(vii)Taking advantage of bulk purchase discounts
Cost Accounting System
An accounting system is a formal process of gathering and communicating accounting
information bearing in mind the goals and objectives of the organization. Cost accounting system
of an organization, therefore, is the foundation of the internal financial information system,
(Obara and Ukpai, 2014). The importance of cost accounting system, is noted by Biggs, (1972)
as cited in Obara and Ukpai,( 2014) that without a system of cost account, it is doubtful whether
a business of any size can survive in the intensely competitive conditions of today, but it must be
emphasized that just as no two businesses are alike, even in the same industry, so no ready-made
system of cost accounts can be provided to suit each and every business. When installing an
effective cost accounting system, according to Owler and Brown (1984), therefore, the following
general conditions should be observed as far as possible:
a.
The arrangement of the system should be to suit the general organization of a
particular business, subject to such alteration as may be unavoidable.
b.
The technical aspect of the business must be carefully studied and an effort made to
secure the sympathetic assistance and support of the principal members of the whole
staff and of the workers generally.
c.
The minimum amount of detail in which records are to be compiled should be
arranged.
Page 6 of 18
d.
The records to be made by foreman and workers should involve as little clerical work
as possible
e.
To ensure reliable statistics, every original entry on factory forms should be supported
by an examiners signature or by counter-checks.
f.
Promptitude, frequency and regularity in the presentation of costs and statistics must
be arranged for.
g.
The cost accounts and financial accounts should either be interlocked with single
account or be kept separately to be recorded by means of control accounts.
The Informal Sector
Informal sector refers to the sector of the economy that is not formally registered. It is
sometimes referred to as hidden economy, black economy and so on. In the words of Burr (2008)
as cited in Kofar Wambai and Hanga (2013), the hidden economy is usually taken to mean
undeclared economic activity ranging from casual moonlighting and work paid cash in hand.
There is no universally acceptable definition of small-scale enterprises, as different
institutions, disciplines, countries and individuals have put forward different definitions of small
scale enterprises based on different parameters. The criteria commonly used, however, according
to ICAN (2006), to describe small scale enterprise are number of employees, capital invested,
sales turnover and total asset base. Notwithstanding the absence of an exact definition, the
following may be said to be the features of small scale enterprises:
(a) The ownership of the firm and its control are not often separated.
(b) The informal relationship among employees in the organization dominates the formal
relationship.
(c) The companys shares are usually not quoted on the stock market.
(d) In most cases, their outputs are locally sold and their inputs are similarly, locally
sourced.
(e) Management structure is uncomplicated hence, there is speedy decision- taking process.
Review of Empirical Studies
The study of Mairura, (2011), revealed that there exists a positive relationship between
accounting records and business performance; and it recommended that entrepreneurs should be
trained in records keeping to enhance the performance of their business.
Maseko and Manyani, (2011), in their study, revealed that majority of SMEs do not keep
complete records because of lack of accounting knowledge and as a result there is inefficient use
of accounting information in financial performance measurement. The study recommended
mandatory record keeping improving accounting practices of SMEs in Zimbabwe.
Hamdallah et al, (2014) conducted a study which indicated that there is a relationship
between the cost accounting system and the pricing process in small textiles, leather and clothing
companies in Jordan. It further
suggested that good quality and highly effective cost
accounting system and modern techniques should be adopted and implemented, Such as ABC
and Target Costing. Moreover companies should also employ qualified cost accountants or train
their staff in the use of such system.
Page 7 of 18
Obara and Ukpai, (2014) also conducted a study in eastern industrial zone of Nigeria
using a sample of 150 respondents which were selected using non probability sampling
technique. A questionnaire was used to collect the data used. The findings revealed that improper
and inadequate records were used and maintained; unconventional costing method were used;
and informal business will approach profit maximization if effective cost procedure is used and
proper books are maintained.
Methodology
A survey design method was adopted in this work because the study involves an investigation of
peoples opinion or other manifestation through direct questioning. The population of the study
consists of all the artisans in the Northern industrial zone. The selected towns are also believed to
be the cities where artisans predominantly engage in their trade and practice of metal and wood
works, small scale farming, food processing, and other forms of entrepreneurship. Data was
collected from both primary and secondary sources. Primary data was collected through
questionnaire prepared on two (2), four (4) and five (5) licker scales and administered to 570
respondents was drawn via stratified sampling technique comprising of artisans in Kano, Lafiya
and Maiduguri the state capitals of Kano, Nasarawa and Borno States respectively. The
questionnaires were proportionately distributed in accordance with the population size of the
towns where Kano was allocated 15, Lafiya 5 and Maiduguri 10 in respect of each
industry/trade, which amount to totals of 285, 95 and 190 respectively. The data collected were
analyzed using simple percentage and frequency tables. Kano is a city in Nigeria and the capital
of Kano State in Northern Nigeria, in the Sahelian geographic region south of the Sahara. Kano
is the commercial nerve centre of Northern Nigeria and is the second largest city
in Nigeria after Lagos. According to the 2006 census, Kano is the most populous state in Nigeria,
with about 9,383,682 million people. The Kano urban area covers 137 km2 and comprises
six local
government
areas
(LGAs) Kano
Municipal, Fagge, Dala, Gwale, Tarauni and Nasarawa with a population of 2,163,225 at the
2006 Nigerian census. The metropolitan area covers 499 km2 and comprises eight LGAs the
six mentioned above plus Ungogo and Kumbotso with a population of 2,828,861 at the 2006
Nigerian census. The principal inhabitants of the city are the Hausa people. As in most parts of
northern Nigeria, the Hausa language is widely spoken in Kano. The city is the capital of
the Kano Emirate. Kano is 481 meters (or about 1580 feet) above sea level. The city lies to the
north of the Jos Plateau, in the Sudanian Savanna region that stretches across the south of the
Sahel. The city lies near where the Kano and Challawa rivers flowing from the southwest
converge to form the Hadejia River, which eventually flows into Lake Chad to the east.
Kano is a Hausa and Fulani dominated city that is largely Muslim. The economic significance of
Kano dates back to the pre-colonial Africa when Kano city served as the southernmost point of
Page 8 of 18
the famous trans-Sahara trade routes. Kano was well connected with many cities in North Africa
and some cities in southern Europe. Formerly walled, most of the gates to the Old City survive.
The Old City houses the vast Kurmi Market, known for its crafts, while old dye pits still in
use lie nearby. The products exported from Kano to north Africa include textile materials,
leather and grains. Kano was connected with trans-Atlantic trade in 1911 when a railway line
reached Kano. Kano is a major centre for the production and export of agricultural products like
hides and skins, peanuts, and cotton. The city maintains its economic and business even in the
21st century with it producing the richest black man Aliko Dangote whose great great
father Alhassan Dantata was the richest during Nigeria's colonial period. Due to the collapse of
industrial activities in Kano mostly as a result of inconsistent government policies and epileptic
electricity supply, trade, retail and services have been the mainstay of the economy. The
emergence of large retail outlets starting from early 2000 with Sahad Stores and Jifatu
departmental stores revived investor confidence in the sector which led to the construction of
the Ado Bayero mall in, then the largest shopping mall in Nigeria with a retail space of 24000
square meters. Borno state is one of the Nigerian first generation states created by the Murtala
administration in 1976. The state has 27 local government arrears located between the latitude
110:04N and longitude 110:04E and 140:04E respectively. It has a land mass of 69,435 Sqkm 2
which is 7.69% of the total land area of Nigeria. It shares border with Cameroun republic to the
east, Tchad in the North-East, Niger Republic in the North and North-West, Yobe and Gombe in
the west while Adamawa in the south. It has an estimated population of 2,163,358 male and
2,007,746 female making the total population of 4,171,104 people. In the same vein, Maiduguri
Metropolis has an estimated population of 282,400 males and 257,607 females, making the total
population of 540,007 people. The state has three senatorial districts of Borno North, Borno
South and Borno Central. Dominant Kanuris inhabit Borno North and Central, while
Babur/Bura, Margi, Chibok Kibaku, Hambagtha and others dominated Borno south. Nasarawa
was created on 1 October 1996 by the Abacha government from the (today
neighbouring) Plateau State. Nasarawa State is bounded in the north by Kaduna State, in the west
by the Abuja Federal Capital Territory, in the south by Kogi and Benue States and in the east
by Taraba and Plateau States. A network of roads exists within the state, linking all the rural
areas and major towns. The Nigerian Railway Corporation (NRC) operates train services
from Kuru, Gombe and Maiduguri. Nasarawa State has agriculture as the mainstay of
its economy with the production of varieties of cash crops throughout the year. It also contains
minerals such as salt and bauxite. Nasarawa is located on coordinates 832N 818E and has a
total area landmass of 27,117 km2 (10,470 sq mi) and a total population of 2,040,112 as at 2005.
Page 9 of 18
Results
The data collected for the study are presented and interpreted using only descriptive
statistics such as frequency tables and percentage.
Question one (1) of the study seeks to know more about the culture of maintaining cost
accounting records by the informal sector of the Nigerian economy. Table one (1) shows the
responses generated.
Mechanic works
Welding
3
7
Block Molding
Leather Works
Panel Beating
0
0
5
Vulcanizing
Fashion Design/Tailoring
0
14
Dyeing
10
Black Smithing
Gold Smithing
Aluminum Fabrication/Glazier
0
0
7
Aluminum Casting
Shoe Making
Refrigerator/Air Conditioner Repairing
Poultry Farming
0
0
0
22
Fish Farming
19
Fish Processing
Meat Processing
0
0
Page 10 of 18
%
26.
7
10
23.
3
0
0
16.
7
0
46.
7
33.
3
0
0
23.
3
0
0
0
73.
3
63.
3
0
0
NO
f
22
27
23
30
30
25
30
16
20
30
30
23
30
30
30
8
11
30
30
TOTAL
%
73.
3
90
23
F
30
%
100
30
30
100
100
100
100
83.
3
100
53.
3
66.
7
100
100
76.
7
100
100
100
26.
7
36.
7
100
100
30
30
30
100
100
100
30
30
100
100
30
100
30
30
30
100
100
100
30
30
30
30
100
100
100
100
30
100
30
30
100
100
Total
95
16.
7
475
83.
3
570
100
Furniture Makers
Mechanics
Welding
Block Molding
Leather Works
Panel Beating
Vulcanize
Fashion Design/
Tailoring
Dyeing
Black Smith
Gold Smith
Aluminum
Fabrication/Glazier
Aluminum Casting
Shoe Makers
Refrigerator/Air
Conditioner Repairs
Poultry Farming
Fish Farming
Fish Processing
Meat Processing
OPTIONS
Job Costing
Batch Costing
22
3
20
10
2
26
7
14
Contract Process
Costing Costing
Service
Costing
2
27
6
8
18
4
7
2
5
8
4
23
Total
30
30
30
30
30
30
30
30
10
5
3
27
11
20
18
3
8
3
9
30
30
30
30
13
10
24
17
16
4
6
30
30
30
20
30
30
30
30
21
30
30
9
10
Page 11 of 18
Total
218
Percentage (%)
38.2
Source: Field Survey, 2015
209
36.7
30
5.2
59
10.4
54
9.5
570
100
Table two above shows that, furniture makers, welders, block molders, panel beaters,
gold smith, fashion designers/tailors, Aluminum fabricators, aluminum casters, dyeing and shoe
makers adopted combination of job and batch costing methods; poultry and fish farmers adopted
only batch costing. Leather works, black smith and meat processing adopted process costing,
while welding, block molding, fashion designers/tailors, and refrigerator/ air conditioner
repairers adopted contract costing. Service costing is adopted by mechanics, panel beaters and
vulcanizers.
In absolute figures and percentages, 218(38.2%) respondents adopted job costing method,
while 209(36.7%) and 30(5.2%) respondents adopted batch and contract costing methods
respectively. Process and service costing methods were adopted by the respondents in
proportions of 59(10.4%) and 54(9.5%) respectively.
Question three (3) of the study seeks to know whether materials are stocked by the informal
sector of the Nigerian economy. Table three (3) of the study shows the responses generated.
Table 3: Responses on whether materials are stocked
INDUSTRY
YES
F
%
Furniture Makers
30
100
Mechanics
0
0
Welding
30
100
Block Molding
30
100
Leather Works
30
100
Panel Beating
2
6.7
Vulcanize
Fashion Design/Tailoring
Dyeing
Black Smith
Gold Smith
Aluminum Fabrication/Glazier
0
30
30
30
30
10
Aluminum Casting
Shoe Makers
Refrigerator/Air Conditioner Repairs
Poultry Farming
Fish Farming
Fish Processing
30
24
0
30
30
25
Page 12 of 18
0
100
100
100
100
33.
3
100
80
100
100
100
83.
NO
F
0
30
0
0
0
28
30
0
0
0
0
20
0
6
30
0
0
5
%
0
100
0
0
0
93.
3
100
0
0
0
0
66.
7
0
20
100
0
0
16.
TOTAL
F
%
30
100
30
100
30
100
30
100
30
100
30
100
30
30
30
30
30
30
100
100
100
100
100
100
30
30
30
30
30
30
100
100
100
100
100
100
Meat Processing
10
Total
401
3
33.
3
70.
4
20
169
7
66.
7
29.
6
30
100
570
100
Furniture Makers
Mechanics
Welding
Block Molding
Leather Works
Panel Beating
Vulcanize
Fashion Design/
Tailoring
Dyeing
Black Smith
Gold Smith
Aluminum
Fabrication/Glazier
Aluminum Casting
Shoe Makers
Refrigerator/Air
Conditioner Repairs
Poultry Farming
Fish Farming
OPTIONS
Lack
Storage
Space
12
15
14
14
5
13
of Lack of
Adequate
Capital
18
3
10
12
20
11
Short
Prod.
Process
Nature
of
Business
12
2
3
2
10
5
10
18
Fear of
Theft
4
1
5
3
1
20
25
20
12
10
7
16
14
4
24
16
14
6
13
11
12
15
Page 13 of 18
2
23
2
12
5
2
Total
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
Fish Processing
14
Meat Processing
16
Total
214
Percentage (%)
37.5
Source: Field Survey, 2015
10
2
182
31.9
3
22
3.9
6
4
98
17.2
5
54
9.5
30
30
570
100
Table four (4) above shows responses of artisans on the various reasons why adequate
materials are not stocked. A total of 214 (37.5%) of artisans disclosed that lack of storage space
is what prevent them from storing materials, while 182(31.9%) attributed it to lack of adequate
capital. Whereas 98(17.2%), 54(9.5%) and 22(3.9%) artisans blamed it on fear of theft, nature of
business and short production process respectively.
Question five (5) of the study seeks to know the sources of labour the informal sector of the
Nigerian economy are comfortable of engaging/employing them. Table five (5) shows the
responses generated.
Table 5: Responses on sources of labour
INDUSTRY
Furniture Makers
Mechanics
Welding
Block Molding
Leather Works
Panel Beating
Vulcanize
Fashion Design/Tailoring
Dyeing
Black Smith
Gold Smith
Aluminum Fabrication/
Glazier
Aluminum Casting
Shoe Makers
Refrigerator/Air
Conditioner Repairs
Poultry Farming
Fish Farming
Fish Processing
Meat Processing
Total
OPTIONS
Apprenticeship
Employees
12
24
19
2
14
26
22
21
17
24
16
23
15
10
26
4
12
2
2
9
4
2
2
Coownership
6
6
2
20
12
4
8
4
4
14
2
10
5
83
Page 14 of 18
103
Total
30
30
30
30
30
30
30
30
30
30
30
30
8
4
30
30
30
10
13
20
6
94
30
30
30
30
570
7
6
4
11
20
17
19
290
Casual
Labour
8
Percentage (%)
Source: Field Survey, 2015
50.9
14.5
18.1
16.5
100
Table five (5) above shows that over 290 (50%) of labour requirement of artisans is
supplied by casual labour, while 83(14.5%), 103(18.1%) and 94(16.5%) are supplied by
employees, co-owners and casual labour respectively. It can be concluded that most of the
labourers employed by the artisans are casual labourers.
Discussion of Findings
The informal sector of the Nigerian economy does not have specific inventory control
system, the determinants of stock holding and its associated stock levels vary. Where some
operators see the inability to hold stock as an attribute of lack of capital adequacy, others
attribute it to lack of storage space, fear of theft or short production cycle.
Material storage skills are also lacking as they are kept in shambles, and the issuance
from the storehouses are not observed strictly in accordance with the popular procedure of first
in first out method. New receipts are just placed on top of the earlier deliveries or randomly
dropped without clear distinction as to which batch came first or last.
Majority of the artisans do not keep proper accounting records, worse of all, the cost
accounting records. Even those who keep do so in form of incomplete records. This is as a result
of inability of the majority of them to read and write. They also lack basic accounting knowledge
to aid them keep good and proper costing records.
The sources of labour expenditure by the artisans range from apprenticeship, coownership, employees and casual labour. The reliance is mostly on apprenticeship. In this respect
the masters do not pay the apprentices salaries or wages, but instead give only allowances for
upkeep, which is the cheapest source of labour. Since the artisans do not have contractual
obligation for paying wages, the meager allowances paid are mostly overlooked when recording
costs of operations, which normally results in understating cost of products.
Conclusion
This study which identifies and assesses the costing methods practiced in the informal
sector of the Nigerian economy concludes that majority of the artisans do not maintain cost
accounting records, and even those who do so are in form of incomplete records. Proper material
storage system is also not in place and issuances of materials from the storehouse are not on
FIFO basis. Apprenticeship is the main source of labour in the informal sector, and record of the
allowances paid to them are not kept or incorporated into the cost of products, therefore, pricing
of products are wrongly arrived at.
Recommendations
In view of the foregoing, therefore, the following recommendations are proffered:
i.
Government should ensure that workshops and seminars are organized to train the
proprietors in the informal sector in basic cost accounting techniques.
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ii.
iii.
iv.
v.
The artisans should try to seek the assistance of professional accountants to properly
cost their materials and fix appropriate prices for the products.
The owners of business in the informal sector should try to team up and jointly
employ competent accountants to prepare their cost accounting records for them,
while they contribute to pay for the fees. Alternatively, they may wish to outsource
the services of professional accountants for contractually determined fees.
The professional accounting bodies such as ICAN and ANAN should, by way of a
corporate social responsibility, organize workshops for the informal sector operators
to receive training in basic cost accounting techniques free of charge.
Government should make it a precondition for every proprietor of a predetermined
average asset base business to engage the service of at least a middle cadre accountant
before such business is registered.
It is recommended for further study that a similar research be conducted in other
industrial zones in Nigeria, particularly South Western Nigeria or, any part of a particular
industrial zone in Nigeria or, in an entirely different economy.
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